Who Pays for AI Data Centers?

John Steinbach has lived in his Manassas, Virginia, home for nearly 40 years, and in January 2026 he opened an electricity bill for $281, up from roughly $100 the month before. "It's just so far beyond any bill that I've ever had," he told Consumer Reports. What worries him is where rates go next, as more AI data centers plug into the grid around him.

He has plenty of company. A March 2026 Gallup poll found that seven in 10 Americans oppose building AI data centers in their area, 48% of them strongly, with majorities opposed among Democrats, Republicans, and independents alike.

Local opposition disrupted about 120 projects in the first half of 2026, according to Data Center Watch, including at least 45 projects worth roughly $68 billion stalled in the second quarter alone.

Around 379 US jurisdictions have adopted moratoriums or barred data centers outright. Indianapolis voted 23–1 in August to bar new construction through 2027, and Charlotte paused approvals for 150 days after a city survey found 78% opposition. Brookings reports that candidates in both parties now run ads against the facilities.

The fight is usually framed as whether data centers get built. The harder question underneath it is who pays and who decides. The costs land locally and soon. The benefits land regionally or nationally, and later. The rules for splitting them were written before AI-scale demand existed.

What follows looks at the contentious issue of data centers from three important angles: the strongest case from critics, the strongest case from industry, and where the evidence lands.

Traditional cloud data centers were built around general-purpose servers whose load rises and falls with user traffic. AI clusters pack GPUs far more densely, throw off more heat per rack, and during training runs draw power around the clock. That changes what a single campus asks of the local grid and water system.

U.S. data centers used about 176 terawatt-hours in 2023, roughly 4.4% of the country's electricity, according to a Lawrence Berkeley National Laboratory report prepared for the Department of Energy. The growth ahead is the contested part.

Bloom Energy's January 2026 power report projects U.S. data center IT load nearly doubling, from about 80 gigawatts in 2025 to about 150 gigawatts in 2028. That is a company forecast, and Bloom sells on-site power systems, so it has a stake in the answer.

The same report points to a legitimate bottleneck. Utilities expect to deliver power 1.5 to 2 years later than developers plan for. Developers, for their part, expect roughly a third of data centers to run entirely on on-site power by 2030. When the grid can't keep pace, companies build their own power plants.

The concern starts with one market. PJM, the grid operator serving 13 states and Washington, D.C., runs auctions for capacity, which pays power plants to be available when demand peaks.

The clearing price went from $28.92 per megawatt-day for 2024/25 to $269.92 for 2025/26, then hit the price cap in the next two auctions at $329.17 and $333.44. PJM's independent market monitor attributed 63% of the 2025/26 increase, about $9.3 billion, to data center load.

Other numbers point in the same direction. Virginia residential prices rose about 13% over 12 months, per EIA data. Nearly three-quarters of Virginia voters blamed data centers in a January 2026 survey from Global Strategy Group and the Chesapeake Climate Action Network Action Fund, an environmental advocacy group.

Looking ahead, a peer-reviewed modeling study from NC State, Carnegie Mellon, and two other universities projects wholesale prices 6% to 29% higher nationally by 2030 than in a world without data center growth, and up to 57% higher in the hardest-hit regions. Those are modeled wholesale prices, not retail bills.

The industry's case is that big customers usually lower rates. An Electric Power Research Institute study of 2015 to 2024 found that each doubling of data center capacity came with average retail prices 3.5% lower, because large, steady loads spread a utility's fixed costs across more sales.

An Amazon-funded study by the consultancy E3 found Amazon's payments in four utility territories met or exceeded the cost of serving its data centers, leaving about $3.4 million in net surplus per site on average. A separate E3 report funded by the Data Center Coalition puts load growth's share of the 2025/26 PJM increase at about 50%, well under the monitor's figure. The free-market Institute for Energy Research found no statistically significant correlation between a state's data center count and its prices.

The evidence lands on "not yet." Rutgers' New Jersey State Policy Lab found no statistically significant effect on bills at the utility level through 2024, and added that "'not yet' is not the same as 'nothing to worry about.'"

The historical benefit depended on spare grid capacity. If the grid is built for demand that never shows up, the fixed costs involved in the grid's capacity increase will end up being spread across a smaller number of people. Other costs are climbing too: Berkeley Lab's 2026 price-trends update points to transmission and distribution spending on hardening, replacement, and expansion. So the useful question is less whether data centers have raised bills so far and more who pays for the next round of inevitable grid expansion.

Water-cooled data centers can consume millions of gallons on a single hot summer day, and that number lands hard in dry places. Arizona faces a federal plan that cuts its Colorado River use by 760,000 acre-feet, about 27% to 30%.

That context shaped local votes. Tucson's city council unanimously rejected Amazon's Project Blue in August 2025, and Chandler turned down another proposal 7–0 that December. In Florida, Orange County's vice mayor has proposed a one-year moratorium, citing a projected groundwater shortfall of 96 million gallons a day by 2045.

The viral version of the concern — that each 100-word AI prompt uses about half a liter of water — comes from a GPT-4-era estimate by UC Riverside researchers. Google's own 2025 figure for a median Gemini text prompt is about 0.26 milliliters, roughly five drops, though that counts only water used on site.

The other side points to scale. Berkeley Lab estimates U.S. data centers used about 17.5 billion gallons directly in 2023, a figure that could double or quadruple by 2028. The American Enterprise Institute's Jim Pethokoukis, cited by The Dispatch, puts data centers at under 0.5% of U.S. freshwater and compares Google's Iowa facility to some golf courses.

An Arizona State University report found no rise in central Arizona power suppliers' water use despite data center growth, and agriculture accounts for 72% of the state's water. The fuller count cuts the other way: Berkeley Lab also estimates about 211 billion gallons of indirect use through power generation in 2023.

The evidence says national totals hide local stress. In Botetourt County, Virginia, a planned Google campus could use up to 2 million gallons a day, possibly 8 million, in a county where many residents rely on wells, and the county is putting $300 million toward a new regional water supply, offset by the project's tax revenue.

The tax case is the industry's strongest. Data centers across Northern Virginia paid an estimated $1.3 billion in property taxes in 2024, and total local revenue they supported topped $2 billion, according to Chamber of Progress, a tech-industry group.

Quincy, Washington, is the best-case story. In that small farming town, roughly 30 data centers carry an estimated 57% of property taxes. That base has helped pay for a $120 million high school, a hospital, new police and fire stations, and a $30 million water reuse facility built with Microsoft, according to CNN and KOMO News.

Texas industry figures cited by the Texas Tribune claim 61,060 direct jobs and $3.5 billion in state and local taxes in 2023, and company officials say a proposed $10 billion campus would bring $50 million a year to Lacy Lakeview, a town of about 7,000.

Even Virginia's legislative auditors ranked the state's data center tax exemption as its second-most productive incentive, at $6.1 million in personal income per $1 million of forgone revenue.

The jobs case is thinner. A Brookings analysis of about 1,500 facilities found that a county's first large data center adds on the order of 100 to 200 jobs over a decade, with no change in wages.

Incentive thresholds reflect that. Texas grants sales tax exemptions to facilities of at least 100,000 square feet that create 20 jobs; Maryland asks for five jobs and $2 million in investment in its Tier 1 areas. Construction jobs are real, but they end when the building does.

States are adjusting. Governors in Illinois, Massachusetts, Nebraska, Nevada, and Ohio paused or reworked data center breaks this year, and Arizona froze new awards for three years, per the Arizona Capitol Times. Virginia kept its exemption but added a tax of 1.1 cents per kilowatt-hour on data center electricity, running from July 2026 to June 2028 and capped at $600 million a year.

Memphis is an outlier, not the norm, but it shows what happens when a company decides it can't wait for the grid. To bring its Colossus 1 supercomputer online in 2024, xAI ran trailer-mounted methane gas turbines in South Memphis, as many as 35 by the Southern Environmental Law Center's count from aerial imaging, near Boxtown, a community with decades of industrial pollution. For Colossus 2 it put turbines just across the state line in Southaven, Mississippi, 46 of them by May 2026.

Classifying the units as "non-road engines" let xAI skip air permits until the EPA's January 2026 rule confirmed that large turbines are stationary sources that need them.

SpaceX, which acquired xAI in February, now runs 69 turbines, won't finish removing the unpermitted ones until July 2027, and is building a permanent 1.2-gigawatt gas plant. The NAACP, represented by the Southern Environmental Law Center (SELC) and Earthjustice, has sued under the Clean Air Act.

The company has allies. In June, the Justice Department intervened on xAI's side, calling the turbines a matter of "national, economic, and energy security."

Third-party tests found the 10 pollutants measured weren't at dangerous levels, though the SELC noted that ozone wasn't tested and the wind blew away from the monitors on both test days. Supporters' underlying argument is speed: grid connections take years, and AI competition moves in months.

The studies disagree. A University of Tennessee, Knoxville analysis of satellite data for TIME found average nitrogen dioxide up 3% after June 2024, with peak concentrations up 79% right around the site and 9% in Boxtown.

University of Memphis researchers, writing in The Conversation, modeled a roughly 1% rise in fine particulate matter and found no significant change in satellite data, while noting their methods couldn't detect several hazardous compounds.

Read together, the average effects look small. But they fall on air that already exceeds federal limits, and they come from a plant that skipped the permitting process built to settle exactly this question. The more common version is quieter: Aurora, Colorado's proposed Trident campus plans 28 diesel backup generators.

Much of the backlash is about process as much as impact. Before Applied Digital's $3.6 billion Louisiana campus was announced as Delta Forge 1, it ran as "Project Lightning" and "Project Pixel," under nondisclosure agreements signed by state senators, the parish assessor, and members of the board that approved the deal, NPR reported. In the same state, Hut 8's $10 billion project in West Feliciana Parish went ahead without nondisclosure agreements, because the parish president chose to negotiate in the open. Bills to ban such agreements have been introduced in Michigan, Oklahoma,