Electricity prices are rising by double the rate of inflation. Data center demand means no relief ahead

Core Insights - Rising electricity prices are driven by increased demand from artificial intelligence data centers, with prices jumping 6.9% year-over-year in 2025, significantly outpacing the headline inflation rate of 2.9% [1] Group 1: Electricity Price Trends - Electricity prices are projected to continue rising through the end of the decade, with data centers accounting for 40% of electricity demand growth [2] - Households are expected to see electricity prices rise another 6% through 2027, with inflation slowing to 3% in 2028 due to lower natural gas prices [3] Group 2: Economic Impact - The increase in electricity prices will lead to a decline in disposable income and consumer spending growth, which is expected to fall by 0.2% through 2027, while economic growth will slow by 0.1% [2][3] - Higher electricity prices will contribute to core inflation, increasing it by 0.1% through 2027 and by 0.05% in 2028 as businesses pass on costs to consumers [4] Group 3: Demographic and Regional Disparities - Lower-income households will experience a larger impact from rising electricity prices, as electricity constitutes a greater share of their spending [4] - The impact of rising electricity prices will vary significantly across different regions in the U.S., influenced by regional market structures and regulatory choices [3]