Copyright Newsweek
Affordability is clearly the most significant political theme running through both local and national politics today. While grocery prices have long been the most common barometer of increasing consumer prices, the cost of electricity is fast becoming the biggest household affordability issue. On the 2024 campaign trail, Donald Trump promised he would cut energy prices in half. But prices for electricity have continued moving in the wrong direction, and will be a major issue in the two major gubernatorial races this November—in New Jersey and Virginia. It is worth exploring the substantive reasons for these price increases, and asking who consumers are likely to blame for this increasingly expensive element of the cost of living. While the energy price picture is somewhat muddled, there is one pro-consumer policy that may offer elected officials a rhetorically sellable and politically palatable path toward affordability. In New Jersey, residents saw their utility bills increase 17 to 20 percent this summer. There is also some evidence that power shutoffs due to non-payment have begun to rise nationally. These trends will have immediate electoral consequences. Mikie Sherrill, the successful Democratic candidate for governor of New Jersey, made freezing electric rates a centerpiece of her victorious campaign, and got huge applause in mentioning the issue in her victory speech. In Georgia, two public service commission seats were up for election, with two Republican incumbents facing voters, and electricity rates were at the heart of the race. Georgia Democrats had not won a non-federal statewide race in 20 years, and Democrats flipped both seats. That tells us just how politically charged the issue of electric rates is becoming. Many Democrats had hoped that increasing development of alternative power sources, particularly solar and wind, would provide cheaper electricity as renewable energy is not subject to the erratic pricing and market fluctuation dynamics of fossil fuel sources. President Joe Biden's signature Inflation Reduction Act offered many incentives for the development of these alternative energy sources. However, President Trump and congressional Republicans repealed many of them in the Big Beautiful Bill, arguing that the cost of building out renewable energy sources is what caused the rate spikes. Neither argument is quite right. Nonpartisan experts who have studied the subject believe the increasing cost of upgrading the grid, with new transmission lines or other facilities, is the single factor most responsible for rate increases. Some of this, of course, is related to fires in California and hurricanes in the southeast that destroyed an enormous amount of utility infrastructure. Some of it is also related to the age and deterioration of much of the grid, which now requires rebuilding. Solar and wind do add to these transmission facilities costs. The buildout of new solar and wind infrastructure; the construction of backup facilities to bring in power when wind and solar, because of weather conditions, are not able to meet consumer needs; and the need for substantial battery storage when their generation is high all come with significant price tags. These can add a large amount to what electric utilities need to invest, and the capital costs on which they are allowed to make a guaranteed return by their state regulators. So it is true that the buildout of alternative energy sources presents meaningful incremental costs to utilities, although most expert studies conclude that even accounting for the added infrastructure costs, over time renewable sources are cheaper than relying on fossil fuels for electric power generation. The real culprits in this story, however, are the broader societal and industry transformations that are putting increasing demands on electricity needs. The massive rollout of AI, and the enormous boom in data center construction which will continue well into the future, drive a huge new level of electric power generation needs. A single AI data center can require the same amount of electricity as 80,000 homes, and by some estimates data center demand is expected to need electric power equivalent to what 30 nuclear reactors would generate by 2030. Virginia, which has more data centers than any other state, is bracing for major electric rate increases after having seen electricity costs rise by only about 3 percent over the last year. Nuclear energy is often cited as a clean energy source that also can provide power at costs comparable to natural gas, but it involves very high upfront costs, presenting big initial burdens to the rate base. Moreover, getting regulator and zoning approvals for nuclear facilities is a long process as most citizens do not want nuclear reactors in their backyards. So who gets the political heat, so to speak, for the cost of electricity? Interestingly, a recent New Jersey poll found a plurality of voters blamed the utility companies themselves. Less than 20 percent blamed the state's Democratic governor, although a third of Republicans did. About a quarter of Democrats blamed the federal government. With Republicans blaming electric rates rising on wind and solar, and Democrats blaming them on taking away incentives for wind and solar—and with both sides upon deeper analysis having some truth to their arguments—what is the smart way to play the politics of blame with this pocketbook issue that is now increasingly taking the spotlight? The answer may well lie in the public perception of Big Tech companies fawning over and paying regular homage to President Trump. The president has made himself the biggest cheerleader for the AI companies and their massive data center build outs in the public eye. Standing in the way of technology development is not a good look for the Democratic Party, but demanding that tech companies foot the bill for the need to modernize, upgrade and massively expand utility electricity generation would be a good position to take. Moreover, requiring that AI and data center buildouts come in the form of developing solar and wind capacity would enable Democrats to take the side of consumers, making sure higher electric demand does not mean forcing higher electric prices, while also being true to their environmental positions and putting the cheapest renewable energy sources in place for the long run. Several tech players are already constructing private energy plants for their own use as part of their data center buildouts, so there is nothing radical about Democrats insisting on tying approvals for data centers to bearing the cost of enhancing the public grid. Power politics on the issue of affordability require careful strategizing of the politics of power. But if they are willing to ask tech companies to pay their fair share, Democrats can reap electoral rewards—and help everyday consumers in the process. Tom Rogers is executive chairman of Claigrid, Inc. (the cloud AI grid company), an editor-at-large for Newsweek, the founder of CNBC and a CNBC contributor. He also established MSNBC, is the former CEO of TiVo, a member of Keep Our Republic (an organization dedicated to preserving the nation's democracy). He is also a member of the American Bar Association Task Force on Democracy. The views expressed in this article are the writer's own.
