Microsoft Plans to Pay More for Data Centers' Power

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Written by Danny Levin, Deputy Editor for IIR News Intelligence (Sugar Land, Texas)

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Summary

Microsoft says it is working to prevent residents from seeing data center-driven electricity price hikes by requesting that utilities charge the tech giant higher rates. Community backlash around the issue of electricity prices has become a point of contention around data center construction.

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Microsoft's Pledge to Limit Data Center Power Costs

At an onstage event in Great Falls, Virginia, Microsoft President Brad Smith said the company would be asking public utilities to set higher electricity rates for its data centers amid community backlash.

Concerns regarding the data center-driven rise in electricity prices is creating "a moment in time when we need to listen, and we need to address these concerns head-on."

Large-load data centers, such as those that house artificial intelligence (AI) applications, require processors that consume large amounts of energy.

"We will pay utility rates that are high enough to cover our electricity costs in part by collaborating with utilities on plans to add the electricity supply that we will need."

Smith made an identical statement at a September event near a data center complex in Racine, Wisconsin, that's on track to come online this year. The project is one of $67 billion worth of active and planned data center projects from Microsoft across the U.S., according to Industrial Info's Global Market Intelligence (GMI). Subscribers to the GMI Industrial Manufacturing Project Database can see a full list of project reports.

The tech giant also has said it plans to curb water usage at its data centers, which is another concern for local residents; servers require large amounts of water to stay cool.

But following push-back from residents, in part regarding power and water use, the tech giant decided not to move forward with a proposed data center in Caledonia, Wisconsin.

Smith also said Monday that Microsoft would sign deals with utilities in advance, in order to invest in grid infrastructure needed to support data centers. "When our data center expansion requires improvements in transmission and substation capabilities, we will continue our existing practices by paying for these improvements," according to a blog on the company website promoting the new initiative.

"This work will build on a spirit of partnership with utilities we've worked to foster across the country," he added. That includes the company contracting to add 7.9 gigawatts of new electricity generation to the Midcontinent Independent System Operator (MISO) grid, "which is more than double our current consumption."

U.S. utilities have sought to recover large capital outlays by raising electricity prices for residential customers.

Trump Supports the Push to Protect Ratepayers

Smith's speech came just hours after President Donald Trump in a Truth Social post pledged his administration would work with "major American Technology Companies," including Microsoft, to protect customer utility bills from rising.

While data centers "are key" to the AI boom, the "big Technology Companies who build them must 'pay their own way.'"

Figures for U.S. electricity demand, usage and prices vary by source, but a general consensus is that energy-intensive data centers are causing, and could continue to cause, all three indicators to increase.

The U.S. Department of Energy (DOE) estimates data centers could consume 6.7% to 12% of all U.S. energy use by 2028.

Meanwhile, a recent report from the U.S. Energy Information Administration (EIA) forecasted U.S. electricity use will grow by 1% this year and 3% in 2027, marking the first time since 2007 that power demand has increased four years in a row and the strongest four-year growth period since 2000. "The driving factor behind this surge is increasing demand from large computing centers," EIA said in a press release regarding the outlook.

Regarding prices, the latest data from the EIA indicates the U.S. average residential electricity price was 17.98 cents per kilowatt-hour, an increase of 5.2% from the previous year. While the agency did not give a reason, it is reasonable to assume those figures have been impacted, at least in part, due to the rise in active and planned data center capacity.

Meanwhile, the International Energy Agency estimates that U.S. data center electricity demand will more than triple by 2035, growing from 200 terawatt-hours (TWh) to 640 terawatt-hours per year.

A report from the DOE released in January 2025 indicated data centers consumed around 176 to 183 TWh of electricity in 2024.

For more information on the U.S. data center buildout, including challenges facing construction, see January 13, 2026, article - Meta Boosts Nuclear Agreements, Adds Vistra, TerraPower, Oklo, December 24, 2025, article - Will GOP Food Fight Break Out Over AI Regulation, Affecting Data Center Buildout?, and December 8, 2025, article - U.S. Data Center Buildout Hits Obstacles--Speed Bumps or an Iceberg?.

Industrial Info is tracking nearly $200 billion worth of U.S. data center projects under construction, and another $546 billion that could kick off in 2026 (see project reports.) Some of the proposed projects are in their early planning phase, where plenty of factors can delay, alter or eliminate proposed investment.

Key Takeaways

• Microsoft says it will work to prevent data center energy usage from causing utility price hikes.
• The tech giant will ask utilities to charge higher electricity prices.
• Backlash from communities over costs was a major reason for the initiative.
• Data centers could consume 6.7% to 12% of all U.S. energy use by 2028.
• U.S. data center electricity demand could more than triple by 2035.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resource's Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).