AI Surge Threatens Texas Electricity Prices

Texas electricity prices rose 4.4% over the past year. Despite the rise being a smaller increase than the national average, experts warn that a surge in energy-hungry data centers tied to artificial intelligence (AI) could significantly increase costs in Texas.

The national average retail price for electricity climbed from 16.41 cents to 17.47 cents per kilowatt-hour between May 2024 and May 2025, which is an estimated 6.5% jump, according to the U.S. Energy Information Administration.

Texas rates went from 14.84 cents to 15.49 cents in the same period. By contrast, Maine saw the sharpest spike at 36.3%, followed by Connecticut (18.4%) and Utah (15.2%).

Power prices vary widely by state, depending on supply, demand, fuel costs, and infrastructure. However, analysts argue that data centers are becoming an increasingly important factor, especially in fast-growing regions.

Cathy Kunkel, an energy consultant with the Institute for Energy Economics and Financial Analysts, commented on the issue, saying, “anywhere you’re seeing a massive takeoff in load growth, the most likely cause is data centers, and that is almost certainly going to have an impact on electric rates.”

Researchers at the University of Houston project that the Lone Star states’ electricity demand could double or even quadruple by 2035. If there are no upgrades to address the surge, the state could face a 27 to 40-gigawatt annual shortfall.

As such, utilities are already reacting.

CPS Energy is seeking 400 megawatts of new wind power to keep with rising demand. This is CPS Energy’s largest request in more than a decade. The San Antonio–Austin data center market has quadrupled in size since 2020, according to the San Antonio Express-News.

Texas lawmakers also moved quickly to manage the strain.

Senate Bill 6, which was passed in June, requires emergency shutoff switches for data centers. This allows the Electric Reliability Council of Texas (ERCOT) to cut service during crises like extreme heat or winter storms.