A new report from Monitoring Analytics, the independent market monitor for the PJM Interconnection, found that wholesale electricity prices in the country’s largest regional power market climbed 75.5% year over year. Prices rose from $77.78 per megawatt-hour during the first quarter of 2025 to $136.53 during the same period in 2026.
PJM Interconnection manages the electrical grid across all or parts of 13 states and Washington, D.C., including Northern Virginia, home to the world’s largest concentration of data centers. According to Monitoring Analytics, demand from AI-focused data centers has become a major driver of tightening supply conditions and rising prices.
Perhaps most concerning: the report also warned that the financial impact on households and businesses is likely to continue, referring to the impact on customers as “not reversible.”
Overwhelming the Grid’s Ability to Respond
The International Energy Agency reported that global electricity demand from data centers grew 17% in 2025, while AI-specific workloads increased electricity consumption by roughly 50%. In the US, data centers now account for about half of all incremental electricity demand growth.
Utilities, regulators, and transmission planners say the rate of development has outstripped the grid’s ability to respond. The problems extend beyond electricity generation and include transmission construction, permitting delays, equipment shortages, and long interconnection queues.
In PJM territory, with its many data centers, the delays are especially severe. According to research from RMI, the average timeline from interconnection application to commercial operation has stretched from under two years in 2008 to more than eight years in 2025.
The infrastructure needed to modernize the grid is also becoming more expensive and harder to obtain. Large power transformers, essential for moving electricity across transmission systems, face significant supply shortages. Wood Mackenzie estimates lead times for some transformer categories now exceed two years. Transformer prices have climbed sharply since 2019, with some categories increasing as much as 95%.
Transmission construction is another bottleneck. Grid planners estimate the US needs roughly 5,000 miles of new high-voltage transmission annually to accommodate future electricity demand. Last year, fewer than 900 miles were completed.
Building new transmission lines can take a decade or longer because of environmental reviews, permitting requirements, land acquisition, and state-level approvals.
A Major Shortfall
Monitoring Analytics has proposed a more immediate solution to energy limits: require large data center operators to secure or finance their own power generation rather than shifting the costs onto the broader electricity market.
Some data center developers, seeing the grid’s limitations, are moving ahead with on-site natural gas generation to avoid grid connection delays. Still, the shortfall between the speed of AI investment and the slower pace of energy infrastructure development continues to be significant.
