Public Power Is the Affordability Solution Hiding in Plain Sight
Public Power Is the Affordability Solution Hiding in Plain Sight
New paper from Groundwork Collaborative outlines solutions to immediately lower electricity bills, save households over $250 billion over ten years, and ensure utility customers aren’t left paying for Big Tech’s AI data center boom
As electricity bills are set to spike 8.5% higher this summer, Groundwork Collaborative today published a new report detailing how public power can be a powerful tool for addressing the cost of living crisis. The paper, How Public Power Can Build the Grid of the Future & Lower Bills Now, authored by Groundwork Senior Fellow Grayson Flood, provides a roadmap for both immediate bill relief and long-term affordability. It pairs policies that can quickly lower household electricity bills – such as a rate freeze or fixed-rate, stable monthly price – with the creation of new public power institutions to build more transmission and make the grid more efficient and effective. In turn, these changes would ensure the wealthy and Big Tech companies pay for the new power generation and transmission infrastructure needed to support lower prices, decarbonization, and power-hungry AI data centers. If adopted, the paper’s proposals would save households roughly $255 billion on bills over 10 years.
Energy bills have risen nearly 40% over the last six years and are now rising at twice the pace of inflation with little relief in sight. Utility companies are expected to request $93 billion in rate increases from 2025-2028, in part due to the AI boom. Polling from Groundwork finds that voters hold profit-seeking utility companies and the energy demand of AI data centers most responsible for the price they pay for energy, with nearly two-thirds of voters (65%) saying that new AI data centers will raise local utility bills.
While today’s utility model incentivizes rate hikes on working people in order to feed profits to executives and investors, the author proposes the creation of two new federal institutions – the National Power Authority and the Grid Trust Fund – to instead plan and finance a modernized power grid for public benefit.
In the paper, Flood writes:
“At a time when public anger about rising bills and data center proliferation is reaching a fever pitch, debates about the future of the energy system are either too narrow to solve the problem or too rooted in the market fundamentalism that has eroded the capacity of the grid over decades. While the challenges of how to meet the demands of growing electricity demand are vast, the opportunity is just as great. After decades of deregulation and complacency, the time is ripe to embark on a grand national project to fundamentally rethink how energy is generated and distributed in the U.S.”
Background
Policymakers Must Take Steps to Lower Bills Now.
- Policymakers should intervene directly to protect residential utility customers from surging utility bills by enacting price stabilization policies and targeted rate freezes contingent on the federal investment and planning needed to bring prices down in the near term.
- Flood shows how a rate stabilization program would have avoided 2022’s natural gas-driven price spike in New England, and he estimates that a rate freeze, in which utilities opt-in in exchange for federal investment, would save utility customers and taxpayers roughly $30 billion to $35 billion over 25 years.
- A majority of Americans support reforms to lower utility bills immediately, modeled after Norway’s system of rate stabilization and steady prices year over year.
- A clear majority of voters (57%) support the model, which would empower the government to set a fixed monthly electricity rate to give households a predictable budget month-to-month.
The Future is Public Power.
- Today, our grid serves as a bottleneck when it should be the backbone: an electric commons that enables new energy demand to lower prices by spreading costs, rather than a balkanized system governed by private interests that limits capacity growth and generates uneven costs. At a time when we are seeing the largest load growth in decades, policymakers cannot tinker at the margins of existing markets or regulatory structures to solve this problem.
- Following in the footsteps of public institutions like the Tennessee Valley Authority, Power Marketing Administrations, and Highway Trust Fund, Flood proposes the creation of two new federal institutions – the National Power Authority and the Grid Trust Fund – to plan and finance the public backbone of our new grid while using existing technologies to make the existing grid more efficient.
- Political winds are blowing in favor of public planning and public investment instead of private market solutions. Groundwork polling finds that 60% of Americans say the public sector should lead grid modernization efforts and 58% believe the public sector should run utilities themselves.
To Build The Grid of the Future, Make Data Centers Pay Their Fair Share Now.
- Currently, our power grid is largely financed through a regressive payment scheme where households are charged the same energy rate, regardless of income. Meanwhile, while lower energy rates for industry have historically been used to attract jobs and tax revenue, data centers represent a new class of industrial utility customers that bring few jobs and little tax revenue. AI data centers must be forced to pay into the public purse to fully fund new generation and transmission infrastructure to meet their own growing demand for power.
- To move from a regressive system to a progressive system, federal lawmakers should fund the Grid Trust Fund via the tax base, and implement an excise tax on outsized electricity use from AI data centers and crypto mining to help fund public investment in the grid. Flood estimates that such a tax could raise roughly $95 billion over ten years, which would seed the Grid Trust Fund.
- Groundwork polling finds that 60% of Americans believe that the energy demand from new AI data centers is responsible for the prices they pay for utilities, with majorities believing that if an AI data center was built in their community, it would have a negative impact on both their electricity (58%) and water (52%) bills.
- An even larger majority (69%) say requiring AI data centers to invest in new power plants to generate more power for the community as a whole would be an effective way to reduce the data centers’ impacts on utility bills.
