For most of the last twenty years, electricity was a line on the P&L that nobody owned. It went up a little every year, it was paid by accounts payable, and the only time a founder looked at it was when the air conditioning broke.
That is over in a growing part of the United States. Two forces are landing on commercial bills at the same time. The build-out of AI data centres is consuming grid capacity faster than new generation and transmission can be added, and that scarcity is being priced into what every other customer on the same grid pays. On top of that, the energy shock that followed the conflict involving Iran earlier this year pushed fuel prices up worldwide, which feeds through to generation costs.
In October 2026, rising energy and power costs were one of the fastest-growing worries in the monthly small business surveys, and Federal Reserve officials were publicly naming AI, tariffs and energy together as the reasons inflation might stay sticky. You do not need to have an opinion on any of that to act on it. You need to know what you are paying for, and which of it you can change.
The short version
- The increase is regional, not national. Some grid regions, particularly where data centres are clustering, have seen capacity costs rise several times over in two years. Others have barely moved. Find out which one you are in before you panic or relax.
- Most commercial bills have three parts, and the one rising fastest is often not energy. Capacity and demand charges, the price of being able to draw power at your peak, are where the data centre effect shows up.
- Your peak matters more than your total. Two businesses using the same electricity in a month can pay very different bills depending on their single worst fifteen minutes.
- The cheap levers come first: rate class review, peak shaving, controls. Solar and storage come after you know your load profile, not before.
- If you do one thing this month, pull twelve months of interval data from your utility and find your peak.
Why are commercial electricity bills rising so fast in some states?
The mechanism matters, because it tells you which part of the bill to attack.
Grid operators run auctions to make sure enough generating capacity will exist in future years to meet peak demand. When forecast demand jumps, as it has with data centre interconnection requests, and new supply cannot be built quickly, the clearing price in those auctions rises. That cost is passed through to utilities and retail suppliers, and from them to you, usually as a capacity or demand component.
PJM, the operator covering much of the Mid-Atlantic and Midwest, publishes its capacity auction results, and the jump between its 2024 and 2026 auctions was large enough to show up in industrial rates in states like Ohio and Pennsylvania within the year. Other regions run their markets differently, and some vertically integrated utilities file rate cases with the state commission instead. The US Energy Information Administration publishes average commercial prices by state monthly, which is the quickest way to see whether your state is an outlier.
The second force, fuel, is more familiar. When natural gas prices rise, so does the cost of the generation that sets the marginal price in most markets. That part tends to show up in the energy component of the bill and moves faster, in both directions.
How to read a commercial electricity bill
Pull your last twelve bills and find these lines. Names vary by utility, but the structure is nearly universal.
| Component | What it pays for | What drives your cost | Can you move it? |
|---|---|---|---|
| Energy (kWh) | The electricity you actually used | Total consumption, time of use, fuel prices | Yes: efficiency, shifting load to cheaper hours, supply contracts in deregulated states |
| Demand (kW) | The capacity needed to serve your highest draw | Your single highest interval in the billing period, sometimes over twelve months | Yes, often cheaply: this is where most quick wins are |
| Capacity or transmission charges | Your share of grid capacity, often set by your load at system peak hours | Your usage during a handful of grid-wide peak hours a year | Yes, if you know when those hours are likely to fall |
| Fixed and customer charges | Metering, billing, connection | Your rate class | Sometimes, via a rate class review |
| Riders and taxes | Programmes and surcharges approved by the state | Regulatory decisions | No, but read them: they explain surprises |
If demand and capacity together are a large share of your bill, you have a peak problem, not a usage problem. That changes what you should buy.
Which levers actually reduce the bill?
In rough order of cost and speed.
1. Rate class review. Utilities offer several tariffs for commercial customers, and businesses are frequently on the default one rather than the best one. A time-of-use or demand-based tariff can be materially cheaper for a business that operates mostly off-peak. Ask your utility account representative for a rate analysis. It costs nothing.
2. Find and shave your peak. Look at the interval data. Peaks usually come from a predictable collision: compressors, HVAC and ovens all starting at 8am; EV chargers plugged in at the same moment as the kitchen fires up. Staggering start-up sequences, adding simple load controls, or setting EV chargers to throttle during peak hours can cut demand charges without reducing what you actually do.
3. Watch the system peak hours. Where capacity charges are set by your usage during the grid's annual peak hours, many larger customers reduce load on the handful of hot afternoons when a system peak is likely. Your utility or supplier often publishes alerts. A business that can pre-cool a building or delay a batch process for three hours can cut next year's capacity charge.
4. Controls before equipment. Building automation schedules, occupancy sensors and thermostat lockouts are cheap and pay back quickly. LED retrofits are close behind if you have not done them.
5. Supply contracts, in deregulated states. In states with retail choice, you can buy the energy component from a competitive supplier. In a rising market, the question is how much to fix and for how long. Read the contract carefully for pass-through clauses: many "fixed" offers pass capacity and transmission costs through at actual cost, which is exactly the part that is rising.
6. Solar, storage and demand response. These can pay back well, especially where demand charges are high, because a battery that discharges for fifteen minutes at your peak can be worth more than the energy it stores. But size them from your interval data, not from a salesperson's estimate, and model payback with conservative assumptions about future incentives. The same discipline we describe for commercial solar decisions applies in any market: model the payback so that a policy change cannot break it.
How should you budget and price for this?
Treat energy the way you would treat any volatile input cost.
- Budget with a range, not a number. Build next year's energy line from your interval data with a base case and a stress case. If the stress case breaks a product line's margin, that is information you want now.
- Know your energy cost per unit of output. Per meal served, per unit manufactured, per square foot cooled. Without it you cannot price, and you cannot tell whether an efficiency project worked.
- Reprice deliberately, not reactively. If energy is a material input, build it into your pricing review the same way you would a tariff or a raw material. We set out a practical sequence in our 90-day pricing playbook for volatile input costs.
- Assign an owner. Someone should look at the bill every month and be able to explain the change. In most small companies nobody does, which is how a demand charge doubles unnoticed.
Who is most exposed?
Businesses with high, spiky loads in regions where capacity costs are rising: food service and food processing, light manufacturing, cold storage, laundries, car washes, gyms, and anyone who has added EV charging for a fleet without load management. Multi-site operators are exposed differently: the risk is that nobody is comparing sites, so the expensive one stays expensive.
Businesses in leased offices are usually less exposed directly, but watch your service charge and lease renewals. Landlords pass these costs through.
Frequently asked questions
Is the data centre effect temporary?
Nobody knows, and you should not plan as if you do. New generation and transmission take years to build. Plan for elevated capacity costs for at least the next few auction cycles in affected regions, and treat any relief as upside.
Should we sign a long fixed-price supply contract now?
Only after reading what is actually fixed. If capacity and transmission are passed through, a fixed energy price protects only part of the bill. Consider splitting your volume across terms rather than locking everything at one point in the cycle.
Is a battery worth it for a small business?
Sometimes, and mainly where demand charges are high. The test is your interval data: if a small number of short peaks set your demand charge, storage can be very effective. If your load is flat, it usually is not.
What is the single most common mistake?
Buying equipment before reading the interval data. The data often shows that the biggest saving is free.
Where to go next
If you would like your bills and interval data read by someone who will tell you which part is actually moving, that is a short piece of our business operations consulting work. For sector context, see our notes on manufacturing and hospitality, or talk to us.
