WASHINGTON — Growing energy consumption from AI data centers dominated the agenda at the National Association of State Energy Officials’ 2026 Energy Policy Outlook Conference last week.
Commissioner of the Federal Energy Regulatory Commission Judy Chang said policymakers need to act now to make power grids more efficient in anticipation of rising AI use.
“There is an opportunity where when large loads come in, we can keep rates steady and enhance the grid,” she said. “If we’re not careful, we do run the risk of increasing rates for everyone.”
According to technology experts David M. Klaus and Mark MacCarthy at the Brookings Institute, electricity costs have increased 30% since 2020, rising at twice the rate of inflation.
Bill Streilein, the Vice President and Chief Technology Officer at science and tech non-profit Noblis, said advancements in AI demand more energy. But, he said, these demands are matched with more complex and useful outputs.
“Scale is really continuing to return benefit, meaning that as we increase the size of the models, we increase the amount of data, we increase the need, obviously, for energy that’s required to power them,” he said. “We are getting benefit. The models are able to make stronger, better, larger inferences.”
Streilein also noted that data centers require cooling technology for the chipsets, increasing their environmental impact
“I know that many of them are looking for advantageous locations that are near water cooling or in spaces where they can take advantage of the local environment,” he said.
The annual conference brought together nearly 400 attendees, including state and federal lawmakers, private sector leaders, and organizations for four days at the Fairmont hotel to address pressing issues facing the energy industry.
NASEO focused multiple sessions and panels on energy consumption in AI data centers and the expansion of the geothermal energy sector. Many policymakers spoke on the future of energy consumption by large data centers as AI use becomes a household practice. According to the International Energy Agency, energy consumption from data centers has grown12% per year over the last five years.
As the commissioner of FERC, which has jurisdiction over transmission access and pricing, Chang said the organization wants to prioritize “how we can make sure that all the resources that want to connect to the bridge have non-discriminatory open access to the transmission bridge.”
Company representatives also discussed how they are managing new data systems. According to Advanced Energy United, large-load tariffs are a way for power grids to accommodate new data without costs shifting entirely to consumers.
In August, Politico reported that President Donald Trump wanted to create a pact with big tech companies including OpenAI, Microsoft and Google to ensure residential electricity bills would not go up.
Google’s Senior Lead for U.S. Energy Markets, Brian George, said Google has been working with state level jurisdiction to implement tariffs that will ease the burden on utility partners.
“We recognize the burden that that is putting on our utility partners and developers to service,” he said. “We want to match that burden with some level of appropriate financial commitment that we will show up.”
However, households have already been absorbing costs as a consequence of rising rates. In January, Virginia’s State Corporation Commission raised rates to cover grid updates, which added $16 a month to residential electricity bills, according to Inside Climate News.
Noblis Director of Resilience & Sustainability Jill Thijs said one way to relieve pressure from the grid would be for every data center to operate independently by fueling itself.
“You’re going to see some energy innovations in technologies that are existing but might need to be improved to take on that capability,” Thijs said. “Geothermal, some small modular reactors, those types of things. I think you’re going to see that being applied more to data centers.”
For states with limited local energy resources, two expanding energy sectors came to the forefront of policy talks: geothermal and nuclear. Lawmakers from Hawaii, Idaho and West Virginia all noted that they are trying to revitalize the geothermal energy sector.
The issue, Hawaii Deputy Energy Officer Stephen Walls said, is with energy transmission and relying on foreign oil.
“We need supply chains for the full gamut of energy technologies that’s domestic or in line with other countries,” he said.
In the last five years, Walls said Hawaii has rerouted imports from Russia to Libya and now Argentina. He said a stable source of energy will bring price stability and easier access for consumers.
West Virginia Office of Energy Director Nicholas Preservati spoke about the challenge for smaller states to build new energy operations from the ground up. For West Virginia, Preservati said a history of relying on coal and imports has stalled efforts for new technology.
“We’re having to build an entire ecosystem for nuclear, for geothermal,” he said. “We don’t have a lot of the resources that other states do.”
States’ reliance on the power grid and electrical energy is fuelling the bulk of AI consumption. In multiple sessions, policymakers expressed concern over the rapid increase in AI use, calling on Congress to make permitting reforms.
President and CEO of Citizens for Responsible Energy Solutions Heather Reams said the permit process is blocking advancements in energy since new projects can take anywhere from a few months to multiple years to get approved. As a result, Reams said expanding AI data centers will likely outpace new legislation.
“Permits are an important piece of it, but we’re going to be faced with a lot of other challenges with AI, what it can do, who holds the power,” Reams said. “Policymakers, particularly in Congress, are looking for a lot of input, and it’s anyone’s game.”