The Data Center Problem

Local, Tri-County, Statewide Impacts

Electricity, it seems simple; plug something in, and it works. Behind the scenes, however, it’s a little more complicated. Electric bills continue to rise as society becomes more reliant on the utility, bringing increased scrutiny on how rates are set. A complicated, somewhat regulated, process determines rates on monthly bills. Those numbers are rising, with some of the largest increases just taking effect this summer. Expect more increases as demand spikes because of data centers.

Loudoun County, Virginia. The city of Asburn, where over 200 data centers are built or approved, is known as “data center alley.” From 2021-2024, the number of data centers nationwide nearly doubled as the rush for Artificial Intelligence, or AI, has companies investing billions. This year alone Amazon, Meta, Google, and OpenAI have announced more than $700 billion in financing for data center projects around the country.

State and local governments view data centers as lucrative opportunities to increase revenue and jobs. However, many utility watchdog groups have grown concerned about utilities cutting deals to get big tech to locate in their service area. Utilities are incentivized to expand transmission lines because they can recoup costs, plus a profit, from ratepayers. Originally, this structure was to encourage companies to expand transmission networks so more people have access to electricity. Now, the situation is ripe for exploitation. Data center facilities can use up to five giga-watts of energy, the equivalent of five nuclear reactors powering around a million homes. To meet the demand, utilities must quickly expand transmission infrastructure. 

Most people know electricity is supplied to their home or business from their utility company or cooperative. Locally, SMECO covers Charles, Calvert, St. Mary’s, and southern Prince George’s counties. SMECO purchases power from PJM, a regional transmission organization composed of the utility companies in its service area that manages and coordinates the wholesale electricity grid across 13 states and Washington D.C. PJM is also responsible for adding new energy sources to the grid. With 65 million Americans living in PJM’s service area, it is the biggest retail market.

PJM Service Territory

There are two other major players in this equation. Public Service Commissions (PSC) regulate utility companies and the process through which those companies petition to set supply rates. The PSC also sets distribution rates. Meanwhile, the Federal Energy Regulatory Commission regulates transmission rates charged. These quasi-governmental bodies are supposed to protect ratepayers from being charged too much.

Electric bills have two main rates, supply and distribution, plus applicable taxes and fees. Supply rates have three components: the energy’s cost, capacity cost during peak periods, and transmission infrastructure. Distribution rates are set when a utility files an application with a PSC to alter their rates based on business needs. The company requests a base rate and an additional percentage to recover incurred costs plus profit, as allowed by law. The PSC decides whether the proposed rate is reasonable before granting approval. Utilities can file rate cases as often as they like.

Every couple years, PJM holds a capacity auction where power plant operators sell portions of their capacity to utilities. Prices set during the capacity auction affect what’s charged to ratepayers. In 2024, PJM’s auction set prices for 2025 and 2026 that broke all previous records, going up by 800% according to the Office of the People’s Counsel. Fiscal year 2024 capacity price was $28.92 per megawatt-day; FY25’s is $269.92 and FY26 is set at $329.17. Daniel Lockwood, a PJM spokesman, admitted the increase was from "unprecedented and continuing growth in demand from the proliferation of high-demand data centers in the region.” A study ordered by Virginia state lawmakers found energy demand from data centers “would drive up Virginia’s energy usage 183% by 2040.”

Further complicating the issue, PJM’s queue of projects waiting to join the grid is backlogged. Projects capable of a combined 63 gigawatts of energy are in the queue. Projects totalling forty-six gigawatts have been approved, but “some aren’t being built because of factors beyond PJM’s control,” according to Lockwood. Solar and wind projects in development have now stopped because of funding cancellations from the Federal government. Funding allocated under the Inflation Reduction Act and Bipartisan Infrastructure Law, passed under President Biden, has been rescinded by the Trump Administration. Without additional capacity projects to create more supply, increasing demand will continue to drive up costs. As of July 2025 there are over 2000 projects in PJM’s queue, of which 1,213 are solar and 132 are wind according to Inside Climate News.

Maryland is on the cusp of a data center boom. Governor Larry Hogan signed a law in 2020 offering qualified data centers a tax exemption on personal property across a 10 year consecutive benefit period. It allows data center owners to purchase things like computers, desks, and other equipment tax-free potentially saving millions of dollars. In 2024, Governor Wes Moore signed the Critical Infrastructure Streamlining Act, co-sponsored by Senator Jack Bailey, to remove barriers for the use of backup power generators, something data centers often need. This was after the Maryland PSC denied an exemption requested by a data center developer to install as many as 168 diesel generators in Frederick County. Earlier this year, Moore vetoed a bill (https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/HB0270?ys=2025RS) from Delegate Brian Crosby that would’ve required a report on the environmental, energy, and economic impacts of data center development.

In 2024, then-County Executive Angela Alsobrooks proposed a bill in Prince George’s County to fast-track data center development. Qualified data center projects would be exempted from “filing preliminary plans of subdivision and establishing requirements for public notice and adequate public facilities.” But the Prince George’s County Council voted against the bill, instead creating a Data Center Task Force to study the issue and make recommendations on potential impacts of this type of development. Just this month, hundreds of residents showed up at a task force meeting concerned about negative consequences on their community. Locations being considered for data centers include Brandywine, Laurel, and the old Landover Mall site. On September 15th, news broke that Aisha Braveboy, Prince George’s County Executive, was stopping data center development via executive order.

Charles County’s Department of Economic Development’s website highlights positive economic impacts of data centers and explains why the county is an ideal location. Plans were recently pulled for the Piney Reach Data Center off Billingsley Road, which showed a three phase development across more than 430 acres. A brochure from commercial real estate firm NAI Michael says there is “significant support from Charles County government, utility authorities, and fiber network providers.” Charles County government is planning a community meeting on September 20th at 9:30am to discuss “growing developer interest in possible locations for data centers in the county.”

Likewise, Calvert County Government has planned a public information session on September 29th at 6pm “to help residents learn more about data centers and how they operate.” Constellation Energy, operator of Calvert Cliffs Nuclear Plant, has been pushing to co-locate a data center nearby. Co-location is a strategy used by power plant operators and data center developers to provide power directly to the center. The option will likely increase electric prices because “capacity prices would increase as the supply of capacity to the market is reduced” according to a report from Harvard Law. In other words, being next to the power source gives data centers first dibs on their output.

St. Mary’s County hasn’t been part of the data center conversation, and the County Commissioners have not taken any action on the issue. The Patuxent Partnership held a panel discussion on the subject back in June at the USMSM Smart Building in California. President/CEO of SMECO, Sonja Cox, said there that the utility is exploring data center feasibility studies but non-disclosure agreements prevented her from sharing details. These agreements are often put in place by data center developers who want to protect business information, but it really obstructs public clarity and transparency on these projects.

To see how data centers are already affecting you just look at your electric bill. PJM’s new capacity auction rates began on June 1, 2025. In March, I used 1031 kwh of energy and paid $88.05. But in August our household used less energy, 968 kilowatt hours, and paid more for it at $102.32. Though the rates increased, my overall bill cost was lower because of an energy credit from the Next Generation Energy Act, passed this year. The act provides $200M in residential electric customer bill credits in fiscal 2026 to combat rising prices. It also requires that data centers are treated as a separate class of ratepayer to limit effects on residential customers. But the bill credit is a temporary solution to a long-term issue.

As Charles, Calvert, and Prince George’s engage in conversations about data centers, St. Mary’s residents should pay attention. Actions in neighboring counties will affect everyone in SMECO’s service area. Broadly, ratepayers across Maryland must also be aware of data center development in neighboring states. Virginia’s welcoming environment for data centers has cost more than just their residents.

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