A Progressive Plan to Freeze Electricity Rates Without Starving the Grid

There’s an interesting new report out today from the progressive think tank Groundwork Collaborative that makes a case for how Democrats can harness the artificial intelligence and data center boom to help the power grid — while also cutting costs for electricity customers.

But first, some news. We’ve known for some time now that artificial intelligence is transforming America’s biggest technology companies, turning them into major energy consumers and even quasi-industrial firms. Now we have even more evidence that it’s driving up their carbon emissions, too.

Google and Amazon released their annual sustainability reports yesterday, and both show huge surges in their energy use and climate pollution. Google’s greenhouse gas pollution grew by 18% last year, its largest year-over-year jump on record, and its energy use leapt by 37%. The company’s energy use rose by more than a quarter last year; it now uses roughly 3.5 times as much energy as it did before the pandemic.

Amazon’s climate pollution, meanwhile, increased by more than 16%, surging by the equivalent of more than 10 million metric tons of carbon dioxide. Emissions from its purchased electricity increased 34% since last year. If you feel like you’re seeing more Rivian-made Amazon delivery vans on the road, you’re not wrong: The company claims it deployed an additional 21,000 last year.

What’s driving this surge? The AI boom, of course. “Our AI infrastructure buildout is currently accelerating faster than the grid is decarbonizing,” Kate Brandt, Google’s chief sustainability officer, said in a statement.

What to do about it? That’s what Groundwork’s report is about.

“How do we bring down costs now? How do we bring down costs in the long term? And how can we make those two things mutually reinforcing?” Grayson Flood, the report’s author and a former policy adviser to Representative Alexandria Ocasio-Cortez, told me. “We wanted to be pretty direct about addressing what we see as a broken incentive structure within the system, particularly for interregional transmission.”

The report outlines a few novel ideas about how to lower prices immediately, in part to get through a coming multi-year “crunch,” during which the power grid in some regions will be maximally constrained while utilities work to bring new power plants online:

• It proposes an electricity rate freeze — but only as an opt-in mechanism at the utility level. Essentially, Congress could create a new program that helps utilities voluntarily freeze rates for consumers for several years; in return, the utility would get easier permitting and access to low-cost federal financing. It would also get help using the capacity it already has through reconductoring and virtual power plants.
  
• The report also proposes a new ratepayer stabilization fund, which governors could elect to join at the state level modeled on a similar program in Norway. Under the Norgespris framework, households below a certain usage cap can opt into a fixed-price electricity rate. In the U.S. version, that rate would remain stable even as electricity prices shift depending on the season and geopolitical conditions. (The scheme would seek to buffer households from natural gas-triggered volatility, which an influential 2025 Lawrence Berkeley National Lab report identified as a major driver of higher power prices.) When prices drift below the cap, those stable rates will recapitalize the fund.

The report also imagines several policy ideas to help build out the grid. One of them is a Grid Trust Fund, a new federal bank account funded through an excise tax on data centers and other large electricity loads.

The government has often turned to funds like these to support infrastructure that creates a natural monopoly at national scale, Flood said. “The interstate highway is the most notorious example, but you can look at airports, you can look at seaports — they have these types of trust funds. There’s a lot of precedent for this in the tax code, and they tend to be financed with excise taxes on some sort of corresponding usage of the infrastructure.”

Under his scheme, the new excise tax would fall on big power users like data centers or crypto miners that don’t generate many permanent local jobs — in other words, aluminum smelters, steel mills, and semiconductor fabs would be exempt from it. But even just taxing electricity for large loads at 1 or 1.5 cents per kilowatt-hour, he said, could throw off more than $100 billion in a decade. That money could then be used to fund new transmission projects, technical assistance for utilities, ratepayer relief, or economic development.

That trust fund would be partly overseen by a National Power Authority, a new government corporation modeled on the Tennessee Valley Authority or the Energy Department’s existing power marketing administrations. This authority would have limited powers and would be partly inspired by Texas’ successful effort to centrally plan transmission lines in order to expand its electricity market.

The new authority would plan and develop interregional transmission, linking far-flung regions of the country to create new power markets. It would also have the power to build new 24/7 zero-carbon electricity power plants with high up-front capital costs, such as new geothermal projects, offshore wind farms, or nuclear plants.

“People talk about the power grid as a platform,” Flood said. But “right now, the grid is not functioning as a backbone and platform, it’s functioning as a bottleneck.”

The goal of the report, he said, is to ask: “How do we build [the power grid] as a backbone to support the growth of private markets, whether that’s in renewable energy generation, or an AI data center, or a new hospital that’s showing up?”

It’s an interesting document. Many energy wonks have proposed plans to shift some of the costs of expanding the electricity system out of the ratebase — that is, out of customers’ power bills — and onto the tax base, which is funded in a more progressive way. (I recently argued for a national, publicly funded grid buildout in The New York Times.) The new Groundwork report, in essence, tries to reframe those ideas for an era of populist politics — and one in which Americans are suspicious of data centers, as Heatmap’s polling has shown.

In its fusion of populist and pro-growth attitudes, this new set of proposals reminds me of New York City Mayor Zohran Mamdani’s attempt to freeze the rent for some tenants while passing major supply-side reforms allowing new housing construction. That effort has won Mamdani praise from many housing advocates in New York (even as some remain dubious about his de facto rent freeze). Whether that kind of politics works at a national level remains to be seen.