In the artificial intelligence race, Amazon and other companies worth trillions of dollars are competing to secure as much electricity as they can to power as many chips as possible. Their gargantuan demand is sending shock waves through energy markets.
Wholesale energy prices are rising — in the Northwest, but especially at the epicenter of the nation's data center power crunch on the East Coast. There, the concern that AI will drive up electricity costs — held by 77% of Americans, according to a Reuters/Ipsos poll — is coming true.
But the world’s richest companies aren’t exposed to price shocks the same way smaller companies or households are. By signing multibillion-dollar electricity deals before prices shot up, tech behemoths like Seattle-based Amazon locked in their prices for years, sometimes decades. Recent regulatory disclosures show just how well they protected themselves.
In July, Amazon reported a $599 million unrealized gain, an increase in the value of some of its long-term electricity contracts over the first half of this year. The figure highlights that the companies profiting most off AI are also winning the competition for electricity that the technology helped drive.
One of Amazon’s deals — a 17-year, $18 billion contract to power new Pennsylvania data centers with an existing nuclear plant — exemplifies how AI’s growing demand can reshape energy markets and help fuel a backlash against data centers in places as politically diverse as Washington state and Texas.
In interviews with The Seattle Times, Amazon officials emphasized its unrealized gain was on paper, not money the company had received. They called it “accounting noise” that could shrink or turn into a loss if electricity prices fall, and said electricity rates should flatten or fall over time as the grid is built out.
Until then, average households may pay the price of a competition for electricity that is playing out in the Pacific Northwest, where companies like Amazon are outbidding some of the region’s largest utilities for power.
'There is no short-term solution'
The 17-year contract Amazon and Talen Energy struck last year, for up to three-quarters of the Susquehanna nuclear power plant’s output in Pennsylvania, is a big deal. It allows Amazon to ramp up to 1,920 megawatts of data center capacity — more than 1% of the peak demand of PJM, the regional grid there.
Whereas Amazon's data centers are new, the power supply for them is not. Built in the '70s and '80s, Susquehanna historically sold its output into PJM’s wholesale market, available to other buyers.
“If you are locking in over 1% of the market, that’s not a trivial amount at a time when the market’s really constrained,” said Severin Borenstein, an energy economist at University of California, Berkeley.
Amazon and other data center companies have pledged not to increase electricity rates by buying, building or bringing their own power. But that only works if they bring new power that otherwise wouldn’t have been built, Borenstein said. Adding demand while contracting with existing generators or buying it on the market can still push prices up.
Amazon is also building campuses in Ohio, Virginia and Indiana within PJM, the regional grid that serves north Virginia, the data center capital of the world. And it’s far from the only company adding facilities there.
PJM said it expects peak electricity demand to increase about 20% from 2024 to 2030, driven largely by data centers, and that generators are retiring faster than new ones are being built. The result is simply more competition for power.
Future electricity prices at PJM's Western Hub rose by about 25% from June 2025 to June 2026.
“Data centers have definitely caused both energy and capacity price increases in PJM,” said Joseph Bowring, president of Monitoring Analytics, an independent market monitor for PJM.
This isn't happening everywhere. In places where the grid has breathing room, increased demand from data centers can actually lower prices, several studies found. But when supply gets tight, the PJM example shows data centers can increase energy prices even if they pay the direct costs to serve themselves, because there's less for everybody else.
Amazon Web Services' head of Americas energy and water Brandon Oyer said data centers are only one factor behind PJM’s rising prices, pointing to years of slow generation construction. Amazon and other data center companies are working to bring online new supply, but experts said the problem is that adding enough new generators, turbines, transformers and transmission lines to catch up to demand will take years, if not longer.
“There is no short-term solution within a year or two,” said Uzi “Yury” Dvorkin, an energy researcher at Johns Hopkins University.
'A bet that paid off'
As electricity prices rose, Amazon's deals began to look better and better for it.
When Talen Energy struck its deal with Amazon, the energy company said Amazon would pay “anticipated premium prices,” meaning above market rate.
Then, market prices for electricity skyrocketed.
Talen executives acknowledged this summer that the economics of the Amazon deal had shifted. During the company’s second-quarter earnings call, CEO Mark Mac" McFarland said future PJM energy and capacity prices were approaching, “if not exceeding,” the terms Talen had recently negotiated with large data-center companies.
When an analyst pressed McFarland on how much of a premium the Susquehanna deal still offered over market prices, he declined to say, arguing that the long-term contract remained valuable because it provided predictable revenue.
It’s not certain how much the shifting economics of the Susquehanna deal contributed to Amazon’s reported $599 million gain, since Amazon declined to say. However, the timing, size, duration and publicly disclosed terms of the deal suggest it could be a significant contributor.
Economists say signing contracts like these is just what large power buyers do; they hedge against future price spikes. Amazon likely didn’t intend to make a bet on electricity prices, said Stanford energy economist Frank Wolak, but intentionally or not, it “made a bet that paid off.”
Dvorkin also said it was “not the fault of Amazon” that it hedged costs so well, but he called it “not the best thing for the country” that millions of Americans remain "hostages" to price shocks fueled by the AI boom.
Amazon noted it also buys power from the market outside of its long-term contracts and remains exposed to price swings.
Since the company booked its $599 million gain, future electricity prices in PJM have continued to climb, potentially increasing the value of its long-term contracts further.
Washington’s looming data center build-out
Earlier this year, Puget Sound Energy, Washington’s largest utility, lost a 16-round bidding war with Amazon for one of the nation’s largest solar and battery projects. Matt Steuerwalt, PSE’s senior vice president of external affairs, called it concerning that utilities are facing competition for grid resources against buyers larger than themselves.
“More competition for resources usually means higher prices,” Steuerwalt said.
PSE told the Washington Utilities and Transportation Commission that competition was one way data centers could raise electricity costs indirectly and asked it to require large loads like data centers to help pay to develop emerging clean energy resources like geothermal and small modular reactors to mitigate those costs.
The region's hydropower supply is also getting locked up. Data centers used about 37% of the electricity consumed in Grant County last year, which used to contract with Western Washington utilities to sell its surplus hydropower. Those sales have diminished as Quincy has grown to become the state’s de facto data center hub, and Grant County itself faces a shortage of power at times.
In the Northwest, data centers have already added about $4 per megawatt-hour to wholesale electricity prices, "a significant effect, according to a 2026 Federal Reserve Bank of Dallas working paper. If data centers are built at the high end of expectations, the same paper found that wholesale electricity prices nationwide could increase as much as 50% by 2028.
A June report from Lawrence Berkeley National Laboratory estimated that data centers could account for 9.5% to 15.3% of U.S. electricity use by 2030. That estimate increased by about 3 percentage points from last year’s report.
Amazon points to Indiana as one place it’s lowering electricity prices. There, the company is adding up to 2,400 megawatts of data centers, but it made a deal with the utility to pay to build enough new generation to serve it, estimated to lower other customers’ bills by about $1 billion over 15 years.
That’s not the structure Amazon is using at its Washington data center, though. Amazon is developing a campus in Walla Walla County previously estimated to cost about $5 billion, which Columbia Rural Electric Association said could require up to 300 megawatts. Eventually, new small modular nuclear reactors in Southeast Washington that Amazon is helping fund could add hundreds of megawatts of new power. But that technology is not yet commercially available.
Until then, Amazon’s data center will get its electricity from the Pacific Northwest wholesale power market. Microsoft is also adding demand pressure by building a new data center campus in Malaga, Chelan County, which it's powering largely through market purchases while it waits to see whether the fusion facility it's backing can make a breakthrough.
But as long as new generation lags behind surging demand, the entire region will be competing for the same pool of electricity with new, large buyers.
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