In a note to clients on Wednesday, Goldman Sachs analysts Manuel Abecasis and Hongcen Wei forecast that consumer electricity inflation will jump 6% from 2026 to 2027 before slowing to 3% next year due to lower natural gas prices. But bigger electricity bills for businesses like hospitals and restaurants mean more costs are passed on to consumers, Goldman Sachs warns—call it inflation. “Higher electricity prices will also put upward pressure on core inflation by raising business production costs,” Abecasis and Wei wrote.

Electricity prices have already risen by around 7% through December 2025, well above the headline 2.9% inflation rate, the bank said. In addition, Utilities are asking for a record high of $31 billion to increase rates in 2025, more than double the rate in 2024, according to data from the nonprofit PowerLines.

While the aging grid, extreme weather, and rising natural gas prices have contributed to more than 25 years of rising electricity prices, today’s data centers are wasting resources. And with Alphabet, Microsoft, Meta and Amazon—considering the four major hyperscalers—is expected to be eye-watering $700 billion in AI build-out by 2026these prices are not likely to decrease anytime soon. In addition, the individuals most likely to pay for excess electricity to use these centers are more likely to be small businesses and working and middle-class Americans, analysts said.

“The drags on income and spending are likely to be greater for low-income households because electricity accounts for a larger portion of their spending, as well as for households in areas with a higher concentration of data centers where regional electricity markets are more restricted,” the note.

The bank predicts higher electricity prices will increase core inflation by 0.1% in 2026 and 2027, and by 0.05% in 2028, with the largest share of the increase coming from medical services and food. New vehicles and clothing will also see higher prices as an indirect result of higher utility bills, according to the note.

Although the impact seems small, Goldman Sachs sees a ripple effect on consumer spending and GDP in the US, with higher electricity prices causing a 0.2% drag on consumer spending growth due to reduced disposable income, and, by extension, a 0.1% drag on GDP growth in 2026 to 2027. Goldman Sachs estimated productivity gains from AI effectively wiping out any hit to GDP growth related to the effects of higher electricity costs.

How the middle class is burdened by data center expansion

Customers’ electricity bills will increase due to capital investments from new grid infrastructure resulting in rate increases, as well as data centers that strain the power supply, driving up electricity prices.

After the approval of these contracts, construction began rapidly, increasing the demand for not only electricity, but raw materials and labor. With the supply, these resources become more valuable, and more expensive, for other businesses in the areas surrounding the construction of the data center, according to Fordham University economics professor Marc Conte.

“The urgency with which they are trying to make this big expansion, that will also be inflationary,” Conte said. luck“Because they are willing to pay more than the current price to get something done faster, and for that to leak.”

Addressing the rising costs associated with data center construction has been done a hot button election issue. On Wednesday, Sen. Josh Hawley and Richard Blumenthal introduced the Guaranteeing Rate Insulation from Data Centers (GRID) Act which would prevent data center-related price increases in consumers’ utility bills, and prioritize grid access to electricity consumers outside of data centers. Anthropic announced the same day intention of cover the increase in electricity prices from its data centers, but did not share details of deals with power companies.

Conte likened the rapid expansion of the data center to a city’s decision to build a new sports stadium. While the potential to pay may be an economic boon, the sacrifices required to finance the work are not risky for millions of residents in an area.

“We put a lot of trust in these companies,” Conte said. “We’re allowing them to do things that they claim would be incredibly disruptive, with disproportionate burdens falling on (households).”