The rapid expansion of AI data centers is delivering a significant blow to America's traditional manufacturing sector. For years, the electricity costs for Belden Brick, a company based in Sugarcreek, Ohio, remained relatively stable. However, last year, its power expenses surged by 90%, primarily due to skyrocketing electricity demand from data centers in the region. The sharp increase in the 141-year-old brick manufacturer's bill stems mainly from a monthly capacity charge, which recently jumped from $1,600 to $12,000. Belden Brick is just one example of manufacturing firms across the central U.S. grappling with rising power costs as energy-intensive data centers serving the artificial intelligence industry continue to proliferate. Factory electricity expenses, a core production cost, are rising faster than costs for many households and other businesses. In response to public discontent and to ensure grid stability, state and federal authorities are urging large technology companies to shoulder a greater share of electricity costs. However, some proposed policies categorize small and medium-sized factories alongside tech giants like Meta and Amazon for billing purposes, even though these leading tech firms can consume up to 50 times more power than large manufacturers.

The capacity charge mechanism was originally established to compensate power generators for maintaining reserve capacity to meet peak demand and to incentivize new power supply. This charge typically accounts for about 10% of a U.S. residential electricity bill, but for manufacturers, this proportion can be three times higher. Grid operator PJM Interconnection, which serves 13 states, has seen its regional capacity charges soar dramatically due to stagnant power supply growth coupled with massive electricity consumption by data centers. The power draw of a single data center server hall can rival that of a medium-sized town. "The increase on the capacity charge portion of the bill is just staggering," said Brad Belden, president of Belden Brick. Despite the sharp rise in capacity charges, PJM was forced to implement emergency measures last week, asking some customers to reduce usage to avoid rolling blackouts as extreme heat pushed electricity demand to new records.

Policy experts note that at a time when the U.S. government is actively promoting domestic manufacturing, persistently high and rising electricity costs, along with regulatory uncertainty, threaten the survival of some factories. These plants are considering price hikes, slowing expansion, or even relocating. Belden Brick has already raised its brick prices by 4%, yet profits continue to shrink. Belden stated that if electricity costs keep rising, local manufacturers will soon reach the limits of cost-cutting or price increases. "We're getting to the point where a lot of companies are going to go out of business," Belden admitted. The White House has stated that the administration has taken steps to alleviate pressure on manufacturers, including facilitating a pledge from tech companies earlier this year and directing them to fund the construction of new power plants within the PJM region.

The Data Center Coalition industry group argues that the rapid expansion of data centers is forcing long-overdue investment in upgrading the U.S. power grid. It also points out that electricity price increases have multiple causes, including the retirement of aging power plants and constraints on transmission capacity. "Data center growth is forcing us to confront grid challenges that we would have had to face eventually," said Alan Tinjum, Vice President of Energy at the Data Center Coalition. In just two years, capacity charges in the PJM region have surged by over 1,000%. PJM, the largest U.S. grid operator, covers a key manufacturing belt from New Jersey to northern Illinois and south to Tennessee, an area now favored by data center developers. Data from Synergy Research Group shows that five of the top eight emerging U.S. data center hubs are located in traditional Rust Belt industrial regions. The co-location of traditional factories and new data centers in the same area drives up electricity costs and strains grid stability.

"The pace of data center construction is exceeding the pace of bringing new generation online, so demand is growing faster than supply," said Jeff Shields, a spokesperson for PJM. PJM sets the capacity price paid to generators based on supply and demand forecasts, and when these costs are passed on to end-users, manufacturers often bear a disproportionately high share. Driven by data center expansion, PJM's capacity price has skyrocketed from $28.92 per megawatt-day for 2024 to $329.17 per megawatt-day currently, an increase of 1,038%. By December 2025, average industrial electricity prices in Pennsylvania and Ohio had risen 31% and 26%, respectively, compared to 12 months prior, far exceeding the 7% average increase for U.S. industrial users. Residential rate increases in those states were 14% and 9%, respectively.

Economists and industry insiders say even a 1% or 2% increase in power costs can pressure factories operating on thin margins with high electricity usage. "Price volatility can impact a plant's ability to operate in the short term and the long term," said Paul Ciccio, President of the Industrial Energy Consumers of America. Government policies aimed at controlling the price surge are inadvertently harming manufacturing because factories are being grouped with data centers as the same class of electricity consumer. Currently, large energy users in the PJM grid with their own generation facilities only pay transmission fees for power drawn from the grid. The Federal Energy Regulatory Commission (FERC) is considering a new rule that would require such self-supplying facilities to also pay capacity charges to ensure sufficient backup power if their own generation fails. Manufacturing industry groups are petitioning FERC for an exemption. Data from the non-profit Smart Electric Power Alliance and North Carolina State University's Clean Energy Technologies Center shows that at least 10 states nationwide are considering new regulations on data center electricity use, but the provisions could also affect manufacturers.

"Manufacturing plants are not data centers, and policies aimed at data centers should not make us pay," Ciccio stated bluntly. Manufacturers like Belden Brick are calling on Ohio regulators to review how utility companies calculate data center electricity demand, while also taking multiple steps to reduce their own power costs. "We're starting to look at every alternative out there. The survival of our plant is completely dependent on the cost of power," said Belden, who is now planning to build distributed generation facilities to reduce reliance on the public grid.