Missourians are preparing for the effects of state utility legislation passed this spring along with new policies contained in President Donald Trump’s “One Big Beautiful Bill,” both of which are expected to cause a spike in energy bills.

Signed into law by Gov. Mike Kehoe in April, Senate Bill 4 allows utilities to charge customers for power plants still under construction and base rates upon a future test year, among other policy changes.

The “One Big Beautiful Bill” is expected to increase energy prices by incentivizing burning fossil fuels to generate electricity, while removing federal tax incentives for renewable energy sources.

According to a report from Energy Innovation, a nonpartisan clean energy and climate policy think tank, household utility bills are expected to increase by an average of $640 annually by 2035. Meanwhile, wholesale electricity prices are predicted to increase by 74 percent in the same time span.

Energy Innovation speculates that the “loss of low-cost renewables and the resulting increase in gas prices” is part of what will cause electricity prices to spike. The same report forecasts the state will see a loss of $1.4 billion in gross domestic product by 2030 and $3.5 billion by 2035, as a result of energy policy changes included in the “One Big Beautiful Bill.”

James Owen, executive director of Renew Missouri, a nonprofit organization that advocates for efficiency and renewable energy policies, said the fact that there will be rate hikes doesn’t come as a surprise.

“Rates always get raised,” Owen said. “Utility companies are always going to be seeking rate increases from the state, and the state is going to usually be inclined to give it to them. I don’t think that should be how this works, but that’s what happens.”

Senate Bill 4 will allow energy rates to be set based on what utility companies expect energy to cost in the coming year, known as a forward test year. Prior to this, rates were set based on the past year, which means that by the time consumers are charged, the effective rates were set based on what the economy was like two years ago.

According to Michael Sykuta, an economist and associate professor in the Division of Applied Social Sciences at the University of Missouri, using a future test year will grant more precision to rate forecasts.

“It’s probably going to make the rates more accurate,” Sykuta said. “Now, whether that means rates go up or down is difficult to say. We know that costs are going up across the board, so rates are probably going to go up.”

However, the new law also says that, if utility companies overcharge based on the future test year provisions, the excess money must make its way back to customers in some way. Also, all rate increases must be petitioned to and approved by the Missouri Public Service Commission, which provides time for public input on the proposed changes.

“Even though this bill has passed, how it’s actually going to play out is still a little bit up in the air, and there are mechanisms built into the system for people to participate in the process and share their opinions,” Sykuta said.

The charges for construction while in progress will allow for utility companies to bill customers now for new power plants or other projects ahead of their completion. But Sykuta said there are eventual benefits to consumers with this plan.

“If you pay for a little bit of the construction as you go, then you don’t have to pay as much in interest charges,” Sykuta said. “So long term, it saves customers money, but it gives them a little bit of a increase in price sooner than later for stuff that isn’t in service.”

Sykuta feels that changes in energy policy and demands are driving the price increases more so than the changes in the regulatory process.

“We have a lot of really, really old infrastructure that has to be replaced at some point, whether it’s transmission lines, generation facilities, distribution systems. A lot of that stuff has gotten to a point where we have to replace it, just like building a brand new house is a lot more expensive than maintaining an old house, usually,” Sykuta said. “You’re going to end up paying more just for having to do this stuff to keep the system running.”

As energy prices increase, data centers, which power artificial intelligence, cloud computing and the internet, have become more common nationwide, and Missouri is no exception.

Owen said he hopes that facilities will pay for the bulk of the costs, but he fears that the power use from data centers could raise costs for consumers.

“I think it’s the intention that the direct costs are going to be absorbed by the data center,” Owen said. “However, when you’ve got one customer that’s using so much energy that’s going to put a strain on the grid altogether. That puts a strain on distribution lines, that puts a strain on transmission lines, that puts a strain on wires, poles, etc. That’s something that all customers are going to have to pay.”

However, Sykuta said that although companies seeking to build data centers may be eyeing Missouri, they are likely looking into building in other states as well.

“There’s a lot of talk about all these data centers, but we don’t know how many are actually going to be built,” Sykuta said. “And then we don’t know how the technology for AI is going to change.”

Sykuta said its possible that as AI continues to develop, companies may discover ways to power it more efficiently, meaning that the large energy demands may not materialize.

However, with the current large power loads needed for AI to function, he said that most areas where data centers will be built are seeking to negotiate long-term contracts for large load rates that are meant to protect customers from shouldering the costs of data centers.

“Now, are those going to be perfect protections?” Sykuta said. “No, there’s some small chance still that customers are going to end up eating the cost of some of these activities if the data centers or the AI doesn’t come in the way we expect it to, or doesn’t stay as long as we expected it to.”

This story originally appeared in Missouri Business Alert, a digital newsroom covering business and the economy in Missouri.