Amid rising electricity bills, state governments are increasingly concerned about data centers inflating energy costs. Once a competitive lure for states, these facilities now face scrutiny over their impact on residential and business electric rates. Oregon led efforts by enacting a law that mandates data centers pay higher electricity rates than other industries.
“We are now making data centers pay a higher rate commensurate with the amount of energy they’re sucking out of the system,” stated Oregon state Rep. Tom Andersen. At least twelve states, led by both Republican and Democratic officials, are pursuing similar measures. These include requiring financial commitments before approving data center projects. Lawmakers recognize the complexity of isolating data center-specific costs amid numerous factors affecting energy prices.
The digital era and AI growth are driving data center expansion, with McKinsey & Company forecasting nearly $7 trillion global spending by 2030. However, concerns grow over their impact on utility bills and local environments. Delaware recently advanced legislation for higher data center rates, while Florida is considering new rate structures.
In Oklahoma, a proposed moratorium on new data centers until 2029 aims to assess their impact on utility rates and the environment. Legislation by state Rep. Brad Boles intends to ensure data centers cover their infrastructure costs. Boles expressed constituent worries about potential data center projects, emphasizing, “We’re trying to ensure that those data centers pay for their own infrastructure.”
Despite Andersen’s legislation in Oregon, consumer advocates accuse the state’s largest utility of shifting costs to residential customers. Andersen acknowledges the new rate structure aims to prevent future cost increases rather than immediately lower bills, stating, “It’s just going to stop future raises.”
The data center boom
Utility bills, outpacing inflation, are under scrutiny from regulators and lawmakers. Data centers are frequently blamed for rising electricity prices due to their extensive power needs. A Bloomberg analysis highlighted significant cost increases in areas with heavy data center activity.
Data center firms argue they’re not solely responsible for price hikes. Lucas Fykes of the Data Center Coalition noted multiple factors, including weather and aging infrastructure, contribute to rising costs. He criticized differential rate structures, emphasizing the importance of maintaining U.S. competitiveness in the data center race.
Rusty Paul, Sandy Springs mayor, acknowledged the need for balance, saying, “We want to be leaders in AI, but we don’t want the infrastructure needed to support it.”
A bipartisan push
Georgia’s Public Service Commission instituted new rules to shield ratepayers from data center costs, but lawmakers seek to strengthen these regulations. State Sen. Chuck Hufstetler’s bill aims to codify these rules, preventing utilities from passing data center costs onto other customers.
Hufstetler highlighted utility bills as a significant concern for constituents, noting its role in recent electoral shifts. He stated, “This is very bipartisan. We have all heard from our people around the state of Georgia.”
The Georgia Public Service Commission agrees with the legislation but worries about losing flexibility if rules are legislated, according to spokesperson Tom Krause.
A complex challenge
Maryland’s utility regulator is considering a new rate structure for high-power users, including data centers. Proposed regulations include preapproval analysis and separate tariffs to ensure other ratepayers aren’t burdened by data center costs.
Maryland People’s Counsel David S. Lapp asserted residents face higher costs due to data centers, advocating for stronger consumer protections. Gov. Wes Moore joined other governors in urging PJM Interconnection to shield residents from data center infrastructure costs.
State Del. Lorig Charkoudian highlighted the challenge of accurately forecasting power needs for utilities. She is crafting a bill to encourage data centers to reduce power usage during peak times and promote energy efficiency, as reported by Maryland Matters.
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