State lawmakers are drafting legislation for this year that would protect electric utility ratepayers from higher costs and address environmental concerns, the twin threats posed by the growing data center industry.
The expanding use of artificial intelligence, the onshoring of manufacturing, and increased electrification are driving the need for more data centers, which are voracious users of electricity. But rising demand threatens to raise costs as well as emissions, given that renewable energy is expensive and still only covers a portion of America’s energy needs.
Legislators in at least three states — New York, Oregon and Virginia — are preparing legislation to increase regulations on the data center industry to balance the need for new data centers with the potential downsides, including environmental damage and the potential for rising energy bills.
The moves come as many state leaders, intrigued by the potential for jobs and tax revenue, are offering companies lucrative incentives to build and run their data centers in their states.
“As a user of technology, I think data centers are what we need in order to enable the ongoing growth of technology,” Oregon Rep. Pam Marsh (D) said in an interview. But Marsh said she worries about the growing electricity demand that data centers will require.
A report in May from the Pacific Northwest Utilities Conference Committee, a Portland-based industry trade group, projected that electricity demand in the Northwest is expected to grow more than 30% in the next decade, partly due to data center growth.
Marsh plans to introduce legislation ensuring that data centers and other heavy-energy users, such as crypto miners, pay for all the energy they require, including new infrastructure.
“This is a basic consumer issue,” Marsh said. “If you have energy demand, you need to pay the cost of that, and you need to commit to new installations to make sure that those don’t wind up being picked up by consumers.”
Currently, Marsh said, investor-owned utilities, which serve about 70% of the state, cannot require large energy users to commit to paying the cost of a newly built power plant for a minimum period. That cost would fall to consumers should the large user go out of business or stop operating for whatever reason.
Marsh championed a bill in 2023 that would have required new data centers and crypto mining facilities to run entirely on clean energy sources by 2040. The bill died after opposition from Amazon.
Marsh said tech firms have so far been receptive to her proposal. The data center industry said it wants to work with states to prevent so-called stranded assets and pay for its energy needs.
“The data center industry is committed to paying our full cost of service for energy, and we’re actively exploring ways to align our growth with the broader goals of maintaining grid reliability and integrating renewable energy resources,” said Dan Diorio, director of state policy for the Data Center Coalition, which represents companies including Google, Amazon, Meta, Visa and Microsoft.
“The data center industry is continuing to work collaboratively to help ensure a reliable, affordable, cleaner, and resilient electric system,” Diorio said.
Read more: Data center industry watching for more state incentives in ‘25
In New York, Sen. Kristen Gonzalez (D) is reintroducing the New York State Sustainable Data Centers Act. She first introduced the bill in the last days of the 2024 session.
The far-reaching measure would require data centers to get at least a third of their energy from renewable sources by 2035, rising to two-thirds by 2050. It would require existing data centers to disclose statistics on labor, energy usage, greenhouse gas emissions, waste heat and water usage. Before construction, new data centers must disclose these numbers and hold two public hearings to inform the surrounding communities. The bill would also implement a community discount plan to help insulate consumers from upward pressure on energy prices.
The issue is important to Gonzalez given that her district includes an area of Queens known as Asthma Alley for its poor air quality. The area is near the Ravenswood Generating Station, which generates 20% New York City’s electricity usage by burning fossil fuels. The issue is also under Gonzalez’s jurisdiction as chair of the Senate Internet Technology Committee.
“This district is very familiar with the impacts of fossil fuels,” Gonzalez said in an interview.
The bill allows Gonzalez to protect her constituents by “aggressively transitioning to renewable energy,” she said.
“Data centers already exist in New York, and we want to make sure they continue to exist, but we need to balance our expansion with these incredibly energy-intensive facilities with our own energy needs and own climate goals as New York state,” Gonzalez said.
In Virginia, Sen. Danica Roem (D), an outspoken opponent of the industry, plans to introduce five bills to regulate the industry. Her northern Virginia district, outside of Washington, D.C., is home to the biggest data center market in the world.
Roem is still working on the details of her proposals. Last year, she introduced a package of data-center-related bills, including measures that would blunt the effects on state and national parks, require disclosure of projects’ water and power usage, and require data centers to implement stormwater management.
In an interview, Roem said she’d also focus on protecting consumers and restricting the siting of data centers.
“By siting, I mean keeping these things as far the hell away from homes, parks, schools, community gathering places, and frankly, the woods,” Roem said.
Roem said that under current regulations, data centers are increasing energy prices for consumers around the state because the cost of transmission infrastructure is funded over multi-state regional transmission organizations, as opposed to just the users of the lines.
“That’s not OK when we’re dealing with multi-billion dollar corporations, almost trillion-dollar corporations,” Roem said.