With electricity bills rising, some states consider new data center laws – JS

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State Efforts to Address Rising Electricity Costs Due to Data Centers

By Kevin Hardy, Stateline.org

As Americans face increasing frustration over their electricity bills, states are taking action to prevent the growing number of data centers from driving up energy costs for consumers.

For years, states have competed to attract data centers, which house the servers behind apps and websites. However, officials are now examining how these energy-intensive projects could impact the electric bills of households, businesses, and other industries.

Oregon was among the first states to pass a law requiring utilities to charge data centers different electric prices to account for the strain they put on energy production and transmission. State Rep. Tom Andersen explained, “We are now making data centers pay a higher rate commensurate with the amount of energy they’re consuming.”

Both Republican and Democratic leaders in multiple states have implemented separate, higher electric rates for data centers to protect other customers. States are also requiring data centers to make long-term commitments and provide financial guarantees before new projects are approved. However, lawmakers acknowledge the complexity of targeting data center-specific costs in the broader energy pricing landscape.

The rapid growth of data centers, driven by an increasingly digital world and the rise of energy-intensive technologies like artificial intelligence, has led to concerns from residents about the impact on utility bills. Legislation in states like Delaware and Florida aims to create new rate structures for data centers, while others, like Oklahoma, are considering moratoriums on new data center projects to study their effects on utility rates, the environment, and property values.

In response to these challenges, lawmakers like Rep. Brad Boles in Oklahoma are working to ensure that data centers pay their fair share of infrastructure costs and do not burden everyday consumers. Oregon’s new rate structure for data centers with long-term contracts aims to prevent future increases in energy costs as data centers expand.

The Data Center Boom

Rising utility bills have outpaced inflation, prompting scrutiny from regulators, governors, and lawmakers. The proliferation of data centers is often cited as a key driver of electricity price hikes due to their significant energy demands for operation, leading to increased power generation and distribution costs. Data center companies argue that rising electricity prices are influenced by various factors beyond their operations, such as extreme weather events and aging infrastructure.

Lucas Fykes of the Data Center Coalition emphasized that higher electricity prices are not solely attributable to data centers and cautioned against rate structures that single out data centers for higher costs. The industry is working with regulators to ensure that residents and small businesses are not financially burdened by large energy investments if data center projects do not materialize.

As technology and power needs continue to grow, states are grappling with the challenge of balancing economic development opportunities with the impact on utility bills. Mayors, like Rusty Paul of Sandy Springs, Georgia, are navigating the tension between incentivizing tech investments and managing infrastructure costs.

While states like Georgia have implemented rules to protect ratepayers from data center costs, lawmakers are pushing for legislation to further safeguard consumers. State Senator Chuck Hufstetler in Georgia is advocating for measures that would prevent utilities from passing on data center costs to other customers, reflecting bipartisan concern over rising utility bills.

Efforts in Maryland to establish a new rate structure for data centers and other large energy users aim to protect consumers from bearing the financial burden of infrastructure investments. Lawmakers are exploring ways to ensure that data centers cover the costs they impose on residential customers, particularly as demand for electricity continues to rise.

A Bipartisan Approach

State efforts to address the impact of data centers on energy costs are gaining bipartisan support, reflecting the widespread concern over rising utility bills. Lawmakers in Georgia are working to enshrine regulatory rules into law to prevent data center costs from being passed on to consumers.

As states like Maryland grapple with the complex challenge of balancing economic growth with affordable energy prices, legislators are exploring innovative solutions to mitigate the impact of data centers on electricity costs. Democratic Governor Wes Moore has joined other governors in urging regional grid operators to protect residents and businesses from shouldering the costs of data center infrastructure.

State Representative Lorig Charkoudian in Maryland is spearheading efforts to incentivize data centers to reduce power usage during peak periods and promote renewable energy generation. By focusing on energy efficiency programs and sustainable practices, states can mitigate the need for additional power generation and alleviate the financial burden on consumers.

As the energy landscape continues to evolve, states are proactively addressing the challenges posed by data centers to ensure a sustainable and affordable electricity supply for all consumers.

Stateline reporter Robbie Sequeira contributed to this story. Stateline reporter Kevin Hardy can be reached at khardy@stateline.org.