With the surge in data center development, legislators across many states are seeking ways to mitigate the effects of elevated electricity costs.
“A significant demand for fresh electricity and updated infrastructure to support data centers and other major power consumers is expected,” stated Daniel Tait, the research and communications director at the Energy and Policy Institute, a national nonprofit organization that tracks the electric utility sector.
Electricity costs are already a significant factor in rising inflation. Data centers areset to consumeapproximately half of all new electricity added to the grid by 2030, and their scale is changing electricity markets. Consumer advocates are concerned that the expenses associated with modernizing the grid might be borne by all electricity users, particularly if current conditions remain unchanged.the excitement about artificial intelligence is diminishingTo stay ahead of the issue, state legislatures are establishing separate customer categories designed to ensure Big Tech covers not just its influence, but also costs related to new infrastructure and managing risks.
Who controls the pricing of electricity?
Numerous government agencies and companies contribute to deciding the amounts seen on Americans’ monthly bills. The specific arrangement of which entity holds the final authority over pricing differs from state to state.
Generally, public utilities commissions—also known as public service commissions—are the state regulatory bodies responsible for overseeing electric utilities. If an electric utility company seeks to increase customer rates, the commission must provide its approval.
The commissions set rate increases so that utility companies have the necessary funds to maintain the power grid and develop new infrastructure when required. They also oversee which types of expenses utilities can charge to customers and thepercentage of profitcompanies can benefit from new infrastructure investment.
However, as Tait explained to Straight Arrow News, state legislatures “can instruct the PUC to perform specific actions that impact profits and determine what can be charged” to consumers. This implies that numerous state legislatures have the ability to reduce customer rates.
Nevertheless, in certain states where the commission is established through a constitutional amendment, legislative action does not come with an obligation. Additionally, other states that enable residents to choose their own plan from multiple power providers have reduced direct influence over electricity rates.
What actions are states taking regarding data centers?
As major technology companies allocate their financial power to start construction on hundreds of new data centers, states are seeking to safeguard consumers’ interests.
“Left, right, red, blue – whatever you call it: there’s likely a proposal in your state addressing this,” Tait stated.
To date, legislators have attempted to establish a new classification of utility customers for major electricity users—those who consume as much power as tens of thousands of households.
For example, in Delaware, House Bill 233Requires the state Public Service Commission to establish new pricing for any data center using 20 megawatts of power or more. The electricity rate charged to these customers will be different from current rates for residential, commercial, or industrial users. Along with covering the direct expenses of providing service to data centers, the legislation proposes electric rates for data centers that “reduce the likelihood of other retail electricity consumers bearing unnecessary costs,” and compensate for the broader risk of reducing grid reliability.
“It is essential that we establish appropriate safeguards,” stated state Sen. Stephanie Hansen, one of the bill’s supporters, in apress release. Hansen stated that the legislation is intended to make major energy consumers “contribute their fair portion for energy and distribution.”
Although the bill was approved by the committee, legislators have not yet conducted a complete vote on it.
What are the differences between state proposals?
Delaware is not the only one facing upcoming legislation.
In California, SB 978would create a new rate category for facilities capable of drawing 75 megawatts or more from the power grid. One megawatt can generally supply electricity to between 400 and 700 homes, depending on the time of day and weather; 75 megawatts could power as many as 50,000 homes. Proposals in Iowa (SB 2324) and New York (S8540) each join Delaware in setting a 20-megawatt limit – roughly equivalent to power needed for 8,000 to 14,000 households.
Some states have introduced rates that apply when data centers reach 30, 40, or 50 megawatts. Overall, approximately a dozen states have already enacted new regulations regarding electricity pricing for data centers, with at least nine more states having related bills under consideration, such as Arizona, Alabama, Georgia, Illinois, and Maryland.
Although state law may not mandate distinct rate categories for data centers, numerous utility providers are independently exploring this option. By the end of 2025, utility companies in 34 states had established 65 specialized electricity rates—referred to as tariffs—for particular high-power consumers,Latitude Media reported.
New data center rates often involve minimum contract duration requirements. The company responsible for a significant electrical load must continue paying for a part of the rising system costs throughout the agreement’s term—typically 15 years—even if the data center is no longer in use. This approach aims to reduce the risk for utility companies that invest in new infrastructure to support major clients.
“You must agree to cover these expenses for at least 10 or 15 years, ensuring that even if you decide to change your mind, we don’t unintentionally affect other customer groups,” Tait stated.
Why aren’t more states attempting to reduce electricity costs directly?
Tait advocates for separate pricing tiers for data centers, but mentioned it is insufficient.
Addressing this issue is highly beneficial and needs to be accomplished,” stated Tait. However, he further noted, “that alone will not provide the relief people are seeking.
Instead, he highlighted the ability of state legislatures to influence current customer rates by reducing the guaranteed return on investment that utility companies receive from infrastructure expenditures, or by altering which expenses the companies can charge customers.
In Florida, where state officials authorized a $7 billion surcharge increase last year,one proposed billcould restrict the return on equity and prevent costs from being transferred, but it still needs to be voted on.
However, such legislation encounters strong resistance. Tait mentioned that solutions aimed at lowering current customer bills are rare because of “political influence and, quite honestly, control over utilities.”
Discussing issues such as data centers and those expenses in the future is not very threatening to a utility,” Tait stated. “Talking about return on equity or what can actually be included in the rate base is significant for shareholders and investors.
