With the backlash to data center development growing around the country, some states are launching a preemptive strike to shield residents from higher energy costs and environmental impacts.
A bill wending through the Washington State legislature would require data centers to pick up the tab for all of the costs associated with connecting them to the grid. It echoes laws passed in Oregon and Minnesota last year, and others currently under consideration in Florida, Georgia, Illinois, and Delaware.
Several of these bills, including Washington’s, also seek to protect state climate goals by ensuring that new or expanded data centers are powered by newly built, zero-emissions power plants. It’s a strategy that energy wonks have started referring to as BYONCE — bring your own new clean energy. Almost all of the bills also demand more transparency from data center companies about their energy and water use.
This list of state bills is by no means exhaustive. Governors in New York and Pennsylvania have declared their intent to enact similar policies this year. At least six states, including New York and Georgia, are also considering total moratoria on new data centers while regulators study the potential impacts of a computing boom.
“Potential” is a key word here. One of the main risks lawmakers are trying to circumvent is that utilities might pour money into new infrastructure to power data centers that are never built, built somewhere else, or don’t need as much energy as they initially thought.
“There’s a risk that there’s a lot of speculation driving the AI data center boom,” Emily Moore, the senior director of the climate and energy program at the nonprofit Sightline Institute, told me. “If the load growth projections — which really are projections at this point — don’t materialize, ratepayers could be stuck holding the bag for grid investments that utilities have made to serve data centers.”
Washington State, despite being in the top 10 states for data center concentration, has not exactly been a hotbed of opposition to the industry. According to Heatmap Pro data, there are no moratoria or restrictive ordinances on data centers in the state. Rural communities in Eastern Washington have also benefited enormously from hosting data centers from the earlier tech boom, using the tax revenue to fund schools, hospitals, municipal buildings, and recreation centers.
Still, concern has started to bubble up. A ProPublica report in 2024 suggested that data centers were slowing the state’s clean energy progress. It also described a contentious 2023 utility commission meeting in Grant County, which has the highest concentration of data centers in the state, where farmers and tech workers fought over rising energy costs.
But as with elsewhere in the country, it’s the eye-popping growth forecasts that are scaring people the most. Last year, the Northwest Power and Conservation Council, a group that oversees electricity planning in the region, estimated that data centers and chip fabricators could add somewhere between 1,400 megawatts and 4,500 megawatts of demand by 2030. That’s similar to saying that between one and four cities the size of Seattle will hook up to the region’s grid in the next four years.
In the face of such intimidating demand growth, Washington Governor Bob Ferguson convened a Data Center Working Group last year — made up of state officials as well as advisors from electric utilities, environmental groups, labor, and industry — to help the state formulate a game plan. After meeting for six months, the group published a report in December finding that among other things, the data center boom will challenge the state’s efforts to decarbonize its energy systems.
A supplemental opinion provided by the Washington Department of Ecology also noted that multiple data center developers had submitted proposals to use fossil fuels as their main source of power. While the state’s clean energy law requires all electricity to be carbon neutral by 2030, “very few data center developers are proposing to use clean energy to meet their energy needs over the next five years,” the department said.
The report’s top three recommendations — to maintain the integrity of Washington’s climate laws, strengthen ratepayer protections, and incentivize load flexibility and best practices for energy efficiency — are all incorporated into the bill now under discussion in the legislature. The full list was not approved by unanimous vote, however, and many of the dissenting voices are now opposing the data center bill in the legislature or asking for significant revisions.
Dan Diorio, the vice president of state policy for the Data Center Coalition, an industry trade group, warned lawmakers during a hearing on the bill that it would “significantly impact the competitiveness and viability of the Washington market,” putting jobs and tax revenue at risk. He argued that the bill inappropriately singles out data centers, when arguably any new facility with significant energy demand poses the same risks and infrastructure challenges. The onshoring of manufacturing facilities, hydrogen production, and the electrification of vehicles, buildings, and industry will have similar impacts. “It does not create a long-term durable policy to protect ratepayers from current and future sources of load growth,” he said.
Another point of contention is whether a top-down mandate from the state is necessary when utility regulators already have the authority to address the risks of growing energy demand through the ratemaking process.
Indeed, regulators all over the country are already working on it. The Smart Electric Power Alliance, a clean energy research and education nonprofit, has been tracking the special rate structures and rules that U.S. utilities have established for data centers, cryptocurrency mining facilities, and other customers with high-density energy needs, many of which are designed to protect other ratepayers from cost shifts. Its database, which was last updated in November, says that 36 such agreements have been approved by state utility regulators, mostly in the past three years, and that another 29 are proposed or pending.
Diario of the Data Center Coalition cited this trend as evidence that the Washington bill was unnecessary. “The data center industry has been an active party in many of those proceedings,” he told me in an email, and “remains committed to paying its full cost of service for the energy it uses.” (The Data Center Coalition opposed a recent utility decision in Ohio that will require data centers to pay for a minimum of 85% of their monthly energy forecast, even if they end up using less.)
One of the data center industry’s favorite counterarguments against the fear of rising electricity is that new large loads actually exert downward pressure on rates by spreading out fixed costs. Jeff Dennis, who is the executive director of the Electricity Customer Alliance and has worked for both the Department of Energy and the Federal Energy Regulatory Commission, told me this is something he worries about — that these potential benefits could be forfeited if data centers are isolated into their own ratemaking class. But, he said, we’re only in “version 1.5 or 2.0” when it comes to special rate structures for big energy users, known as large load tariffs.
“I think they’re going to continue to evolve as everybody learns more about how to integrate large loads, and as the large load customers themselves evolve in their operations,” he said.
The Washington bill passed the Appropriations Committee on Monday and now heads to the Rules Committee for review. A companion bill is moving through the state senate.
