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By Hannah Parry
Associate News Editor
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The rapid expansion of data centers is reshaping the nation’s electric grid, prompting states to take action over who pays for the enormous amount of power these facilities require.
As technology companies build massive facilities to support cloud computing and artificial intelligence, lawmakers are introducing new rules to protect residents and businesses from shouldering the costs of grid upgrades and increased electricity demand.
Others have seen efforts to regulate the industry fail, leaving residents—meaning anyone who pays an electric bill—potentially exposed to higher costs as utilities invest in new generation and transmission capacity.
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The result is a growing divide across the country. In some states, lawmakers are requiring data centers to shoulder more of the costs they create. In others, legislation has stalled, been vetoed or has yet to become law, leaving residents facing soaring electricity costs.
Which States are Protecting Ratepayers from Data Center Costs?
States are taking different approaches to managing the growing electricity demands of data centers, with policies ranging from requiring companies to cover grid infrastructure costs to increasing public oversight of new projects. Some have enacted laws requiring large facilities to pay for upgrades needed to serve them, while others have introduced fees to support energy assistance programs or established rules to reduce electricity use during periods of peak demand.
Maryland established a new framework for reviewing large data center projects, requiring state agencies to assess their potential effects on electricity ratepayers, local communities and the environment. Under an executive order signed by Gov. Wes Moore in September 2026, projects requiring at least 25 megawatts of power will be reviewed by a state task force, and a public dashboard will disclose details including projected electricity demand and water use. The state is also pushing for data centers to cover the infrastructure costs associated with serving them and for communities to have a greater voice in development decisions.
South Dakota enacted legislation requiring electricity providers to establish separate service terms for data centers and make them reimburse utilities for costs fairly attributable to their electricity demand and consumption. The law also accounts for costs utilities may incur if a data center leaves the system or significantly reduces its electricity use. The policy is designed to prevent other electricity customers from being left to cover costs associated with serving these large facilities.
Alabama enacted legislation requiring certain large data center electricity contracts to undergo review by the state's Public Service Commission. Under the law, which took effect October 1, 2026, contracts for qualifying data centers with electricity demands of at least 150 megawatts must address recovery of the additional costs associated with serving those facilities. The legislation also requires the contracts to promote positive economic benefits for the communities where the data centers operate. The goal is to ensure that the costs of serving major new electricity customers are accounted for in their utility agreements.
Minnesota enacted legislation imposing annual fees on qualifying large-scale data centers based on their electricity demand. The fees range from $2 million for facilities with peak demand of 100 to 250 megawatts to $5 million for facilities requiring at least 750 megawatts. The revenue goes into the state's energy and conservation account, which supports energy conservation and related programs. Minnesota's approach combines a financial contribution from large electricity users with measures intended to support energy conservation and address energy affordability, including assistance for qualifying households.
Texas enacted legislation requiring large electricity customers to contribute to the costs of connecting their facilities to the grid and establishing measures to manage their electricity use during emergencies. Under Senate Bill 6, utilities must develop procedures to curtail certain newly connected, transmission-voltage customers during firm load-shedding events. The law also establishes a mechanism for procuring electricity-demand reductions from large customers during anticipated emergencies. These requirements are intended to help maintain grid reliability while reducing the risk that infrastructure built for major new electricity users becomes an unnecessary cost for other customers.
Virginia strengthened its ratepayer protections in 2026 by directing regulators to ensure that data centers cover the costs of transmission infrastructure built exclusively to serve their facilities. In August, the State Corporation Commission issued an order requiring data centers to pay for dedicated transmission infrastructure, following a request from Governor Abigail Spanberger's administration to protect other electricity customers from those expenses. The action is intended to keep families, small businesses and other ratepayers from subsidizing infrastructure required specifically for large data center developments.
Nebraska enacted legislation giving public power suppliers authority to require data centers to cover the costs of infrastructure upgrades their facilities necessitate. Depending on the circumstances, suppliers may require direct payments, letters of credit or electricity-service terms designed to ensure that costs are not passed on to other retail customers. The law also requires qualifying data centers to submit annual reports detailing their electricity demand, water use, ownership, tax incentives and energy-efficiency measures. In addition, data center owners must cover decommissioning costs and enter into community benefit agreements with affected communities. The requirements combine cost accountability with greater transparency about local resource use.
New York launched a statewide, one-year pause on permits for new hyperscale data centers in July 2026 while the state develops a broader regulatory framework for the industry. Governor Kathy Hochul said the initiative is intended to protect electricity customers from paying for transmission and infrastructure expansions needed to serve these facilities. The state also plans to establish a community investment framework to help local governments benefit from data center development and pursue changes to tax exemptions for large facilities. The pause gives state officials time to examine how data center growth affects electricity costs, the environment and surrounding communities before establishing longer-term rules.
Other states are focusing on transparency, requiring data center operators to disclose their energy and water consumption or giving regulators more time to study the effects of new developments.
Together, these policies represent several approaches to the same problem: making sure the costs created by rapidly growing electricity demand are not automatically spread across every customer on the grid.
Why Data Centers Can Increase Home Electric Bills
Data centers are among the most electricity-intensive facilities being built today. A single large campus can require as much power as a small city, and the rapid growth of artificial intelligence is pushing companies to build even larger facilities.
When a utility needs to serve a major new customer, it may have to invest in transmission lines, substations, power plants and other infrastructure. Utilities can also need to secure additional electricity-generation capacity to ensure enough power is available when demand peaks.
Those investments cost money. The key question is how those costs are divided.
If a data center pays the full cost of the infrastructure required to serve it, the financial burden is more directly tied to the customer creating the demand. But if utilities recover some of those costs through rates paid by all customers, households and other businesses can end up contributing to infrastructure built in part to accommodate data center growth.
Ohio has become a prominent example of the issue. The state is part of a regional power grid where rapidly increasing electricity demand from data centers is contributing to higher capacity costs. Those costs have been estimated to add roughly $16 a month to the average home's electric bill.
States Where Data Center Ratepayer Protections Have Stalled
Other states are wrestling with similar concerns, but efforts to address them have produced mixed results.
In Pennsylvania, a bill that would charge data centers a community energy fee passed the state House but has not become law, while residents continue to face rising grid costs associated with increased data center demand.
In Maine, lawmakers passed a bill that would have paused construction of large data centers until 2027, but the governor vetoed it.
In Oklahoma, legislation proposing a pause on large data center construction while the state studied their energy impacts failed to pass.
Delaware lawmakers also attempted to establish a moratorium on very large data centers using more than 100 megawatts, but the proposal failed.
In Wisconsin, legislation that would have imposed stricter requirements on data centers, including eliminating state subsidies and meeting environmental conditions, failed to advance.
New Hampshire lawmakers considered a one-year ban on new data center construction, but the proposal failed.
And in Vermont, lawmakers proposed pausing data center permits until 2030, but that effort also failed.
The debate is likely to intensify as demand for electricity from artificial intelligence and cloud computing continues to grow.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here. Contact Newsweek editors on this story: Kate Nalepinski and Edward T. Cummins
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