– Zachary Skidmore. Speed and scale are two buzzwords often used in the data center sector. However, both are now harbingers of concern across the US, with data center growth outpacing the very frameworks designed to regulate them..
Across the US state legislatures, utility companies, and regulatory bodies have responded with not a trickle but a cascade of bills targeting the industry’s growing energy demand and its composite impact upon infrastructure build-out.. As of early 2026, more than 300 pieces of legislation regulating data centers have been filed at the state and federal levels, with more likely to come.
Some have sought moratoriums, others have proposed new rate classes, and a handful have attempted both.. The specifics have varied from state to state, but the underlying concern is consistent. Grid infrastructure built over the last century to serve residential homes and industrial manufacturers is being asked to absorb loads it was never designed to handle, necessitating large-scale build-out of transmission, distribution, and generation infrastructure to meet the new demand.
Someone will have to pay the difference. The question is who?. Not fit for purpose.
For years, the question had been bubbling in the background with no discernible action. The arrival of AI thrust it into the limelight, bringing a new scale of data center development not seen before, and catching most stakeholders completely off guard.. Tyson Slocum, director of lobbying group the Public Citizen’s Energy Program, puts it plainly. “Almost all stakeholders, including some within the AI industry itself, were surprised at the very sudden and spectacular projected growth of data centers,” he says. “Traditionally, they were never the subject of significant regulatory attention.
With the rise of generative AI, that started to change in a big way.”. The system that failed to anticipate this is not complicated in its design. In the current model, utilities serving defined geographic territories are legally obligated to serve customers within them.
Under normal conditions, a developer contacts the utility, declares its energy needs, and the utility reports to its state regulator for preliminary approval of associated infrastructure costs. It is a model that functioned reliably for more than a century of incremental load growth.
What it was not built for was facilities ranging from a couple of hundred megawatts to more than a gigawatt arriving in concentrated clusters.. The consequences for ordinary ratepayers have not been hypothetical, with compounding pressure on household bills occurring across several states.
This has already been reflected in data center hotspots such as Columbus, Ohio, where household electricity bills have increased by between $10 to $16 a month, causing significant anxiety among the general population. The bill increases have been mainly driven by the expected investments required in new transmission, distribution, and generation assets required to power the new data centers..
The only thing the employees wanted to talk about, after hearing what I did, was why their bills were so high because of data centers Josephus Allmond, Virginia’s chief of energy. The scale of anxiety is best seen not in legislative dockets, but at a T-Mobile store in Richmond, Virginia, where Josephus Allmond, Virginia’s newly appointed chief energy officer, describes walking into a shop during the state’s sixty-day legislative session. “The only thing the employees wanted to talk about, after hearing what I did, was why their bills were so high because of data centers,” he says..
While these concerns have begun to permeate society, data center developers have fought back over accusations of cost shifting. A recent report, commissioned by the Data Center Coalition, argued there is no historical evidence that data centers are driving increases in residential electricity costs under existing rate structures.
Instead, Kush Patel, senior partner at E3, the consultancy firm that completed the report, says: “The key point our analysis makes is that residential electricity costs are driven by a range of economic, policy, and market factors, and those factors play out differently across regions.”. While there has been pushback to the impact of data centers on cost shifting, an undeniable pressure has been placed on regulators and legislators to take action.
The legislative and regulatory landscape that has emerged from this pressure divides broadly into two camps:. States that have already seen substantial data center development, such as Virginia, Ohio, and Oregon, and those that have yet to see significant developments, namely, Maine..
For states already with substantial data center development, the approach has broadly been a regulate-and-manage model, with regulators and legislators rolling up their sleeves to design new rate classes that can accommodate large loads without exposing existing customers to cost shifts. States observing those struggles from a distance, without yet facing the same immediate development pressure, have reached for a temporary moratorium, a pause long enough to build the regulatory framework before development arrives..
Cleaning house. Ohio was one of the first states to respond to the pressure of data center energy demand with concrete action, led by its main distribution utility, American Electric Power (AEP) Ohio. The utility first recognized the issue in 2021, says Zach Miller, director of economic development and data center integration at the company, when it began receiving data center capacity study requests at a rate its systems were not designed to handle.
This peaked in 2023, when the total volume of inquiry reached 30GW, an amount entirely disproportionate to any realistic buildout. The major factor in this unrealistic pipeline was the proliferation of developers who treated interconnection queues as placeholders rather than commitments, submitted applications without clients, and counted the same projects across multiple states simultaneously.. – Getty Images.
AEP Ohio’s response was deliberate. In early 2023, it paused data center load studies entirely while it developed a new framework. “The goal of the tariff was to protect all of our customers and separate the speculative from the real projects,” says Miller.. The tariff, approved in July 2025, set a clear 25MW threshold for rate class applicability.
Customers that fall into this class face a take-or-pay structure requiring payment for 85 percent of contracted capacity, regardless of actual consumption. They must also demonstrate creditworthiness verified by Moody’s and S&P and post collateral equal to or greater than the full infrastructure buildout cost, or 50 percent of the minimum charges over the contract term.
Contract terms were set between eight and twelve years, depending on the load rate.. The filtering effect was immediate. By September, the 30GW had been whittled down to only 13GW, which submitted formal applications.
Of those, 5.2GW progressed to the first round of cluster studies, 18 percent of the starting volume. A second round is currently underway at the time of writing.. “The data center tariff is working,” says Miller. “It’s separated the speculative projects from the real projects, and we’re not overbuilding infrastructure and putting those costs on the backs of our ratepayers.”.
According to Miller, the decision was underpinned by a clear operational principle within the utility. AEP Ohio builds infrastructure only for signed, executed agreements, with nothing constructed based on forecasted demand or queue position.. This principle seeks to solve rate design’s biggest problem: the stranded asset risk created by the fundamental mismatch between data center depreciation timelines and the useful life of the utility infrastructure built to serve them.
A modern data center can be completely reconfigured with new chipsets in the span of a weekend; the transmission and generation assets built to serve them, however, operate on century-long economic assumptions. A take-or-pay structure means that a developer cannot simply walk away from its infrastructure obligations when its load profile changes.. “If there’s no rationing of which projects move forward, the process can grind to a halt and zero percent of them move forward,” asserts Rob Gramlich, founder and CEO of Grid Strategies. “Ten percent is infinitely better than zero percent.
Once you identify the real projects, the utility can plan the right amount of infrastructure.”. A caveat worth noting in the AEP Ohio rate case is that it addresses only the distribution side, as the utility is a wires-only business – one that builds and operates distribution infrastructure – in a deregulated state.
Whether its principles can be translated into more complex regulated utility environments is what Oregon and Virginia have been working to answer.. Act of power. Oregon has always been a leader in clean energy integration.
In 2021, it passed a 100 percent clean-energy mandate, covering roughly 75 percent of the state served by investor-owned utilities. However, two years after the act’s passing, legislators noticed a trend of data centers targeting developments in the 25 percent of the state served by cooperatives and municipal utilities to avoid the clean energy mandate..
Initially, legislators sought to pass a bill requiring data centers within the cooperatives to meet the same standards. However, the bill failed to pass, with communities hosting or considering data centers interpreting the move as state interference in their economic development decisions..
Representative Pam Marsh, who chairs the Oregon House Energy and Environment Committee and had led the clean electricity legislation, drew clear lessons from the experience. “We started to understand that the issues around data centers were way bigger than we’d seen to that moment,” she says. “This was not on our radar in 2023 – and then it became an overwhelming issue in 2024 and 2025.”. What emerged was the Power Act, which was signed into law in June of last year and approved by regulators in May 2026.. “We weren’t setting out to be a model for anybody else,” Pam Marsh, Oregon State Representative.
The bill attracted Republican co-sponsors, passed without the partisan opposition that has marred similar legislation elsewhere, and has since generated calls from legislators and advocates in other states seeking to understand its design. Marsh is candid about its origins. “We weren’t setting out to be a model for anybody else,” she says. “We were setting out to solve a problem for Oregon consumers.”.
In designing the act, Marsh drew direct influence from the very same unregulated utilities that had blocked the clean energy bill. These companies had ensured that cost recovery measures were included in every contract they signed with data center operators, recognizing the potential polarization the facilities could cause if they led to bill increases for regular ratepayers.. “They were not going to allow an Amazon to come in and see significant increases to other customers,” says Marsh. “The Power Act was essentially emulating what we saw already happening in the unregulated utilities.”.
The bill that emerged had two primary functions. Firstly, it created a new rate class for data centers and crypto mining operations of 20MW and above, requiring the rate to reflect the full cost of providing energy to those facilities. Secondly, it mandated long-term contracts between the utility and the incoming facility to address stranded-asset risk. “If data centers have huge energy demands that require expansion of the system, those data centers need to pay the cost so it doesn’t spill over to other consumers,” says Marsh. “That’s really what the Power Act does, and it’s really that simple.”.
For Marsh, the act’s success is a rebuttal to the argument that ratepayer protection and data center development are incompatible goals. “We’re really not anticipating that the Power Act will scare people off,” she says. “Our consumer-owned utilities were already doing this, and they’re getting plenty of data center activity.”.
Regulation in the data center capital. Virginia is not at the forefront of a new data center boom. The state, home to the world’s largest data center market, has experienced one for more than a decade, with little chance of the growth slowing down.
In Dominion Energy’s most recent Integrated Resource Plan, 30 percent of planned transmission investments were directly tied to data centers, with the costs currently being socialized across the broader rate base.. Josephus Allmond, who came into his role as Virginia’s chief energy officer from the Southern Environmental Law Center, acknowledges that, until now, data center growth has had a leveling effect on bills, providing additional revenue across the system that has prevented rates from rising faster than they otherwise would have.
However, the state has now reached an inflection point. “I think if we hadn’t had this data center growth for the last five years, our rates would have increased significantly more,” he says. “But we’re at that inflection point now where the leveling effect may be about to change.”. In response, in March of last year, Dominion filed a review application proposing a new rate structure for large load customers.
After direct witness testimony across a range of stakeholders and several hearings, the Virginia State Corporation Commission (SCC) approved the GS-5 rate class in November, effective January 1, 2027.. The new rate class is applicable to customers with a capacity of 25MW, capturing most of the commonwealth’s roughly 450 data centers and the vast majority of any new facilities being planned.
Those that fall into the class are locked into 14-year contracts with minimum demand charges of 85 percent for transmission and distribution infrastructure and 60 percent for generation, meaning facilities pay for the power headroom they reserve, whether they consume it or not. Early modeling suggests the cost shift will push data center bills up roughly 15.8 percent while trimming the average residential customer’s monthly rate by around $5.52.. “We’ve got more levers to pull than just the legislative route,” Josephus Allmond, Virginia’s chief of energy.
While the legislation is groundbreaking, representing the first major large load rate class to cover an entire state, Allmond remains measured about its overall prospects. “We’ll see when the rates kick in how effective it is,” he says, “and the function it serves in weeding out speculative projects.”. The rate class has seen opposition from both data center lobbyists and environmentalists.
In response to the new regulations, a coalition of data center operators filed a counterproposal during the SCC process, pushing for lower minimum charges of 50 percent on generation and 75 percent on new transmission and distribution costs, which was ultimately rejected.. On the other side of the aisle, many argue that GS-5 does not go far enough and argue GS-5 is merely a partial and delayed measure unlikely to have a concerted impact on ratepayer protection in the state.
Piedmont Environmental Council president Chris Miller argues that while the decision “alleviates some financial risk,” the SCC’s choice to continue current cost allocation among rate classes for two years “is still unfair and does not go far enough to protect the average Virginian ratepayer.”. One major difference between Virginia and Ohio is that, unlike Ohio’s deregulated wires-only structure, Virginia, through Dominion Energy, works as a regulated monopoly utility, with the SCC as the primary regulatory body.
This means the options available to Allmond’s office extend well beyond legislation. “We’ve got more levers to pull than just the legislative route,” he says, describing a multi-agency approach involving the utility directly, the SCC rate case process, and coordination with the Attorney General’s Division of Consumer Counsel. “You can still attract data centers to Virginia and capitalize on the benefits they bring, but also place more stringent requirements on what they have to do and how they engage with communities. It’s important that we do both.” Whether this is possible under GS-5 will be answered when the provisions come into force next year..
Moratorium in Maine. While Virginia is one of the most densely populated data center locations, Maine is at the other end of the scale, with relatively few developments in the pipeline. But legislators in the small northeastern state have kept a keen eye on data center developments across the US, knowing that they, too, could soon face huge interest from the sector..
For Melanie Sachs, a representative in the Maine House of Representatives, this posed a clear and present danger due to the complete absence of data centers as a category of development in its current frameworks. As a result, in February 2025, Sachs proposed a new bill in the House, which called for an 18-month statewide moratorium on new data center developments.. – Getty Images.
Sachs described the moratorium as less of a blunt instrument and more of a precise tool. Rather than banning data centers in perpetuity, LD 307 combined a temporary, targeted 18-month pause on new data center development, alongside the creation of a 13-member collaborative council drawn from state energy, environment, municipal, and tribal representatives, utilities, labor, and the state’s public advocate for ratepayers.
Notably, data center industry lobbyists were entirely excluded from the council.. The 18-month timeline was deliberate, says Sachs, as it was reverse-engineered from the approximately six months that Maine’s Public Utilities Commission requires to complete formal rulemaking, allowing the council time to report to the legislature to act and regulators time to put rules in place before a single new project could break ground. “Every project would have clarity around whether they’ll be made to pay for grid upgrades, whether they’ll face an impact fee, whether they’ll be put in a rate class, and whether they’ll be required to use renewables,” she says..
While the bill passed with bipartisan support through both the Maine House and Senate, it caused a stir among data center developers looking to call the Pine Tree State home. Several data center proposals popped out of the woodwork when it became abundantly clear that the bill could pass. “The bill surfaced projects that had been entirely silent,” says Sachs..
The most consequential of these projects was a data center proposed in the town of Jay, which became the primary rationale of the bill’s ultimate veto by Governor Janet Mills earlier this year. In her statement explaining the decision, she stated: “A moratorium is appropriate given the impacts of massive data centers in other states on the environment and on electricity rates.
But the final version of this bill fails to allow for a specific project in the Town of Jay that enjoys strong local support from its host community and region.”. Jay’s case is an interesting one. The site of the proposed data center had originally been planned to feature a compressed board factory, which collapsed in part due to the impact of US President Donald Trump’s tariff regime, which increased costs.
The developer subsequently pivoted to a data center, but did not inform the local community of its decision until LD 307 made disclosure unavoidable. The permits the governor cited as evidence that the project had proceeded properly were, in fact, issued for the board factory. The job figures promised, which Mills cited as a deciding factor, have shifted between 30 and 150.
In addition, the end energy user has yet to be disclosed, and the developer Sentinel Data Centers’ green energy commitment rests on a planned solar field, likely three to four years down the line, with the grid expected to bridge the gap.. “The governor sacrificed the protections of 1.4 million Mainers for a promise of 100 jobs that was never verified,” Melanie Sachs, Maine State Representative. “In my view,” says Sachs, “the governor sacrificed the protections of 1.4 million Mainers for a promise of 100 jobs that was never verified.”. While Mills vetoed the moratorium, she did advance the creation of a 13-member collaborative council to analyze the impact of data centers.
However, rather than remaining unpartisan, according to Sachs, the lobbying firm that the legislature had explicitly voted to exclude from the council was subsequently awarded a seat on the governor’s replacement advisory body. Days after the veto, the lobbyist was reported by the Maine press in connection with fundraising for the governor’s prospective Senate campaign. “You can’t make this stuff up,” exclaims Sachs..
Slocum, who has tracked data center lobbying patterns across multiple states, places what happened in Maine within a broader context. “The data center and AI industry has a lot of resources, resources to make campaign contributions, resources to lobby, to run ads,” he says.. Sachs sought a path to secure approval of the bill, drafting an amendment to exempt the Jay project from the moratorium. “I tried,” she says. “I truly tried.” The override attempt fell short, and it was defeated 115 to 29 in the House..
Since the original publication of this piece, Sentinel DC reported that it was dropping out of the project. JGT2 Redevelopment, which had been planning to partner with Sentinel on the $550 million project, is now pursuing discussions with other interested parties, but the data center project is currently on hold..
Despite the apparent cancellation, the practical implications of the bill’s failure are still evident. For a state as small as Maine, the combined capacity would have a huge impact on the approximately 5.6GW the state uses during peak times. Without the framework that LD 307 would have provided the time to develop, the projects will face no dedicated rate class, no cost-causation principle for grid upgrades, and no impact fee mechanism.
In response, individual communities are now moving to enact their own local restrictions. This has been reflected across several communities within the US, with 51 active local moratoriums, and nine states with active legislation seeking partial or complete moratoriums on new data center builds.. “We had the opportunity.
We really could have done something,” laments Sachs.. Fifty solutions, one problem. Our four-state tour arrives at an uncomfortable destination.
Ohio, Oregon, and Virginia have each developed frameworks that work at varying stages of implementation for their specific regulatory structures, load profiles, and political environments. Maine produced a framework that worked, but it was vetoed. However, none of it adds up to an answer to a very national question..
Those in favor of more uniformity contend that if regulations vary from state to state, it could create an uneven patchwork of rules, leading to a fragmented landscape and ultimately shifting developments to less-regulated states.. Willie Phillips, a former commissioner with the Federal Energy Regulatory Commission (FERC), draws a historical parallel in which federal oversight could be a force for good.
In the 1950s, inconsistent and underfunded roads were adversely affecting the national economy. In response, President Eisenhower established federal rules and funding while allowing states to plan and build their own sections of highway. “I believe that same level of federal leadership can be applied here,” says Phillips. “I never discount the ability for great things to happen when leaders step up and the public demands it.”. “I never discount the ability for great things to happen when leaders step up and the public demands it,” Willie Phillips, former chair of the Federal Energy Regulatory Commission.
Since the turn of the year, the Trump administration has made a more concerted effort to place greater federal oversight on data center growth. In March, Trump brought Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and xAI together to sign the Ratepayer Protection Pledge, under which the companies agreed to build, bring, or buy new generation resources and cover the cost of all power delivery infrastructure upgrades required for their data centers..
However, many argue that the pledge has significant limitations since the commitment lacks any legal enforcement mechanisms, and these concerns have been compounded by apparent counterintuitive moves by the federal government against state-level protections.. For example, in October last year, Energy Secretary Chris Wright lodged a petition at FERC seeking to establish federal jurisdiction over data centers of 20MW and above connected to the FERC-jurisdictional grid.
The plan has drawn the ire of many states and utility companies, which contend that the standards could intrude upon traditional state jurisdiction.. “There is such a difference among states in terms of whether utilities are regulated or deregulated, and how that implicates cost allocation,” says Virginia’s Allmond. “A one-size-fits-all federal approach is going to miss a lot of important nuance.”. Slocum is even more forceful in his rejection of federal inference as a force for good. “States are proving to be extremely active and fact-based in trying to figure out how to manage data center load,” he says. “But at the drop of a hat, the Trump administration could say this is a national security issue, and any state law inhibiting AI is now a national security threat.
That sounds crazy, but it’s consistent with everything else this administration does.”. While federal interference will hang over the heads of states for the foreseeable future, the tide of new state-specific regulations and legislation facing data centers shows no sign of abating.
California, Ohio, and Utah have enacted laws surpassing the federal Ratepayer Protection Pledge. South Carolina, Maryland, and Oklahoma have enacted rate-negotiation laws, and 27 states are advancing legislation that requires developers to cover energy costs and report usage.. For the data center industry, the message is simple: the rules have changed, and from here on out, you pay to play..
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