https://stateline.org/2025/04/10/lawmakers-fear-ai-data-centers-will-drive-up-residents-power-bills/
For the first time in decades, America needs to produce more electricity.
In many places, a sharp uptick in power demand has been driven by data centers, the industrial buildings that house huge banks of computer servers and support our increasingly digital society.
State lawmakers have long sought to attract such operations with generous tax breaks and incentives. But now, some are concerned that the infrastructure needed to add all those data centers to the electric grid will drive up residents’ utility bills. The growing use of artificial intelligence, which requires massive amounts of computing power, has added to that worry.
“We’re going to have tremendous stress from AI,” said New Jersey state Sen. Bob Smith, a Democrat who chairs the Environment and Energy Committee. “We have a crisis coming our way in electric rates. These outrageous increases are going to be put on the citizens. Why should they bear the rate increases?”
Smith has authored a bill that would require new AI data centers in New Jersey to arrange to supply their power from new, clean energy sources, if other states in the region enact similar measures.
The bill is among roughly a dozen proposals in state legislatures nationwide seeking to ensure that data centers don’t result in increased rates for other electric customers, according to the National Caucus of Environmental Legislators, a forum for state lawmakers. Smith and lawmakers in other states with clean energy targets also say the demand for AI could derail their climate goals.
Those goals are also under attack from President Donald Trump, who this week directed Attorney General Pam Bondi to block enforcement of all state climate policies. Trump also issued orders seeking to boost coal production, in part to meet the energy demands from AI operations.
Tech companies note that their data centers are crucial for everything from credit card transactions to remote work to streaming Netflix. And the centers create tax revenue and jobs in the states that host them, the companies argue.
Data centers are just the first wave in a new era of increased electricity demand. Electric vehicles, a growing manufacturing sector and the electrification of household appliances are all expected to use more power in the years to come.
Industry leaders say it’s unfair to single out data centers, when more power will be needed for a variety of sectors.
“[Targeting data centers] risks creating unjustified distinctions amongst similar customers,” said Dan Diorio, senior director of state policy with the Data Center Coalition, a membership association for tech companies.
Ground zero: Virginia
Virginia hosts the world’s largest concentration of data centers, and is at the epicenter of debates over the industry’s future.
State lawmakers commissioned a study, published last year, to outline the industry’s impacts. Researchers found that data centers are currently paying their fair share for electricity. But the immense energy demands they’re forecasted to create in the coming years “will likely increase system costs for all customers, including non-data center customers,” the report concluded.
The study found that unconstrained demand largely from data centers would drive up Virginia’s energy usage 183% by 2040. With no new data centers, energy use would only grow 15%. In addition to the costs of building more power plants, the report said, utilities will also need to install more substations, transformers and distribution lines.
“They sounded an alarm that the steep increase — if this is unchecked — would quickly [raise consumers’ rates],” said state Del. Rip Sullivan, a Democrat who has been at the center of discussions over the industry’s future in Virginia.
