Data centers face a sweeping new power regime

The U.S. Senate is considering legislation that would impose new costs and restrictions on data centers while streamlining the process for energy infrastructure development needed to fuel the AI boom. This bipartisan bill represents the most aggressive response yet from Washington to data centers' environmental and energy impacts. The provisions, part of a broader Senate energy legislation, aim to speed up permitting for energy but would go far beyond Washington's voluntary efforts to date.

Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, expressed surprise at the new costs and restrictions, emphasizing that no other industry has faced such scrutiny over electricity usage. Congress seeks to balance the need for data center growth with protecting other electricity customers from bearing the costs.

Data centers would be required to pay for both existing transmission network costs and additional costs needed to serve them, reversing a longstanding federal policy. Large data centers with at least 20 megawatts would bear incremental costs across the power system, including generation, storage, transmission, and distribution. Regulators could charge them more, using the excess to offset other customers' bills.

The bill would also give states wide latitude to impose stricter regulations, including treating data centers less favorably than other large industrial customers, competitively allocating access to electricity, and requiring new power supplies or limiting electricity use. While the Data Center Coalition and major tech companies like Microsoft, Google, and Nvidia have yet to comment, Amazon and former government officials have expressed support for the bill's provisions.

Critics argue that the new requirements could encourage off-grid power systems, undermining the bill's overall purpose.