Almost everyone agrees that data centers should pay their fair share — even data center developers. The newest proposal out of Congress poses the question: What’s fair?
Congress has put forward its most aggressive proposal yet to protect electricity prices from massive new data center developments. The bipartisan permitting reform bill would allow utilities to charge data centers more than other customers for using the grid and would let states charge data centers more on top of that.
“I think policymakers are seeing an opportunity for a good deal to take place here between extremely wealthy technology companies and regular everyday consumers, where the technology companies put many tens of billions of dollars into the power system to pay for the upgrade and keep the costs off of everybody else,” said Rob Gramlich, president of Grid Strategies, a firm that focuses on integrating clean energy into the power grid.
The bill errs on the side of “over-collection,” Gramlich said, meaning data centers could pay more than their impact on the system and effectively subsidize other customers.
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So far, major data center developers seem to be on board — though as negotiations continue things could change.
“There are many devils in the details,” Gramlich said. “Regulators at the state and federal levels will have a lot of work to do.”
The data center provisions in the Bipartisan American Affordability and Jobs Act would change a longstanding federal policy that allows utilities to charge customers only one of two costs: the general “embedded” costs of operating on the energy grid or the “incremental” cost of any grid upgrades necessary to serve a new project.
Utilities usually only charge customers the embedded cost of operating on the grid, Gramlich said. Incremental costs are difficult to calculate and can vary widely based on the kinds of grid upgrades that are needed at the time a new customer is coming onboard.
Data centers, cryptocurrency miners and other “high-density computing facilities” would be subject to both of those costs together under the bill. Awhite paper created for utility company Exelon Corporation earlier this year found that data centers could still shift costs onto other customers if they were only charged the “incremental” costs without the continued embedded cost charges.
The bill would also require data centers and similar facilities to provide financial guarantees before the grid is upgraded and to continue paying grid costs even if they abandon projects early.
The bill also notes that states could charge data center customers extra, beyond the incremental and embedded grid costs, using the proceeds as rebates for others on the grid. It also tells states they could choose which projects can connect to the grid first based on how much extra money they’re willing to spend to subsidize other customers.
The idea of data center developers paying for the cost of upgrading the grid for their projects has been widely embraced; several of the data center provisions in the permitting bill seem directly related to President Donald Trump’s Ratepayer Protection Pledge.
But past attempts to avoid shifting data center costs onto the general public have included only voluntary commitments. The permitting bill would turn that directive into law.
Despite the new potential costs, the data center and AI industries have been quiet and moderately supportive of the permitting reform bill, highlighting the support for energy and infrastructure projects from the bill as a whole.
Staci Pies, senior vice president of government affairs and policy at Incompas, an AI infrastructure association, said data center companies have “been very clear” that they will bear appropriate costs.
“They’ll contribute their fair share of whatever kind of incremental infrastructure costs are necessary in order to increase and upgrade the grid,” she said.
But, she added, the costs and analysis “needs to be transparent” — particularly if states decide to charge data centers above the embedded and incremental costs.
“In some instances data centers are going to say ‘we’re willing to live by this additional charge so long as it’s transparent and we understand the implications.’ And in other instances, they may not,” she said.
OpenAI, Anthropic and Meta didn’t respond to requests for comment on whether they supported the bill’s data center provisions. Lobbying disclosures show the Data Center Coalition spent $480,000 on lobbying between July and September, including on the permitting reform bill.
Michele Nellenbach, vice president of federal affairs at the Data Center Coalition, said the organization was still reviewing details of the bill and noted members were “investing hundreds of billions of dollars in the U.S. annually to build America’s digital infrastructure.”
Some progressives have aired concerns that the bill as a whole would amount to a giveaway for data centers because of the easing of environmental laws and the provisions to limit legal challenges to projects.
At the same time, there’s been concern that the proposed changes amount to overcharging data centers for grid connection. Travis Fisher, director of energy and environmental policy studies at the libertarian Cato Institute, wrote the bill’s data center provisions risk “shifting costs in the opposite direction,” which, he says, might be necessary to counter the opposition to AI infrastructure developments.
Over the course of the last year, data center development has faced an incredible rise in political pushback. Communities across the country have rallied against the centers being built in their backyards out of fear of higher utility costs, pollution and other concerns. Data center developers have responded by leveling up efforts to sweeten the deal for communities.
But as they scramble for access to reliable energy, developers have increasingly started running their operations off the grid, using their own power systems that don’t necessarily have any benefit for nearby communities.
Pies, with Incompas, said data center companies are using off-grid power as an “immediate solution to an immediate problem,” but want to connect to the grid as a long-term solution. The big-picture impacts of the permitting bill — more power, quicker grid upgrades and increased transmission capacity — are a critical part of that.
How much a financial burden they’re willing to shoulder, however, remains to be seen.
While the future of the bipartisan bill is uncertain, Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, said the extent of Congress’ proposal shows just how significant a demand data centers are introducing to the nation’s infrastructure.
“There’s really no parallels to these data centers because they use so much energy and there’s so many of them coming on so fast that I don’t think we can really look to historical practice for analogous situations,” he said.
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