Data Center Energy Regulation Debated by Lawmakers

Legislation to ensure that data centers pay for their energy usage is coming to the forefront in both Pennsylvania’s legislature and Congress.

As energy prices continue to rise and demand for power from data center projects explodes, legislators want to make sure that the costs of adding generation to the electric grid and upgrading electrical infrastructure are not passed along to residential and small business utility ratepayers.

The Pennsylvania House recently approved the first-ever data center regulation bill, H.B. 1834, and it will now go to the state Senate for consideration. This comes as a data center buildout is happening rapidly in Pennsylvania, with several data center campuses requiring massive amounts of energy announced in the past year. Gov. Josh Shapiro has been a strong supporter of data center development, but with protections to protect ratepayers from higher bills.

“No one’s electric bill should ever go up because a data center has located to Pennsylvania, but we need to plan ahead to make sure that doesn’t happen,” said state Rep. Rob Matzie of Beaver County, who sponsored H.B. 1834. “It’s possible to protect ratepayers while still allowing the Commonwealth to reap the economic benefits data centers can bring.”

The bill would require data center developers to pay for all costs associated with a project and give the state Public Utility Commission the authority to review utility rates to ensure that data center costs are not being passed along. The legislation would also require a certain percentage of data center energy use to come from clean energy sources, starting at 10% in 2027. That amount would rise incrementally to 32% by 2035.

Data centers would also be required to curtail their electric usage or shut down during peak demand periods, such as heat waves or extreme winter weather. Developers would also be required to pay into the Low Income Energy Assistance Program (LIHEAP) that helps low-income households pay their energy bills.

At the federal level, several pieces of legislation have been introduced to make sure data centers don’t continue raising utility bills. A bipartisan bill in the Senate would mandate new data centers to bring their own off-the-grid power generation and require existing data centers to leave the electric grid within 10 years.

There has been an increasing push for developers to bring their energy to projects to ease strain on grid capacity. Seven of the largest tech companies recently signed a White House agreement committing to build, procure, or fund new generation capacity to cover the electricity demands of their data centers and pay for grid infrastructure upgrades required to connect them without passing those costs to utility ratepayers.

In the 13 Mid-Atlantic states served by regional grid operator PJM Interconnection, demand for electricity is quickly outstripping new generation capacity coming online, leading to higher wholesale electric prices and significant rate hikes for utility ratepayers. The 2025 State of the Market report for PJM by Monitoring Analytics, an independent, external market monitor, found that data center development was responsible for a 56% increase in wholesale electricity prices.

The report also found that PJM’s current supply of capacity is not adequate to meet demand from large data centers, and will not be in coming years, raising the prospect of blackouts. The market monitor also suggests that data centers be required to bring their own generation, and a fast-track interconnection process to accommodate them be developed.