House Passes Legislation to Address Data Center Energy Costs

The U.S. House recently passed its first legislative action to limit the costs of AI development on utility ratepayers as concerns about the effects of such rapid buildout are rippling across the country.

The Ratepayer Protection Act, H.R. 9340, was overwhelmingly approved in a 417-3 bipartisan vote. The bill requires that large energy load data centers be responsible for the costs of all new energy infrastructure necessary to serve them, protecting existing ratepayers from having costs shifted to them.

While the resolution language requires states without large-load data center standards to “consider” adopting regulations, in practice just 13 states lack utility standards. The Pennsylvania Public Utility Commission in May adopted a large-load model tariff framework to guide the state’s utility companies in evaluating data center customers and ensuring cost protections for residential and small business customers.

The bill passed by the House now goes to the Senate, where it faces an uncertain timeline. The legislation defines large loads as commercial or industrial users such as data that have a peak electric demand of 100 megawatts or more at a single site. The PUC tariff is more restrictive, defining large loads as more than 50 MW at one site or more than 100MW at multiple sites.

The federal Ratepayer Protection Act would require that high-demand users pay the full costs of acquiring the required power generation and paying for transmission and distribution upgrades. Developers would also have to provide financial assurances or exit-fee guarantees before building or upgrading any infrastructure in the event a facility scales back or ceases operations and exits its power contract early in order to protect existing utility customers from having to pay for excess supply.

The act builds on the principles of the Ratepayer Protection Pledge, signed in March by major technology company leaders, utilities, and governors committed to having data center developers pay the energy and infrastructure costs associated with new data center development.

The action comes as rapid data center buildout is threatening the stability of the electric grid and causing prices to spike for existing ratepayers. The PUC recently warned that electric use in the state is forecast to rise by more than 18% annually through 2030 due to large load customers, and that electric shortages could occur in the regional grid managed by PJM unless rapid action is taken to address the situation.