Data center construction driven by artificial intelligence (AI) computing requirements is increasing projected energy demand.
States are passing laws to study the effects of data centers, protect residents from higher energy bills, and modernize power grids.
Some state public utility commissions (PUCs) have negotiated conditions for potential large load electricity consumers, such as data centers.
Artificial intelligence (AI) programs include large language models (LLMs), image generators, and digital assistants (Stryker & Scapicchio n.d.) They have greater processing power than other applications and therefore greater energy demand (Goldman Sachs 2024, Electric Power Research Institute (EPRI) 2024a). Data centers contain servers and computers to run online services like AI programs, cloud storage, and cryptocurrency mining (Leppert 2025, Offutt & Zhu 2025). To meet AI computational demands, large tech companies are building more hyperscale data centers, which can require more than 100 megawatts (MW) of power (Shehabi et al. 2024, Powell & Smalley n.d.). This amount is enough to support roughly 80,000 U.S. households (Offutt & Zhu 2025) At the end of 2024, data centers under construction in the U.S. had a total estimated power capacity of 6,350 MW, more than double the amount a year earlier (CBRE 2025).
Experts forecast the power needs of data centers will drive an increase in electricity demand (S&P Global Commodity Insights (SPGCI) 2025, EPRI 2024b, Shehabi et al. 2024). One study projects U.S. electricity demand to increase 35-50% between 2024 and 2040 due to data centers, as well as increased demand from manufacturing, transportation, and heating (SPGCI 2025). For more, see Powering Data Centers and Data Centers Power Requirements.
Eight states require their state public utilities commission (PUC) or a new task force to study the impacts of data centers on energy demand, the state economy, and energy costs to consumers (Figure 1). Six states (CA, IL, LA, NJ, ND, VA) passed legislation for these requirements, while AZ and WA issued executive orders.
To protect residential customers from higher energy bills, seven states (IN, MD, MN, MO, OR, TX, UT) enacted legislation requiring large electricity users pay for the costs of increased generation. The most common approach is creating a separate rate class for “large load” customers, who pay a higher rate than residential users. Most states set the threshold for large load customers between 75 MW and 125 MW to include hyperscale data centers, but OR’s threshold is 20 MW, which would also include smaller data centers in this class. IN also requires new large load customers pay at least 80% of the utility company’s expansion costs.
States are also working to modernize their power grids. Advanced transmission technologies (ATTs) and grid-enhancing technologies (GETs) are new devices that reduce transmission loss and optimize power distribution (Department of Energy (DOE) 2022, DOE 2020). Fifteen states (CA, CT, DE, IL, IN, ME, MA, MN, MT, NM, OH, OR, SC, UT, VA) have passed legislation requiring utility companies to consider the feasibility of using ATTs and GETs when proposing additions or upgrades to their transmission infrastructure.
States have taken other approaches to address the energy demands of more data centers. TX allows their electrical grid operator to cut off power to large load customers in emergencies. In ME, utility companies cannot provide more than 25% of their power capacity to data centers. To encourage off-grid generation, NH exempts electricity providers not connected to the grid from public utility regulations. Similarly, WV allows businesses with new or growing electricity needs to establish microgrids with distinct regulations to generate their own power. MN charges an annual fee on large-scale data centers to fund weatherization and energy conservation programs for low-income residents.
State PUCs have also negotiated agreements between utilities and large electricity users. The IN PUC requires data center energy customers to fund a weatherization program for low-income residents. In KS, the PUC requires customers using more than 75 MW to pay for at least 80% of their proposed electricity demand, even if they use less, while the PUC in OH requires a minimum of 85% from customers using more than 25 MW.
Figure 1. Actions to address data center energy demands. Nine states (blue) protect residential consumers from bearing the costs of larger electricity users. Eight states (dark blue) are studying the impacts of data centers on energy usage. Fifteen states (gold) encourage modernizing the power grid using advanced transmission and grid-enhancing technologies. States in gray took different actions to encourage off-grid energy generation.
References
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