2026 Legislative Session Dates
image/svg+xml Skip to main content
Search image/svg+xml
Home
/
Insider
/
•••

Key Takeaways:

  • About one-third of enacted data center energy legislation this biennium includes ratepayer protection requirements, and the trend is likely to keep growing as more states look to shift grid expansion costs away from everyday utility customers.
  • Thresholds for when these laws apply vary widely across states, ranging from 10 MW in South Dakota to 150 MW in Alabama, meaning some states are targeting only the largest hyperscale facilities while others cast a broader net.
  • The mechanisms states use also differ: some rely on traditional utility ratemaking, others require state-established tariffs, and Nebraska simply authorizes public power suppliers to negotiate rates without mandating any specific outcome.
  • How "costs" are defined is one of the more contested elements of this legislation. Florida's law spells out specific cost categories, while Alabama's standard is more open-ended, which will likely lead to disputes over what data centers are actually required to pay.
  • Virginia and other states have been active on data center policy more broadly, so operators tracking ratepayer protection bills should expect continued variation in how states define cost allocation obligations going forward.


As state legislative sessions are beginning to wrap up, there’s a clear trend leader when it comes to energy-related data center legislation. About one-third of enacted energy policy bills related to data centers this biennium include ratepayer protection provisions, requiring data centers to fully fund their energy demand and any related grid buildout or expansion. This legislation is likely to proliferate, and a variety of approaches will make compliance difficult for data center owners and operators. In this week’s issue of Policy Watch, we’re comparing five of these bills to break down how each state’s version differs.

Table is best viewed on desktop.

State

Threshold

Mechanism

Cost Standard

Notes

Alabama SB 270

150 MW

PSC contract-by-contract review

Recovery of all incremental service costs directly from the data center

Requires contract to “promote positive benefits for the utility’s other retail customers”

Tennessee HB 1847

50 MW projected within 3 years

Electric utility ratemaking

A municipality or electric utility shall not pay, or otherwise absorb, the cost of electrical infrastructure incurred to serve a data center

Allows other residential/commercial customers to submit complaints

South Dakota SB 135

10 MW

Separate terms and conditions for data centers

All costs fairly attributed to the data center for service demand and utility consumption, including costs incurred to serve the data center if the data center departs the system or materially reduces its load

 

Nebraska LB 1010

20 MW

Authorizes public power suppliers to negotiate rates

Fairly allocate electricity system costs to the large load customer and also mitigate operational and resource adequacy risks and financial risks to other customers

Authorizes suppliers to negotiate, does not require

Florida SB 484

50 MW with co-location restrictions

PSC established tariffs

Includes, but is not limited to, connection, incremental transmission, incremental generation, and other infrastructure costs; operations and maintenance expenses; and any other costs required. The risk of nonpayment of such costs may not be borne by the general body of ratepayers.

Includes restrictions on providing access to data centers owned by foreign countries of concern


Key Differences in State Ratepayer Protection Legislation

Power Demand Thresholds Range from 10 MW to 150 MW

One of the clearest differences is the threshold at which the ratepayer protection bills apply. South Dakota’s requirements kick in with 10 MW (megawatts) at peak demand, while Alabama’s threshold is 150 MW at peak demand. Average sized data centers usually use about 5-10 MW, while large “hyperscale” facilities can demand more than 100 MW at peak, so it’s clear that some policymakers are targeting data centers based on size, effectively differentiating between “traditional” data centers and hyperscalers.

Regulatory Mechanisms Vary by State Authority

The mechanism for requiring data centers to pay their own way varies as well. Some states, like Tennessee, depend on the authority of the traditional electric utility ratemaking process. Nebraska’s bill simply authorizes public power suppliers to negotiate rates, and Florida’s bill requires PSC established tariffs. Alabama, on the other hand, uses a contract-by-contract review by the Public Service Commission, while South Dakota establishes separate terms and conditions specifically for data centers.

Cost Recovery Standards Remain Open to Interpretation

One of the key provisions in this type of legislation is how energy input costs are defined, or what, exactly, large load customers are required to pay for. Some states, like Florida, provide detailed examples of what would be included—such as connection, incremental transmission, incremental generation, and other infrastructure costs, as well as operations and maintenance expenses. The risk of nonpayment of such costs may not be borne by the general body of ratepayers. Other states, like Alabama, are left more open-ended, simply requiring recovery of all incremental service costs directly from the data center, with additional language to ensure positive benefits for other retail customers.


Track State Data Center Policy

Last year, states considered hundreds of data center bills, and we expect activity to continue growing in 2026. To stay on top of this rapidly evolving landscape, we've launched MultiState Policy Watch: Data Centers – a subscription featuring legislative analysis, trend summaries, and expert insights across energy, tax, water, zoning, and other policy areas impacting data centers. Sign up here.