Senate bill would make large data centers pay full power costs

A bipartisan Senate permitting bill would require any new data center drawing 20 megawatts or more to pay the full incremental cost of the generation, storage, transmission and distribution built to serve it. That threshold is one-fifth of the 100 megawatts in the version the House passed last month, and the Senate text makes the charge mandatory where the House bill only asked states to consider it, according to the bill text and reporting by Axios.

Senators Shelley Moore Capito and Mike Lee, the Republicans who chair the Senate's environment and energy committees, introduced the Bipartisan American Affordability and Jobs Act on Sept. 30 with Sheldon Whitehouse and Martin Heinrich, the ranking Democrats on those panels. On the same day, the Senate blocked the House's Ratepayer Protection Act on a 57-43 procedural vote, three short of the 60 it needed, SI Infra reported. That bill had passed the House 417-3 on Sept. 16. It covers loads above 100 megawatts and requires states only to hold a hearing on a cost-recovery standard within two years, The Hill reported.

The Senate measure goes further on nearly every point. Within 270 days of enactment, the Federal Energy Regulatory Commission would have to revise its 1994 transmission pricing policy so that data centers pay both their share of the existing network and the cost of new lines built for them, reversing a decades-old policy that generally prevents charging both, Axios reported. A campus that stops buying power would keep paying until the utility recovers its outlay, and utilities would need financial guarantees before building. States could charge data centers more than incremental cost and use the surplus to cut other customers' bills, treat them less favorably than other large industrial users, ration access to electricity competitively, or require them to bring new power supply or accept limits on use.

"By statute, not a suggestion, but an actual law," Heinrich said at the bill's unveiling, according to a transcript his office released.

Much of that regime is already being written into utility contracts. On Oct. 7, Duke Energy announced a settlement in North Carolina, signed by Amazon, Google, Meta, Microsoft and the state's consumer advocate, that would extend its protections from customers of 100 megawatts or more to those of 50 megawatts or more at an 80% load factor, with nonrefundable upfront payments for dedicated grid facilities and deposits for shared upgrades. The North Carolina Utilities Commission is expected to rule by mid-November, the company said.

In Michigan, regulators on Oct. 1 approved DTE Electric's contracts to serve a Google data center in Van Buren Township on a 20-year term, rather than the five years normally required under the utility's large-load rate. Google must pay for at least 80% of contracted demand, compared with 50% to 65% in the standard rate, and cover at least 15 years of minimum charges if it cancels early, according to the Michigan Public Service Commission. Google will also pay for DTE to develop up to 1,600 megawatts of renewable energy and 480 megawatts of battery storage.

In Florida, Florida Power & Light told state regulators the same day that its approved rate structure, which requires data centers to fund 100% of the new generation needed to serve them and sign 20-year minimum contracts, satisfies the state's new data center law.

Amazon energy policy director Craig Sundstrom said the federal bill "could unlock the investment needed to build new generation and transmission faster." One tech industry official, speaking anonymously, called some provisions an "unprecedented level of discriminatory treatment" and said tougher grid-connection terms could push some developers to build power systems entirely off-grid.

For build schedules, the more difficult provision may be the one letting states condition service on a data center procuring its own new generation. Commenting on the same idea in the House bill, ClearView Energy Partners said such a requirement "could extend the construction process of data centers by years, as it typically takes far longer to construct a power plant than develop a data center," according to Utility Dive, as cited by SI Infra.

The power construction pipeline is already strained. Of 12 to 16 gigawatts of data-center-related capacity projected for delivery in 2026, MSI Economics found only about 5 gigawatts actually under construction, Engineering News-Record reported. Ken Simonson, chief economist of the Associated General Contractors of America, told the publication he saw "significant constraints in the supply of natural gas turbines and custom transformers" and "fierce competition for skilled electricians" among data centers, semiconductor plants, LNG facilities and power projects.

The federal bill is not law. A Senate vote waits until after the November elections. "Sometimes big things can happen in lame duck," Capito said, adding, "We're banking on it," according to The Washington Sun. The last bipartisan permitting deal, struck by Joe Manchin and John Barrasso in 2024, expired with that Congress. Even if this one passes, FERC's three deadlines under the bill add up to 905 days before a final transmission pricing rule, SI Infra calculated, and the new cost rules apply only to loads that interconnect after enactment. Arrangements already approved by a state or FERC stay in effect.