As the digital economy accelerates—powered by the insatiable appetite for artificial intelligence, machine learning, and cloud services—data centers have emerged as the backbone of modern infrastructure. Yet, their sheer scale and consumption of energy and water have drawn the scrutiny of lawmakers across the United States. Recent legislative actions in key states are reshaping the development landscape for data centers, presenting both challenges and opportunities for developers.
At the heart of this shift is a growing tension: how can states and public utilities support the immense economic potential of data centers while safeguarding environmental resources and protecting ratepayers? The answer, it seems, is legislation—and plenty of it.
A Patchwork of State-Level Regulation
From Virginia to Utah, states are enacting—or attempting to enact—measures that add new layers of scrutiny and accountability to data center development:
- Virginia House Bill 1601, although vetoed by Governor Glenn Youngkin, reflected growing concern over data center impacts on water, agriculture, and historic sites. The bill’s mere passage by the legislature signals a shift in tone that developers should not ignore.
- Texas Senate Bill 6 requires large energy consumers like data centers to shoulder the burden of infrastructure improvements and be capable of remote disconnection during emergencies—an echo of the 2021 winter storm’s lessons.
- Georgia Senate Bill 34 draws a bright line around cost accountability, ensuring that residential and small business customers aren’t subsidizing the energy demands of data centers.
- Ohio legislative duo—House Bill 15 and Senate Bill 2—focus on transparency, eliminating subsidies for underperforming coal plants and requiring utilities to justify expenditures, especially those tied to high-demand users like data centers.
- Illinois Senate Bill 0094 brings geopolitics into the conversation, aiming to restrict foreign adversaries from constructing data centers unless the impact on the state’s power supply is thoroughly vetted.
- Utah Senate Bill 132 allows direct contracting between data centers and utilities—a move that enables greater cost predictability and relieves pressure on the general rate base.
- Minnesota House File 3007 zeroes in on water usage, implementing stricter permitting for data centers expected to consume over 100 million gallons annually.
The Big Picture: The future of data center power
Collectively, these measures signal a potential paradigm shift. Some States and utilities, particularly those popular to data center development, are pulling back on rolling out the red carpet without condition. They’re setting new expectations around resource allocation and equitable cost distribution. For data center developers, tenants, and hyperscalers alike, traditional project models—especially those reliant on assumptions of subsidized utility access —may no longer be viable. While states are passing legislation, many public utilities are exploring new service, finance, and contract models for “major users.” These changes are largely designed to sequester both risk (downside) and profit (upside) from ratepayers, while allowing utilities to create new revenue models. While utilities are touting these “special” rates or agreements, they may also be asking major users to finance new generation and distribution assets, guarantee power purchases, or provide significant collateral to back new investment. Data center developers are concerned that these changes may disproportionately favor large hyperscalers, while making power acquisition more difficult for independent developers.
How DMA Can Help Turn change into Opportunity
This is where DMA’s strategic expertise becomes a game changer. As regulatory environments grow more complex, our team helps developers in several key areas:
- Site Selection: As the utility and political landscape changes rapidly in the data center industry, it is more important than ever to have a strategic site selection process that ensures both utility service and a welcoming and tax favorable community.
- Onsite Generation and Renewable Developer Partnerships: While data center developers are competing for power, renewable and traditional power developers are looking for projects.
- Navigate Property Tax Complexities: Many jurisdictions reevaluate property tax frameworks when large-scale infrastructure like data centers is involved. DMA helps ensure accurate assessments and identifies opportunities to challenge overvaluation, preserving profitability.
- Optimize Sales & Use Tax Strategy: The construction and equipping of data centers involve high-value transactions that are often subject to nuanced tax rules. Our specialists ensure compliance while identifying exemptions and recovery opportunities.
- Maximize Credits & Incentives: Despite tightening regulations, many states still offer significant incentives to attract data center investment. Our team aligns project plans with qualifying programs—such as energy efficiency grants, job creation credits, and real estate abatements—turning regulatory friction into financial leverage.
In short, while the regulatory tide is rising, it doesn’t have to sink development ambitions. With the right strategy and a trusted partner like DMA, developers can chart a course that meets evolving compliance requirements while unlocking substantial economic advantages.
The bottom line? Regulation isn’t going away—but neither is the demand for digital infrastructure. By getting ahead of the curve, data center developers can transform legislative headwinds into competitive tailwinds.
Turn Regulatory Challenges Into Strategic Advantages
As regulatory pressures mount, proactive planning is essential. Connect with DMA’s experts today to optimize your tax strategy, uncover incentives, and turn compliance challenges into growth opportunities.