In January 2025, amid rapidly growing demand for artificial intelligence (AI), Microsoft announced it would invest over $80 billion in data center infrastructure in fiscal year 2025, with over half that amount deployed in the United States. AI-focused companies such as Oracle, Amazon and Meta are also expected to make significant data center investments in fiscal year 2025, both in the U.S. and abroad.

As data center development continues to accelerate, international markets—including Amsterdam, Beijing, Dublin, Frankfurt, Shanghai and Singapore—have begun to push back citing concerns over electricity and water consumption, noise, nuisance, low job creation and other related impacts.

In the U.S., S&P Global’s 2025 Trends in Datacenter Services & Infrastructure Report, projects continued double-digit growth in data center development in states like Virginia, Texas, Georgia, Arizona, Ohio, Illinois and Nevada. Smaller markets such as Mississippi, Minnesota, Missouri, Indiana and Wisconsin are also expected to see dramatic growth in the space over the coming years. Despite these expectations, lawmakers in several of these U.S. markets have started raising similar concerns and, despite offering state tax and other incentives to attract development, have proposed and even enacted bills to protect ordinary consumers from the costly effects associated with data centers.

How Key States Are Regulating Data Center Utility Consumption

Virginia hosts the largest concentration of data centers across the globe. While data centers contribute about $9.1 billion to Virginia’s gross domestic product, the Virginia General Assembly has introduced language in House Bill 1601 that would limit construction or infrastructure costs being charged to consumers and—before new data centers are approved—would require site assessments to examine the effect of the proposed facility on ground and surface water resources, agricultural resources, parks, registered historic sites and forestland.

In Texas, lawmakers have introduced legislation that includes a “killswitch” allowing the state to cut off power to data centers in emergency situations. Senate Bill 6 provides for higher protection for Texas citizens and was proposed to avoid a situation where a data center has power but residential neighborhoods do not. It is also intended to lessen the chances of repeating the devastation from a massive winter weather storm in 2021, which left more than 4.8 million homes and businesses without electricity for days and more than 100 people dead.

In February, in response to six rate increases by Georgia Power Company within less than two years, resulting in approximately 37 percent increase in rates for homeowners and small businesses, the Georgia Senate Rules Committee approved a bill for a Senate floor vote. This bill aims to prohibit utility providers from passing costs to ordinary consumers incurred by an electric utility. This Senate Bill 34 would notably impact and prohibit Georgia Power, Georgia’s largest utility company, from subsidizing data centers with rate increases charged to ordinary consumers. Senate Bill 34 was filed not long after the Georgia Public Service Commission adopted a rule that is aimed to help ensure the growth of data centers in the state, namely a $1 billion Microsoft project, does not affect ordinary consumers.

Also in January, the Ohio legislature proposed House Bill 15 and Senate Bill 2, both proposing changes to support data center growth while protecting ordinary consumers. More specifically, both proposals would repeal legislation currently allowing electric utilities to increase certain components of electricity rates without review, which would help moderate the costs of large rate loads attributable to data centers passed through to ordinary consumers in Ohio.

In Illinois, data centers have rapidly grown since the enactment of exemptions from certain sales, use, occupation and construction employment taxes. In January, Senate Bill 0094 was introduced to establish that no foreign company (an entity that is 51% owned by a foreign adversary or is headquartered in a foreign country) from constructing data centers in Illinois. This bill requires a join study by the Illinois Power Agency, Illinois Commerce Commission and Department of Commerce and Economic Opportunity to assess the energy consumption of the prospective data center. The study must certify to the Governor and General Assembly that the energy usage does not affect the supply of main state operators.

New Laws in Emerging Markets Aim to Balance Growth with Sustainability

Utah Senate Bill 132 was signed into law in March, enacting Utah Code Annotated Sections 54-26-101–102, 54–26-201–202 and 54-26-301–302. The newly enacted bill allows for data centers to individually contract with the state’s largest utility rather than including them in general rates. This law is meant to ensure that the incremental costs associated with the large load energy requirements of data centers are paid by the large-load consumer rather than being distributed among ordinary consumers in Utah.

Minnesota House File 3007 was proposed and read for the first time to the Committee on Environment and Natural Resources Finance and Policy in April. House File 3007 addresses the tremendous amount of water resources consumed by large data centers in the state. Data centers use large amounts of water for both electricity production and cooling the information technology hardware that performs data storage and supports internet operations. The bill would impose heightened scrutiny in the evaluation and a pre-application process for proposed data centers anticipated to consume more than 100 million gallons of water per year (or 250,000 gallons per day). Amazon, Meta and Microsoft are exploring building new data centers in Minnesota and House File 3007 would limit the amount of water appropriated and consumed in the “Land of 10,000 Lakes.”

The increase in legislation addressing the U.S. data center boom may place more costs on developers rather than ratepaying citizens, which in turn addresses concerns that the high usage of electricity, water, power and other utilities will raise utility costs. Data center developers should be aware of the legislation in various states, as it could increase their overall costs, but also consider such legislation in the context of whether alternative service providers are an option.

Charles Talbot Nunnally III, Chamberlain Hrdlicka
Charles Talbot Nunnally III focuses his legal practice in the commercial real estate industry including site feasibility, entitlement, acquisition, and development.

Nicholas Kemper, Chamberlain Hrdlicka
Nicholas Kemper’s practice focuses on representing companies in a variety of transactional matters, including commercial and industrial real estate acquisition, development, and leasing, and dispositions, commercial finance, corporate governance, and mergers and acquisitions.

Charlsie Mann, Chamberlain Hrdlicka
Charlsie Mann’s practice focuses on representing companies in commercial and industrial real estate matters including title and survey matters, acquisition, and development.