Recent/upcoming developments… The increasingly visible rise in electricity prices was a prominent issue in last week’s elections in GA, NJ, and VA.  Electricity costs are among a multitude of issues that relate to broader voter concern about the cost of living/affordability, which is increasingly dominating the policy dialogue at both the state and federal level.  As a result, we are beginning to see a growing bifurcation in sentiment between Republicans and Democrats about data centers.  The Trump Administration, Congressional Republicans, and state-level Republican officials have been fully supportive of AI/data center buildout, and their answer to concern about rising energy costs is to reduce regulations that enable more power supply.  Democrats both at the federal and state level are beginning to take a more critical approach to data centers, with state level dialogue among Democrats increasingly focused on pausing incentives for data centers and requiring large electricity users (i.e., hyperscalers) to carry a higher cost burden.

* New Jersey… During her campaign for NJ governor, Democrat Mikie Sherrill promised to declare a state of emergency on day one and freeze energy rates for a year.  With the average price of electricity to residential consumers in the state rising more than 20% from August 2024 to August 2025, it’s clear that this was an issue of importance.  In addition to gubernatorial campaign promises, Assemblywoman Katz introduced a bill that would impose a surcharge on data centers that consume a significant amount of electricity during peak hours.  It has not yet gained meaningful momentum.

* Virginia… Electricity prices were also a center message in the VA gubernatorial race, where the price of electricity rose ~13% between August 2024 and August 2025.  Eventual winner Abigail Spanberger spoke on the campaign trail about making data centers pay their “fair share.”  She has encouraged “clean on-site and off-site generation and storage.”  Other down-ballot candidates positioned their campaigns in opposition to data centers and have argued for policies including larger distances between data centers and residential areas and data centers offsetting their energy usage with renewables.

* Georgia… In July, the five Republicans on the Georgia Public Service Commission unanimously approved a plan for Georgia Power Co. – the state’s largest investor-owned utility – to freeze base power rates through the end of 2028.  In 2024, the state legislature passed a bill (that was ultimately vetoed by Gov. Kemp, but could arise again) that would have paused incentives for data centers to evaluate their return on investment. A pair of Democrats unseated incumbent Republican commissioners in last week’s Public Service Commission election, with both highlighting energy affordability as a top priority.  While Republicans will still hold the majority, the election results reflect voters’ frustrations with rising energy costs and could sway the Commission towards a less favorable view of data centers.

* Oregon…  Earlier this year, OR passed a slate of bills aimed at addressing electricity affordability for consumers.  The Protecting Oregonians with Energy Responsibility (POWER) Act specifically targets data centers by requiring that big energy users pay for the strain that they place on Oregon’s electric grid.  The bill sets up a special rate category for large users.  Another bill, the Fairness & Affordability in Residential Energy Regulation (FAIR Energy) Act limits how often utilities can raise rates and prevents them from doing so during the winter months.  It also requires that utilities explain the reason for rate changes.

* California… AI data centers have been addressed both by the CA Public Utilities Commission (CPUC) and in the state legislature.  This summer, the CPUC approved an interim rule to streamline and accelerate electric grid connections for high-energy users if those users agree to pay for necessary transmission infrastructure work up front.  Several months later, Gov. Newsom signed SB 57 into law, which directs the CPUC to study the impact that data center development will have on the state’s ratepayers.  This approach is similar to what OR has pursued.

* Texas… This summer, Gov. Abbott signed SB 6 in response to concerns related to the state’s AI data center-related surge in power demand.  The bill directs the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) to adopt a number of rules, including to ensure that large loads “contribute to the recovery of the interconnecting electric utility’s costs to interconnect the large load to the utility’s system”; to establish a formal process for new large loads seeking net metering with co-located existing generators; and to develop a system for demand reductions from large loads during emergency events.  TX is widely considered a business-friendly state, but SB 6 represents a notable shift in assigning increased financial requirements on large users.

* Trump Executive Orders… In April, President Trump issued the Strengthening the Reliability and Security of the United States Electric Grid Executive Order (EO).  The EO cites AI data centers as one of the key drivers of increased electricity demand and directs the Department of Energy (DOE) to “streamline, systemize, and expedite [its] processes for issuing orders under section 202(c) of the Federal Power Act,” among other things.  This would allow power plants to run at their max capacity during electricity shortfalls so that big users can continue to be served without interruption.  Several months later, the White House more explicitly addressed data centers with the Accelerating Federal Permitting of Data Center Infrastructure EO, which provides financial support and expedites permitting (via NEPA categorical exclusions and FAST 41 designations) for large data centers.

* Potential FERC Rulemaking… On October 23, DOE Secretary Wright wrote to FERC (which is responsible for federal transmission policy) and requested that they initiate a rulemaking related to the interconnection of large loads.  Consistent with the administration’s support for AI, the rule would aim to expedite the process by which large loads (e.g., data centers) connect to the transmission system.  DOE proposed more than a dozen planning principles, including standardizing load interconnection procedures and agreements between transmission providers large electricity users.  While FERC has already established a new docket and invited public comments, the agency has not yet indicated whether they will be moving forward with a formal rulemaking.  Already, influential stakeholders such as the National Association of Regulatory Utility Commissioners (NARUC) have warned FERC not to infringe on state authority to regulate retail electricity sales, even while acknowledging the need to address reliability and cost issues associated with data centers coming online.  We expect utilities to oppose the potential rule as well.

* Letter from Senate Democrats… Five senators – Sens. Blumenthal (D-CT), Markey (D-MA), Sanders (I-VT), Van Hollen (D-MD), and Wyden (D-OR) – wrote to Commerce Secretary Lutnick and White House Office of Science and Technology Policy (OSTP) Director Kratsios to “demand information about the failure of the Administration to prevent consumers from being forced to subsidize the cost of data centers.”  The letter ties the increase in electricity demand to the “cost-of-living crisis” and requested that the Department of Commerce and OSTP share the steps they’ve taken to ensure that data centers are not driving up household electricity bills.

Our outlook… In the next couple of years, we expect states with unified Democratic governments (e.g., CA, NJ, OR, VA) to see an expansion of utility rate regulation, shifting of electricity cost burdens to hyperscalers, and/or limits on incentives to construct data centers, whereas states with Republican governors or legislative majorities are more likely to maintain a supportive posture for data centers.  However, recent evidence in GA and TX suggests data centers may encounter more regulatory friction going forward than has been the case over the last couple of years.  At the federal level, we expect Democrats to become increasingly critical of hyperscalers and scrutinize the administration’s support of them.  This is unlikely to deter the Trump Administration, which is likely to maintain its focus on deregulation to facilitate power supply to data centers.  It is worth noting however, that populist conservative influencers (e.g., Steve Bannon, Rep. Taylor-Greene (R-GA)) have begun to raise questions about AI generally and are strongly critical of “Big Tech.”  To the degree they tie this sentiment to voter concern about electricity costs, we could begin to see more direct criticism of data center buildouts among Republicans in Congress, which could eventually moderate the Trump administration’s enthusiasm for the industry.

Watch for these developments… We are watching for whether Democratic governors prioritize legislation that shifts a greater share of the regulatory cost burden to hyperscalers, as this will materially increase the probability it is enacted in states where the Democratic legislature is likely to be accommodating (e.g., CA, NJ, OR, VA).  We are also watching key Congressional Democrats on energy policy (e.g., Sens. Heinrich (D-NM) and Whitehouse (D-RI), and Reps. Huffman (D-CA) and Pallone (D-NJ)) to see they express concern about data center electricity usage, as this could impact their enthusiasm for passing permitting reform legislation, which to-date has been an area of emerging bipartisan consensus.  We are also looking for indications that populist Republicans in Congress are beginning to criticize data center energy usage, as this would represent a notable shift that could detract from the party’s full support for deregulation in this area.