As artificial intelligence drives unprecedented demand for electricity, New Jersey and Indiana are pursuing sharply different approaches to ensure that massive data center projects do not increase costs for residential utility customers.
New Jersey Gov. Mikie Sherrill, a Democrat, signed legislation in July establishing statewide ground rules before large data centers can connect to the grid. The law requires the New Jersey Board of Public Utilities to create a separate rate structure for large data centers and prohibits costs of new substations, transmission lines or other grid upgrades built primarily for data centers from being added to other customers' bills.
The legislation also requires large data centers to commit to paying for at least 85% of the electricity capacity they request over a 10-year period, protecting utilities in case projects scale back or close. The law directs regulators to encourage data centers to bring clean generation or energy storage online, use power more efficiently and reduce demand during emergencies.
Sherrill paired those ratepayer protections with new disclosure requirements. A separate law requires operators to report their energy and water use to the state twice a year. Her administration says the reporting and new municipal guidance will give officials a clearer picture of data centers' demands and help communities assess local impacts and negotiate with developers.
What the Right Is Saying
Indiana regulators took a different path, approving a deal negotiated by Indiana Michigan Power along with consumer advocates and major technology companies including Amazon Web Services and Google. Rather than imposing statewide prescriptive rules on every large data center, the agreement requires new large customers to make long-term financial commitments for electric service they request, even if their demand falls short of expectations.
Supporters say this approach attracts investment while ensuring costs do not fall on existing ratepayers. With those commitments in place, Indiana Michigan Power says it can turn new demand into a benefit for existing customers and is asking regulators to cut base rates by $59 million in 2027.
Daniel Turner, executive director of the energy advocacy group Power The Future, said Indiana's approach was better than New Jersey's more prescriptive framework but argued neither state had gone far enough to ensure AI buildout adds power to the grid rather than simply consuming it. Every data center should be built alongside generation facilities that power them and give back to the grid, he said.
Turner posited that data centers have become a political football, with officials too often choosing sweeping restrictions or open-ended delays instead of working with utilities, developers and local communities on plans that protect ratepayers while adding needed capacity. The solutions to data centers are not complicated issues to solve. They just require political will, he said.
What the Left Is Saying
Progressive advocates have praised New Jersey's approach as a model for protecting everyday consumers from bearing the costs of tech industry expansion. The requirement that data centers cover 85% of their requested capacity ensures utilities are not left with expensive infrastructure serving empty facilities, while the prohibition on passing grid upgrade costs to residential customers shields households from spikes in their electric bills.
Environmental groups have highlighted provisions encouraging clean generation and energy storage as a way to ensure AI growth supports state climate goals rather than increasing reliance on fossil fuels. The mandatory demand reduction during emergencies could also help prevent grid stress that leads to rolling blackouts, they argue.
Sherrill's administration has emphasized that the framework gives communities tools to negotiate with developers and assess local impacts before projects are approved, rather than reacting after commitments are made.
What the Numbers Show
The scale of new electricity demand from AI infrastructure is significant. Amazon Web Services announced an $11 billion data-center campus near New Carlisle, Indiana, in 2024. Google announced a $2 billion project in Fort Wayne. These projects are among dozens of planned facilities nationwide as technology companies race to build AI computing infrastructure.
If the Indiana Utility Regulatory Commission approves Indiana Michigan Power's rate proposal, an Indiana household using 1,000 kilowatt-hours of electricity per month would save approximately $100 annually. The utility is also proposing to freeze all rates on customers' monthly bills for three years, with a decision expected in June 2027 and any savings beginning that summer.
The Trump administration has sought to turn these state-level debates into a national model. In March, the White House announced a Ratepayer Protection Pledge signed by major technology companies including Amazon, Google and Meta, committing them to practices aimed at limiting impacts on residential utility costs.
New Jersey's law requires data centers seeking new connections to pay for 85% of capacity they reserve over a decade, ensuring utilities recover costs even if projects are reduced. The state also requires twice-yearly reporting on energy and water use from large facilities.
The Bottom Line
The competing approaches in New Jersey and Indiana reflect broader debates about how to manage the rapid growth of data centers without burdening residential ratepayers or stalling economic development. New Jersey's prescriptive framework attempts to establish clear protections before projects proceed, while Indiana's negotiated approach aims to attract investment through financial commitments that shift risk away from existing customers.
The outcome in both states will likely inform how other governors and state legislatures address the issue as AI demand continues to grow. Whether Indiana Michigan Power's proposed rate cuts survive regulatory scrutiny, and whether New Jersey's framework successfully balances growth with consumer protections, will provide evidence for which model works better. The Trump administration's Ratepayer Protection Pledge signals interest in applying similar principles at the federal level.
What to watch: June 2027 when the Indiana Utility Regulatory Commission is expected to rule on the rate cut proposal, and ongoing implementation of New Jersey's data center framework as facilities seek to connect to the grid.