Big Tech’s data center build-out is facing mounting resistance from lawmakers.
This week, Sens. Josh Hawley (R-Mo.) and Richard Blumenthal (D-Conn.) introduced the first bipartisan bill in Congress designed to prevent data center power usage from affecting consumers’ electric bills.
A week earlier, on Feb. 6, New York became at least the sixth state to have its legislators propose a bill to pause data center construction within state lines. This legislation would effectively shut out New York as a potential site for new data centers if it passes.
In doing so, New York’s legislators join federal state congressional leaders across the country in attempting to legislate an industry that has boomed and threatens an already overtaxed power grid.
“The regulatory framework was not designed for single-sector load shocks, so policymakers are attempting to adjust in real time to the scale and speed at which the load forecasts are changing,” Didi Caldwell, founder and CEO of site selection advisory firm Global Location Strategies, told Yahoo Finance.
“The system is ill-equipped to address the dramatic increase in demand created by AI data centers,” she said.
And lawmakers are trying to catch up.
An Amazon Web Services AI data center in New Carlisle, Ind., on Oct. 3, 2025. (Reuters/Noah Berger for AWS) ·Reuters / Reuters
The four Big Tech “hyperscalers” — Microsoft (MSFT), Alphabet (GOOGL, GOOG), Amazon (AMZN), and Meta (META) — are on track to spend upward of $650 billion on artificial intelligence investments this year.
In addition to cutting-edge chips from the likes of Nvidia (NVDA), tens of billions of these dollars have flowed into data center construction, which has spiked power demand and pushed consumer costs higher.
According to estimates from the Lawrence Berkeley National Laboratory, power demand from US data centers doubled between 2018 and 2024 and could triple by 2028.
In the service region for PJM Interconnection, the country’s largest grid operator, capacity prices — the price utilities must pay to generators for electricity — have exploded, rising to $329.17 per megawatt-day for the 2026-2027 period from $28.92 in the 2024-2025 period.
Major data center developments also use large amounts of water to cool the high-running electronic components housed inside their walls. So-called megasize hyperscaler data centers are forecast to use more than 150 billion gallons of water between 2025 and 2023, equivalent to the annual water usage of 4.6 million US households.
For their part, AI developers have pledged to alleviate some of the burden on local communities.
In January, Microsoft said it would pay utility rates high enough to fully cover its data center energy costs and replenish more water than its US data centers consume. Amazon said in December that its data centers have reduced water use per unit of computing by around 40% since 2021 and argued that the infrastructure won’t drive up electricity rates.
This week, AI developer Anthropic (ANTH.PVT) became the latest company to announce a cost-reduction policy, stating that it would “pay for 100% of the grid upgrades needed to interconnect our data centers, paid through increases to our monthly electricity charges.” The company said this will also include “the shares of these costs that would otherwise be passed onto consumers.” ChatGPT maker OpenAI (OPAI.PVT) announced similar plans in January.
But that hasn’t stopped state and federal legislators from seeking to more heavily regulate the industry and, in some cases, block development for several years while legislation catches up.
Legislation introduced in Georgia would pause new construction through February 2027. Virginia’s proposal would pause certain local approvals until July 2028. Bills in Oklahoma, New York, and Vermont have even longer moratorium periods. The end date for the data center pause proposed in Maryland is contingent on when the legislature passes regulatory guidelines.
“When one of these energy-guzzling facilities comes to town, they drive up utility prices and have significant negative impacts on the environment and the community — and they have little to no positive impact on the local economy,” Sen. Liz Krueger (D-N.Y.) said about the bill she introduced.
Sen. Liz Krueger (D-N.Y.) attends the opening of IBM’s new flagship office in Manhattan on Sept. 6, 2024. (Roy Rochlin/Getty Images for IBM) ·Roy Rochlin via Getty Images
For state governments — and their constituents — data center developments can cut both ways.
Data center development in Georgia created more than 8,500 construction jobs and more than 1,600 operations jobs, adding a combined $1 billion or more to the economy, the Georgia Department of Audits and Accounts said in a recent report.
At the same time, the report found, state leaders lost out on nearly $500 million in funding by exempting data centers from certain taxes to incentivize development in their states.
In a post on X.com on Feb. 11, US Senate candidate Mark Moran, who is running to represent Virginia, wrote that Virginia could miss out on more than $2 billion in funding in 2026 due to data center tax exemptions, in addition to $4.5 billion lost between 2020 and 2025.
“We have 663 data centers, the most in the U.S., with another 595 planned,” Moran wrote on X. “It’s time to tax them.”
States and grid operators also face uncertainty about whether funding will come through for all proposed projects.
Given constraints on everything from AI chips and power access to specialized construction labor, “the pipeline of proposed data centers across the US far exceeds what the industry could realistically deliver,” Brendan Pierpont, director of electricity at California-based research firm Energy Innovation Policy and Technology, told Yahoo Finance.
And this only complicates the job of utilities and other grid operators.
If a utility agrees to a proposal and begins buying transformers, building out connection infrastructure, and committing to other necessary spending, the utilities and ratepayers often end up bearing that cost if the proposal falls through, analysts said.
In an effort to counteract the fallout from a major developer walking away from a development in progress, several bills include specific mandates for studies of ratepayer electricity bills and water impacts. Others include proposals that would require developers to fully fund their power use so those costs aren’t passed on to ratepayers.
“Risk allocation is a major drive behind the proposed bills,” Global Location Strategies’ Caldwell told Yahoo Finance.
Legislation, she said, is like “not only to slow things down, but also to shift risks to data center developers through cost-allocation reform, interconnection deposits, and stronger load-commitment requirements.”
And these proposals are already shifting site selection planning for Big Tech’s largest AI developers, Caldwell added.
Hyperscaler developers are increasingly moving from more concentrated markets where opposition has strengthened to “second- or third-tier” states that can offer generation capacity, such as Kentucky or Indiana, where Meta is developing a new 1GW data center.
StockStory aims to help individual investors beat the market.
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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