New York bans new data centers as power bills explode
New York has enacted the first statewide moratorium on new hyperscale data centers drawing 50 megawatts or more, in response to escalating power bills and grid strain. This action, alongside Virginia's new electricity tax on data centers and the PJM grid's failure to secure enough future power, highlights the growing challenge the AI boom poses to the US electricity infrastructure. Governor Hochul cited a 68 percent increase in average residential electricity prices since 2019 as justification for the executive order.
New York has imposed the United States' first statewide moratorium on new hyperscale data centers, a move spurred by surging electricity costs and concerns over grid reliability. Governor Kathy Hochul signed an executive order on July 14, implementing a one-year pause on state environmental permits for new facilities consuming 50 megawatts or more. This halt allows the state to develop a comprehensive regulatory framework aimed at safeguarding ratepayers, the power grid, and local communities, while projects already approved will proceed.
The justification for New York's action is rooted in a nearly 68 percent increase in average residential electricity prices since 2019. Governor Hochul is also advocating for legislation to revoke sales tax exemptions previously afforded to large data centers, transforming them from incentivized investments into regulated and taxed infrastructure.
Further highlighting the strain on power infrastructure, PJM Interconnection, the largest US grid serving 13 states and Washington D.C., reported a record $16.4 billion capacity auction. Data centers were identified as responsible for approximately $6.3 billion of this total, driving supply costs up by over 60 percent. Alarmingly, this marks the third consecutive auction where PJM failed to secure sufficient future power commitments to ensure grid reliability.
Meanwhile, Virginia, a significant hub for data centers, has adopted a different approach by implementing a new $0.011 per kilowatt-hour levy on data center electricity consumption, effective July 1. This tax is projected to generate around $600 million annually. The White House is also reportedly preparing to engage utilities and data center developers to secure a voluntary commitment to prevent the AI buildout from increasing household power bills, implicitly acknowledging the potential for such price hikes.