New Jersey Mandates AI Data Centers Pay for Electric Grid Upgrades

New Jersey Governor Mikie Sherrill signed a bill requiring state regulators to establish a new electric rate for large data centers, mandating that these facilities cover electric grid upgrades and provide financial guarantees. This new law aims to prevent the costs of infrastructure improvements from being passed onto other utility customers and addresses the growing demand on the state's electric grid.

The legislation directs the Board of Public Utilities to set up specific rules for these financial obligations. New Jersey, which currently hosts over 70 data centers with more planned, is experiencing increased demand from AI facilities. Some projects, like the DataOne campus in Vineland, could require more than 300 megawatts, consuming vast amounts of electricity and millions of gallons of water annually. A report by New Jersey Policy Perspective linked AI facility growth to a spike in electric bills, projecting these sites could account for nearly 10% of the state's electricity use by the end of the decade.

The Data Center Coalition, through its director of state policy Khara Boender, supports the principle that large electricity users should pay for the power they need but voiced concerns that the law unfairly targets a single industry. Boender advocated for similar rules to apply to all major commercial and industrial electricity users, citing a coalition-commissioned report that attributes rising electric bills primarily to inflation, grid modernization, and aging infrastructure.

This bill is part of a broader initiative by Governor Sherrill, who also signed two other energy bills aimed at reducing electricity costs. These include eliminating a utility incentive that increased transmission costs and requiring additional state approval for certain major electric grid projects, actions Sherrill stated would save New Jerseyans over $1 billion annually.