Big Tech data center building faces growing resistance from lawmakers.
This week, Sens. Josh Hawley (R-Mo.) and Richard Blumenthal (D-Conn.) introduced the first bipartisan bill in Congress aimed at preventing data center energy use from affecting consumers’ electricity bills.
A week earlier, on February 6, New York became at least the sixth state to introduce a bill to its lawmakers to halt the construction of data centers within state lines. This legislation would effectively rule out New York as a potential site for new data centers if passed.
In doing so, New York lawmakers are joining federal congressional leaders across the country in trying to legislate an industry that has grown and threatens an already overburdened power grid.
“The regulatory framework was not designed for single-sector load shocks, so policymakers are trying to adapt in real time to the scale and speed with which load forecasts change,” Didi Caldwell, founder and CEO of site selection consultancy Global Location Strategies, told Yahoo Finance.
“The system is ill-equipped to handle 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 more than $650 billion in AI investments this year.
In addition to Nvidia’s ( NVDA ) cutting-edge chips, tens of billions of those dollars went into data center construction, which increased energy demand and drove up costs for consumers.
According to Lawrence Berkeley National Laboratory estimates, US data center energy demand doubled between 2018 and 2024 and could triple by 2028.
In the service region for PJM Interconnection, the nation’s largest grid operator, capacity prices — the price utilities must pay electricity generators — exploded, rising to $329.17 per megawatt-day for 2026-27, up from $28.92 in 2024-25.
Major data center developments also use large amounts of water to cool the high-functioning electronic components housed within their walls. So-called megasize hyperscaler data centers are projected to use more than 150 billion gallons of water between 2025 and 2023, equivalent to the annual water use of 4.6 million US households.
For their part, AI developers are committed to easing 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 fill more water than its US data centers use. Amazon said in December that its data centers had reduced water use per computing unit by about 40 percent from 2021 and claimed the infrastructure would not increase electricity rates.
This week, AI developer Anthropic ( ANTH.PVT ) became the latest company to announce a cost-cutting policy, saying it would “pay for 100 percent of the network upgrades needed to interconnect our data centers, paid for through increases in monthly electricity rates.” The company said this would also include “the portion of these costs that would otherwise be passed on to consumers”. ChatGPT creator OpenAI ( OPAI.PVT ) announced similar plans in January.
But that hasn’t stopped state and federal lawmakers 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 freeze new construction until February 2027. Virginia’s proposal would freeze certain local approvals until July 2028. Bills in Oklahoma, New York and Vermont have even longer moratorium periods. The end date for Maryland’s proposed data center shutdown depends on when the legislature adopts regulatory guidelines.
“When one of these energy-intensive facilities comes to town, they raise utility prices and have a significant negative impact on the environment and the community — and have little or no positive impact on the local economy,” Sen. Liz Krueger (DN.Y.) said of the bill she introduced.
Sen. Liz Krueger (DN.Y.) attends the opening of IBM’s new flagship office in Manhattan on September 6, 2024. (Roy Rochlin/Getty Images for IBM) ·Roy Rochlin via Getty Images
For state governments — and their constituents — the growth of data centers can cut both ways.
Data center development in Georgia has created more than 8,500 construction jobs and more than 1,600 operations jobs, adding $1 billion or more to the economy, the Georgia Department of Audit and Accounts said in a recent report.
At the same time, the report found, state leaders lost nearly $500 million in funding by exempting data centers from certain taxes to spur development in their states.
In a Feb. 11 X.com post, U.S. Senate candidate Mark Moran, who is running to represent Virginia, wrote that Virginia could lose more than $2 billion in funding in 2026 due to data center tax breaks, on top of the $4.5 billion lost between 2020 and 2025.
“We have 663 data centers, the most in the US, with another 595 planned,” Moran wrote on X. “Time to tax them.”
States and grid operators also face the uncertainty of whether they will be funded for all proposed projects.
Given constraints on everything from AI chips and access to energy to skilled construction labor, “the pipeline of proposed data centers in the U.S. far exceeds what the industry could realistically deliver,” Brendan Pierpont, director of electricity at the California-based research firm Energy Innovation Policy and Technology, told Yahoo Finance.
And this only complicates the work of utilities and other network operators.
If a company agrees to a proposal and starts buying transformers, building connection infrastructure and committing to other necessary spending, utilities and ratepayers often end up bearing that cost if the proposal fails, analysts said.
In an effort to counter the consequences of a major developer walking away from an ongoing development, several bills include specific mandates for electricity bill and water impact studies. Others include proposals that would require developers to fully fund their energy use, so those costs are not passed on to ratepayers.
“Risk allocation is a major reason behind the proposed bills,” Global Location Strategies’ Caldwell told Yahoo Finance.
The legislation, she said, is “not just to slow things down, but also to shift risk to data center developers through cost allocation reform, interconnection warehouses and stronger load commitment requirements.”
And these proposals are already changing site selection planning for Big Tech’s biggest AI developers, Caldwell added.
Hyperscaler developers are increasingly moving from more concentrated markets, where opposition has hardened, to “second or third” states that can provide generating capacity, such as Kentucky or Indiana, where Meta is developing a new 1GW data center.
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Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow X at @byjakeconley or email at jake.conley@yahooinc.com.
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