As data centers built to run artificial intelligence systems drive a historic surge in electricity demand, states are settling on very different rules for who picks up the tab — and the outcomes could shape utility bills nationwide.
New Jersey Gov. Mikie Sherrill has chosen a top-down approach. Legislation she signed in July directs the New Jersey Board of Public Utilities to create a separate rate structure for large data centers and to keep the cost of new substations, transmission lines and other grid upgrades built mainly to serve a data center off the bills of ordinary customers.
The law also requires large data centers to commit to paying for at least 85% of the electricity capacity they request over a 10-year period, a safeguard in case they scale back operations or shut down. Regulators are further directed to push data centers toward bringing their own clean generation or storage online, using power more efficiently, and cutting demand during emergencies.
Sherrill paired that with a second law, signed this week, requiring data center operators to report their energy and water use to the state twice a year. Her administration says the added disclosure, along with new guidance for municipalities, will help local officials understand what these facilities demand and negotiate accordingly.
Indiana’s Market-Based Bet
Indiana went a different direction, leaning on negotiation rather than a statewide mandate. State regulators approved a deal worked out by Indiana Michigan Power (I&M), the Fort Wayne-based utility serving Indiana and Michigan, together with consumer advocates and major tech firms.
The agreement followed a wave of massive projects announced in I&M’s territory — an $11 billion Amazon Web Services data-center campus near New Carlisle, Indiana, in 2024, and a $2 billion Google project in Fort Wayne. Those announcements forced utility and state officials to figure out who would pay for the added power generation and grid buildout required to serve them.
Under the 2025 agreement, new large customers, including data centers, must make long-term financial commitments to pay for the electric service they request, even if their eventual usage falls short. I&M says those commitments let it turn new demand into savings for existing ratepayers. The utility is now asking regulators to cut base rates by $59 million in 2027, and it’s proposing a three-year freeze on all customer bill rates, with a decision expected in June 2027.
If approved, I&M estimates a household using 1,000 kilowatt-hours a month would save roughly $100 a year.
A Sharper Critique
Daniel Turner, executive director of the energy advocacy group Power The Future, told Fox News Digital he thinks Indiana’s model beats New Jersey’s more prescriptive one — but that neither state has gone far enough to guarantee the AI buildout actually adds power to the grid instead of simply draining it.
“Indiana’s approach is definitely the better of the two,” Turner said. “At least Indiana is saying, ‘Hey, we don’t know where this is going, but we’re not going to put in all of the guardrails yet to stop progress from happening. Let’s work together and figure out what the solution is.'”
Turner argued new generation capacity should be part of every deal from day one. New Jersey’s law encourages data centers to bring on clean generation or storage, but Turner said facilities should be required to build the power generation needed to run themselves and contribute extra capacity back to the broader grid.
“Every data center should be built in conjunction with the necessary power-generating facility to power it and give back to the grid,” he said.
Turner said data centers have turned into a political football, with officials too often reaching for sweeping restrictions or indefinite delays instead of striking deals with utilities, developers and local communities that protect ratepayers while adding needed power.
“The solutions to data centers are not complicated issues to solve,” he said. “They just require political will.”
National Stakes
The debate isn’t confined to New Jersey and Indiana. In Tremonton, Utah, the Box Elder County Commission approved a proposed 40,000-acre AI data center project in May 2026 over protests from residents worried about water use, energy demand and environmental impact. Data center growth has also accelerated in Texas, with North Texas recently ranked as a top global market for the industry.
The Trump administration has moved to set a national framework. In March, the White House announced a Ratepayer Protection Pledge signed by Amazon, Google, Meta, Microsoft, OpenAI, Oracle and xAI, which the administration says commits those companies to cover the cost of additional electricity generation for AI data centers rather than pass it along to households.
Turner tied the stakes to broader competition with China, saying the U.S. cannot afford to fall behind in developing and controlling artificial intelligence.
“When you tell Americans why we have to win the AI race, look at what China did with the Wuhan flu and how they tried to lie about that,” Turner said. “Now imagine they can do that with every single piece of intellectual property on every platform in real time. That alone should scare the crap out of Americans.”
