Vermont Legislature SmartTranscripts:

[Speaker 0]: Okay. Alright. So, Ken, we can go live. Let us know.

[Rep. Bram Kleppner (Member)]: Okay.

[Speaker 0]: Welcome back everybody. It is Thursday, February 5. This is the House Energy and Digital Infrastructure Committee and we are taking a little bit of testimony on h seven twenty seven, an act relating to sustainable data center deployment. And we are gonna be getting a sense of what other states are doing by checking in with the National Conference of State Legislatures. So I'm representative Kathleen James from Manchester.

[Rep. R. Scott Campbell (Vice Chair)]: Scott Campbell from Saint Johnsbury. Richard Bailey, Lamoille too. Michael Southworth, Caledonia two.

[Rep. Christopher Howland (Member)]: Christopher Howland, Rutland four. Dara Torre, Washington two.

[Rep. Bram Kleppner (Member)]: Bram Kleppner, Chittenden Thirteen, Burlington.

[Rep. Laura Sibilia (Ranking Member)]: Laura Sibilia, Windham Two.

[Speaker 0]: Great. And who's joining us in the room?

[Kathleen Perry (Attendee, New Craftsman Group)]: Kathleen Perry with the New Craftsman Group. Great. Danielle Otisan, freelance journalist.

[Rep. Laura Sibilia (Ranking Member)]: Super. Gabriel Molina down to Rackland Martin.

[Speaker 0]: Alright. Thanks. Alex, if you could just introduce yourself for the record, and we're looking forward to your testimony.

[Alex McCord (NCSL Senior Policy Specialist)]: Of course. Yes. So I'm Alex McCord. I'm a senior policy specialist with the energy program at the National Conference of State Legislators.

[Rep. Laura Sibilia (Ranking Member)]: Let me get a little volume.

[Speaker 0]: One sec, Alex. We're having a hard time hearing you.

[Rep. R. Scott Campbell (Vice Chair)]: Okay.

[Alex McCord (NCSL Senior Policy Specialist)]: Can you hear me now?

[Speaker 0]: Yep.

[Alex McCord (NCSL Senior Policy Specialist)]: All right. Excellent. Can you see my slides?

[Speaker 0]: We can.

[Alex McCord (NCSL Senior Policy Specialist)]: All right. Excellent. Well, first of all, I appreciate Chairman James for inviting me to come speak to the House Committee on Energy and Digital Infrastructure about the legislative trends regarding data centers. Like I said, my name is Alex McCord. I'm a senior policy specialist with the energy program at the National Conference of State Legislators. NCSL is the bipartisan organization representing the legislators of our 50 states and territories. In particular, today I'll be discussing state actions mostly addressing the energy consumption of data centers. So to start off with a little background, the increased use of new technologies such as artificial intelligence, cloud computing, and cryptocurrency mining requires the construction of high energy consuming data centers. Data centers currently account for about 4% of energy consumption in The US, but this could double by the end of the decade, thus raising concerns about energy supply and increased costs for ratepayers. We really started to see this emerge as a concern around the start of 2024 as states started to introduce legislation related to the energy usage of data centers. And this trend has only exploded since then as we've continued to see more and more states consider legislation. And we tracked about 70 bills introduced last year concerning the energy usage of data centers. Examples of introduced legislation include setting reporting requirements for data centers regarding their energy and water usage, tax incentives for energy efficient technology, as well as standards to ensure equitable utility rates. And I know a lot of these issues are provisions discussed in House Bill seven twenty seven, so I will be discussing each of these policy topics in more detail during this presentation.

[Rep. Christopher Howland (Member)]: Alex, can

[Speaker 0]: you go back?

[Alex McCord (NCSL Senior Policy Specialist)]: Yes.

[Speaker 0]: How do you define data center on this map? Does it need to be of a certain size?

[Alex McCord (NCSL Senior Policy Specialist)]: No, I believe this is so this map is provided by the data center map is the organization's name, and it just tracks data centers. I'm not sure their official definition, but I think this includes all constructed data centers. And so I don't think there's a specific

[Speaker 0]: Like there's not a minimum okay.

[Rep. Bram Kleppner (Member)]: That does show the two in Vermont.

[Speaker 0]: Three. That's The why I was

[Rep. Christopher Howland (Member)]: size the size of the circle appears to be less than a hundred, one hundred to about 200, and then the others are greater than 200. Are the largest circles. But I think that's

[Speaker 0]: I think that's the number of data centers.

[Rep. Christopher Howland (Member)]: Or no, but the size of the circle on the

[Speaker 0]: Map correlates to the number of data So

[Rep. Christopher Howland (Member)]: all the ones less than 100 are small circles and there's a medium size somewhere between a 100, and I don't see any above the above. And then the two hundred and three hundred and eighteen are the largest circles. Madam chair.

[Speaker 0]: Yeah.

[Rep. Laura Sibilia (Ranking Member)]: I believe these are the data centers that which council mentioned this morning. These are the small and traditional. Yes.

[Rep. Bram Kleppner (Member)]: Yeah.

[Speaker 0]: Okay. Thanks.

[Alex McCord (NCSL Senior Policy Specialist)]: Of course. So perhaps the greatest trend we're seeing right now in states is how they are approaching the cost allocation of interconnecting data centers to the grid. The significant energy demands of data centers is raising a lot of concerns about how utility rates will be impacted. The expansion of data centers is going to increase demand overall and of course require new infrastructure investments for interconnection. And so this can mean new generation facilities as well as transmission and distribution lines for a lot of proposed data centers. Traditionally, a lot of large infrastructure projects have their costs recovered through increased electricity rates, but since some of these infrastructure projects would be constructed just to serve the data centers and are not directly benefiting residential ratepayers, policymakers are now looking to see how to prevent these costs from shifting towards unrelated ratepayers. And so we really started to see legislation first emerge on this issue just this past year. And states have taken a few different approaches to the issue. So first of all, California and Virginia both enacted legislation requiring their public utility commissions to assess the impacts of new data centers on unrelated electricity customers and determine whether further action is necessary. The most common type of action we are seeing is establishing specific tariffs in customer classes for large loads like data centers. Electricity tariffs are structured pricing plans determining how consumers are charged for their electricity usage. So creating new customer classes for data centers or other large loads allows specific pricing plans that are separate from other utility customers like residential rate payers. So for example, Maryland did go ahead and enact legislation last year requiring utilities to submit a specific rate schedule for large load customers. The rate schedule must require large load customers to cover the just and reasonable costs associated with any electric transmission or distribution build out required to interconnect or serve the large load customer. And I do want to note that this legislation does not specify data centers, but instead uses the term large loads, which it defines as commercial or industry customers that have an aggregate monthly demand of at least 100 megawatts. And of course, this does encompass a lot of data centers. And we see this language in most states where they use the term large loads, but for the most part this legislation is targeting data centers. And we saw similar legislation.

[Speaker 0]: Sorry, Alex, we have a question.

[Rep. Laura Sibilia (Ranking Member)]: Alex, is the 100 MEG definition for large loads pretty typical?

[Alex McCord (NCSL Senior Policy Specialist)]: Around that. It does vary. I'll be discussing a Texas example in a little bit. I think they have 75 megawatts. I think I've seen as low as 25, I think for either Oregon or Washington. I did provide I did share yesterday, I'm not sure if you all have it in front of you, but a sheet with some further examples of state actions regarding specific classes for large loads. And if you look in a lot of those bills, they'll have clear definitions for what a large load is. But yeah, I'd say around 100 megawatts, give or take, maybe around like 25, but it does vary a little bit. And so we saw similar legislation also enacted in Minnesota and Oregon, which both required the establishment of a new customer class for large loads and the creation of new tariffs for facilities within that customer class. Then also, Utah enacted Senate Bill 132 last year, which set clear rules for the interconnection process of new large loads to the grid. And the bill requires large loads to pay for any interconnection related studies that are necessary, as well as any identified necessary interconnection upgrades, such as transmission or distribution system upgrades. So like I said, these bills I've got here are just some of the key examples we saw enacted last year, but we have seen a lot more legislation introduced so far in the beginning in 2026. So moving on, another trend we are seeing in states, and it is included in House Bill 77, are demand side management programs or other measures to address data centers energy consumption. So we've seen a lot of different approaches to this in the past year from states with one of the more significant data center bills enacted last year in Texas, Senate Bill six, which set new interconnection rules for large loads. So one of the requirements is that loads of 75 megawatts or greater looking to connect to the grid must participate in a mandatory demand management program. This program mandates that large loads have shutoff equipment installed as the condition of their grid interconnection, and then utilities may disconnect eligible loads during firm load shed events. So these are events where there are controlled power outages ordered by grid operators, typically when electricity demand exceeds supply, in order to avoid more significant outages. Then we also have seen states looking to incentivize the use of distributed energy resources along with data centers to provide power directly. So the greatest example of this was in West Virginia with House Bill twenty fourteen last year. So West Virginia is a state that is very much looking to promote data center growth within the state. And it did so through this bill, which created the high impact data center program. However, this bill also creates the microgrid development program to encourage the use of microgrids to provide energy to new data centers. And so a microgrid is a group of interconnected distributed energy resources that can operate as a controllable entity, which means it can disconnect from the larger grid and run an island mode. So in the case of a disruption to the greater grid, a microgrid can still provide energy to local facilities. And so the bill requires a designated liaison to serve as the point of contact for certified microgrids and high impact data centers to coordinate their development. And then moving on, New Jersey last year introduced legislation that would have required all electricity for proposed data centers to be derived from renewable energy resources. This bill was not enacted, but it is an example of legislation aiming to mandate specific generation sources for data centers. And then so far this year, we've seen Colorado and Virginia both introduce legislation requiring data centers to maintain certain energy efficiency standards to maintain the tax exemptions they receive for their equipment. The Colorado bill also would require that after 2040, all new large loads must meet their energy needs through renewable or clean energy sources. We've also seen states consider legislation that would require data centers to regularly submit reports on their energy and water consumption to the state. So while the requirements for the reports vary by state, for the most part, they include reports would include total energy and water consumption for the reporting period, an assessment of power usage effectiveness, and then also reports on data centers, energy sources, and energy efficiency and water conservation measures that have been implemented. So we have seen quite a few examples of states introduce legislation with these reporting requirements. California, Illinois, and New Jersey all introduced legislation last year, and Nebraska has this year. But we actually have not seen much legislation like this enacted. And I think there is some opposition to this kind of legislation due to concerns that it will set too strict of oversight restrictions that could drive data centers to locate in other states with less rigid requirements. Governor Gavin Newsom in California cited similar reasons for his veto of a bill that would have required water consumption reporting last year. Then regarding the New Jersey veto, the governor explained that the decision to require reporting should be left up to the Board of Public Utilities and that the metrics should remain confidential where as the bill would have required to make them publicly available. I do also I don't have a separate slide for this, I do want to take a minute to discuss data center citing. As I know that a section in House Bill seven twenty seven covers siding and the need for a certificate of public good. For the most part, siding is left up to local governments, but we have started seeing more legislation emerge setting some additional guidelines regarding the siding of data centers. So far this year, we've seen Florida House Bill 1,007 introduced, which would prohibit hyperscale data centers from being located within 10 miles of agricultural, recreational, or conservation land. Additionally, the bill requires local governments to hold public hearings to approve projects before beginning on a hyperscale data center. South Dakota also introduced legislation this year aiming to limit the nuisances caused by data centers. So this bill would prohibit data centers from locating within one mile of a residential area. And it also requires their continuous noise levels to be below 40 decibels.

[Rep. Christopher Howland (Member)]: Sorry, I missed that. Go ahead.

[Alex McCord (NCSL Senior Policy Specialist)]: So then moving on, I do want to finally, one of the last provisions in House Bill seven twenty seven is regarding economic benefits associated with data centers. So our fiscal program was able to share some of these examples of legislation introduced this year utilizing the taxes received from data centers. And so I'll run through this real quickly, but West Virginia Senate Bill six fifty two would modify property tax allocation to ensure most of the increment tax created by data centers is awarded to the county where the data center is located rather than having these tax benefits be distributed across the state. Pennsylvania House Bill 2,153 would require property tax revenue from data centers to be used to fund property tax exclusions for homestead and farmstead properties. And then Virginia introduced legislation that would require municipalities with at least 20 data centers to create a local residential renewable energy incentive program. And then set aside data center tax revenue would be used for the program to help invest in renewable resources such as residential solar and battery systems. Similarly, Arizona introduced legislation that would redirect data center transaction privilege tax revenue to fund solar projects in the state. And then finally, Indiana introduced legislation that would allow data centers to purchase equipment that is eligible well, Indiana does allow data centers to purchase equipment that is eligible for a tax exemption, but this legislation would require data centers to pay 1% of the amount of taxes forgone each year to their host municipalities, a type of payment in lieu of tax. So that's my presentation for today. Again, I would like to thank Chairwoman James for inviting me to speak today. I know I shared a lot of legislative examples here, but my contact information is listed, so do not hesitate to reach out if you would like some follow-up information. I also would like to mention that because data centers and their energy usage has become such a concern for states, we are in the process of updating our legislative energy database to include a data center specific tag, And so that should be publicly available soon. But in the meantime, I'd be happy to answer any questions you may have right now.

[Speaker 0]: All right. Representative Campbell?

[Rep. R. Scott Campbell (Vice Chair)]: Yeah, believe you said that all of these bills a lot of these bills have been introduced. You mentioned one that's been V term. Nothing's been enacted. I think you said.

[Rep. Bram Kleppner (Member)]: Right? Regarding

[Alex McCord (NCSL Senior Policy Specialist)]: the reporting requirements?

[Rep. R. Scott Campbell (Vice Chair)]: Well, to clarify what Maryland. Maryland hasn't enacted a data center law.

[Alex McCord (NCSL Senior Policy Specialist)]: So well, let me hear you. I could have made this more clear. A lot of the legislation so going back to this first slide on tariffs and contracts, this legislation I have listed here, these are all examples of enacted legislation. So this topic in particular we have seen much more legislation enacted on. When I said we haven't seen too many examples enacted, that was regarding the energy usage reporting requirements, which you've seen bills introduced on this topic, but nothing significant enacted.

[Rep. R. Scott Campbell (Vice Chair)]: Okay. Thank you for clarifying. Of course.

[Speaker 0]: R. Sibilia, do you have any?

[Rep. Laura Sibilia (Ranking Member)]: Do I have any? Yeah, think Alex has been a really helpful resource as we've thought about this bill. Alex, when here's a question for you that could be relevant here and certainly is for other pieces of legislation we're considering. How many other states are vertically integrated their electric sector?

[Alex McCord (NCSL Senior Policy Specialist)]: Oh, let me think. Believe Yeah.

[Rep. Laura Sibilia (Ranking Member)]: That's a surprise question. Sorry.

[Alex McCord (NCSL Senior Policy Specialist)]: I want to say it's around two thirds of the country, but I don't think you should quote me on that.

[Rep. Laura Sibilia (Ranking Member)]: Okay. Would be helpful. Yeah, it would be helpful to know one or two other states that have a regulatory frame that's similar to Vermont's. So, I mean, we've got a lot of deregulation around us in New England. In fact, everyone around us is deregulated, largely. And so it's just helpful to try and compare apples to apples when we're thinking about policy and what we do.

[Alex McCord (NCSL Senior Policy Specialist)]: Of course. And I'd be happy to follow-up with some information on that.

[Rep. Laura Sibilia (Ranking Member)]: Great. All right.

[Rep. Christopher Howland (Member)]: Okay. Have a great

[Rep. Bram Kleppner (Member)]: question actually. Do you have a sense, Alex, for The States, how many of them have regulated large load in general, and how many are specifically regulating data centers? And of those regulating data centers, do they have separate specific regulation around other large load?

[Alex McCord (NCSL Senior Policy Specialist)]: I would say for the most part, the legislation I've seen is primarily, I'd say, like 90% regarding large loads. They use that terminology just because I think it's a bit more all encompassing and maybe seems a little less targeted towards data centers, which I guess could maybe, cause data centers to maybe reconsider locating in certain states. And so in cases when it is the few cases I've seen, I think, they do target data centers. So like, for example, the tariffs and contracts, I think I've only seen that regarding large loads. And so I haven't seen a specific rate classification just for data centers. But then some of the other legislative examples I talked about such as, you know, demand side management, those ones do get a bit more involved with data centers specifically.

[Rep. Bram Kleppner (Member)]: Got it. Thank you.

[Rep. Laura Sibilia (Ranking Member)]: Yeah. Brooks Sibilia. I don't know that you touched on this, Alex. Have any of the states passed bills that include decommissioning or a plan for stranded costs within the communities?

[Alex McCord (NCSL Senior Policy Specialist)]: So, like the decommissioning of data centers, like the

[Rep. Christopher Howland (Member)]: process? Yes.

[Alex McCord (NCSL Senior Policy Specialist)]: Yes, I do believe, and I don't have this information with me right now, but happy to follow-up. I do believe a lot of, you know so for example, I mentioned Utah Senate Bill 132, which kind of sets interconnection rules for data centers. A lot of times the interconnection process and the application to interconnect will also require data centers to establish, to have some sort of decommissioning plan. And so I again, I don't have a list off the top of my head of states that have this, but I would be happy to collect that information and share it with you after this.

[Rep. Laura Sibilia (Ranking Member)]: Okay. Thank you very much. And just looking. And we have this presentation, I'm sure.

[Speaker 0]: Yeah. It's either already posted or it

[Rep. Christopher Howland (Member)]: will be.

[Speaker 0]: Alright. Great. Alex, thank you so much for your time. That was really helpful.

[Alex McCord (NCSL Senior Policy Specialist)]: Of course. Thank you very much for inviting me. And like always Yeah.

[Rep. Laura Sibilia (Ranking Member)]: Feel free

[Alex McCord (NCSL Senior Policy Specialist)]: to reach out for any additional false information. Alright. Take care.

[Rep. Bram Kleppner (Member)]: Have a

[Rep. Laura Sibilia (Ranking Member)]: great day.

[Rep. Bram Kleppner (Member)]: Thank you. You too.

[Speaker 0]: Alright, folks. We are back at one,

[Rep. Christopher Howland (Member)]: and we