Why It Matters

The House overwhelmingly passed bipartisan legislation to prevent households and small businesses from bearing electricity infrastructure costs created by large data centers.

The H.R. 9340 Ratepayer Protection Act would amend the Public Utility Regulatory Policies Act of 1978 to establish a federal standard specifying who pays for electricity-system upgrades required by very large new users, particularly data centers. State utility regulators and nonregulated utilities would be required to consider adopting the standard.

Under the standard, rates for covered large-load customers would be designed to recover the full incremental cost of generation, transmission, or distribution upgrades necessary to serve those customers, including costs incurred if a customer terminates its service agreement or otherwise stops purchasing electricity. Utilities would also require financial assurances or contributions to cover the cost of necessary upgrades before making them.

A large-load customer is a nonresidential electricity consumer that operates information technology infrastructure and related systems for data storage and computational applications and services, with an aggregate peak demand of at least 100 megawatts at a single site or campus.

In practical terms, the approach is intended to prevent residential and other ratepayers from subsidizing infrastructure built primarily to serve very large data-center loads. The consumer question is whether households and smaller commercial customers should bear the costs of capacity added primarily to meet that new demand.

The Big Picture

Rep. Gabe Evans (R-CO) introduced the bill on June 18, with Rep. Kathy Castor (D-FL) as its original cosponsor, and referred it to the House Energy and Commerce Committee.

The Energy Subcommittee forwarded the bill to the full committee by voice vote on June 24. The full committee later ordered the bill reported as a substitute by a unanimous 52-0 vote. It was formally reported as H. Rept. 119-814 on Sept. 10 and placed on the Union Calendar as Calendar No. 713.

The House considered the legislation under suspension of the rules and passed amended bill 417-3 on Sept. 16. The Senate received the measure the following day and, after two readings, placed it on the Senate Legislative Calendar under General Orders as Calendar No. 684 on Sept. 24.

The legislation comes amid rapid growth in electricity demand driven by data centers, artificial intelligence and cloud computing. The House committee report cited estimates that data centers account for roughly 4% to 5% of U.S. electricity consumption and noted that electricity demand has begun to rise after years of relatively flat consumption.

The legislation does not itself require state utility regulators to adopt the proposed ratemaking standard. Instead, under the Public Utility Regulatory Policies Act, regulators and nonregulated utilities would generally have to begin considering the standard within one year and complete that consideration and make a determination within two years. States that have already implemented or considered the standard or a comparable policy could qualify for an exception from those requirements.

The Congressional Budget Office estimated that the bill would not affect the federal budget. CBO classified the requirement for state regulatory commissions to consider the standard as an intergovernmental mandate and estimated that the resulting administrative costs would be small.

The central policy tension is how to protect existing ratepayers from infrastructure costs associated with large new data centers while preserving state authority over retail electricity rates and supporting continued investment in data-center and artificial intelligence infrastructure.

Partisan Perspectives

Supporters, including the House Energy and Commerce Committee, argue that the bill protects consumers from data-center-driven rate increases while maintaining U.S. leadership in artificial intelligence and technology.

The bill attracted overwhelming bipartisan support. Evans, a Republican, introduced it with Castor, a Democrat, and the Energy and Commerce Committee advanced it 52-0 before the House approved it 417-3.

Supporters argue that large data centers should bear the incremental costs of generation, transmission and distribution infrastructure needed specifically to serve their electricity demand rather than shifting those costs to existing customers.

The American Public Power Association has said it shares the goal of protecting existing customers from costs associated with serving data centers but opposes creating a new federal Public Utility Regulatory Policies Act mandate requiring utilities to consider the standard. The organization has argued that many public power utilities already have rates or policies addressing data centers and other large loads.

The Bottom Line

The Ratepayer Protection Act matters because it seeks to establish a nationwide process for allocating electricity infrastructure costs associated with extremely large data-center loads.

Rather than directly imposing a national retail electricity rate, the legislation would require state regulators and nonregulated utilities to consider a federal standard under which covered data centers would bear the full, incremental cost of the generation, transmission and distribution upgrades necessary to serve them, backed by financial assurances or upfront contributions.

H.R. 9340 has passed the House and is now on the Senate Legislative Calendar as Calendar No. 684. It would still need Senate approval and the president's signature to become law.

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