Delaware governor signs legislation that aims to make data centers ‘pay their fair share’

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Delaware Gov. Matt Meyer signed a package of legislation Wednesday that aims to protect ratepayers as the increasing demand for data centers threatens a surge in electricity bills.

The legislation prevents data centers from passing the costs associated with powering and upgrading their facilities on to ratepayers. Under the new law, data centers are required to generate their own “clean” energy to reduce their strain on the electric grid.

Meyer also signed legislation that would prevent data centers from receiving tax credits for creating jobs.

“Delaware is open to innovation, investment and economic growth, but growth must be responsible. It cannot come at the expense of those who live here,” Meyer said during the bill-signing event. “Data centers that do not pay their fair share do not belong in our communities. Data centers cannot jeopardize the reliability of our electric grid, and Delaware ratepayers will not be asked to subsidize enormous demands for power.”

Data centers are operated by large tech companies and house big computer servers necessary to power the growth of online processing, storage and artificial intelligence.

Proponents of data center development tout the prospect of increased tax revenue for the states and local governments they’re built in. However, as utility bills continue to soar in the region, residents are concerned that a strain on the power grid could mean higher energy bills.

PJM Interconnection, which manages the region’s electric grid, has pointed to the increase in data centers as a cause of rising electricity bills.

A Delaware state report found that increasing energy demands driven by data center development could cause the average wholesale electricity price to increase by more than 80%.

Under the new Delaware law, Delmarva Power, a subsidiary of Exelon, will create a separate, higher electricity rate for hyperscale data centers.

Data centers must incur the costs associated with building new transmission and distribution infrastructure, as well as capacity procurement, whenever possible.

These large facilities would also be required to reduce their power during peak demand to avoid outages.

After lawmakers introduced the legislation in May, the Data Center Coalition’s vice president of state policy told WHYY News in an email that data centers are “committed to paying the full cost for energy it uses to ensure that those costs are not shouldered by homes or businesses.”

A separate piece of legislation signed by Meyer would require data centers to generate their own energy to power their operations over a 10-year period. The power generated at data centers must meet the state’s renewable energy portfolio standards, such as wind, solar or nuclear.

A portion of data centers’ backup power must also come from clean sources, as opposed to diesel engines that impact local air quality.

“I want to say this directly to the constituents who’ve reached out to me over the past year with concerns about data centers moving into their communities: We see you, we hear you, and those concerns have shaped these pieces of legislation every step of the way,” said bill sponsor, state Rep. Debra Heffernan, D-Bellefonte.

Environmentalists like Dustyn Thompson, director of the Delaware chapter of the Sierra Club, are applauding the new laws.

“There are still a lot of issues that we have to deal with on the local level. But in terms of their impact on energy bills, again, you don’t get a more comprehensive package than what we’ve done today,” he said.

Environmental advocates say additional measures must be enacted to protect residents’ natural resources like water, which data centers use to cool their servers and prevent overheating.

“Communities near data center projects deserve a real say before decisions are made,” said Roby Anstett, executive director of the Claymont Coalition for Environmental Justice, in an email. “We’re already hearing concerns from residents about private wells and water quality. People should not be left with unanswered questions about pollution, noise, water or infrastructure costs while companies get the benefits.”