Data Centers and New Jersey’s Energy Crisis: Part 3 - Protecting Ratepayers by Shifting Costs
In parts one and two of this series, I explained the basis for New Jersey’s massive spike in energy costs and covered how Governor Mike Sherrill’s first two executive orders demonstrated her commitment to addressing New Jersey’s energy crisis. But while Governor Sherrill’s executive orders are just starting to take shape, legislation passed during Governor Phil Murphy’s tenure is already laying the groundwork to protect New Jersey’s ratepayers from the downstream costs of energy-hungry data centers. This third article focuses on how New Jersey lawmakers are attempting to protect New Jersey businesses and residents from the downstream energy costs of data centers—often with blunt tools that may reshape the state’s economic strategy.
Last summer, Governor Murphy signed a law (P.L. 2025, c. 98) requiring the Board of Public Utilities to study how data centers are affecting electricity costs in New Jersey. In short, BPU has until October 2026 to determine whether and to what extent New Jersey energy consumers are enduring increased energy costs at the hands of data centers as well as what the State can do about it. Senator John Burzichelli, one of the bill’s sponsors, said the “high-tech data centers that are proliferating throughout the state consume a large amount of electrical power at a time when energy costs are increasing for ratepayers,” so State legislators “need to know if their impact on the energy supply is causing rate increases for everyday consumers.”
The outcome of the BPU study will undoubtedly set the stage for future legislation that protects New Jersey’s businesses and residents. The law is an acknowledgement that policy makers presently lack sufficient information to optimally regulate data centers. Legislation based on the outcome of the study can be expected later this year.
Significantly, Governor Murphy passed on a chance to take further action during his tenure. Last year the New Jersey Legislature passed a bill, A-5462, that would require public utility companies to create special rules for data centers with the aim of protecting New Jersey ratepayers. After passing both houses, Governor Murphy killed the act in a pocket veto last month.
The New Jersey Legislature has not given up: it has re-introduced the bill, S-731 and A-796, which passed Assembly and Senate committees in unanimous votes last week. The bill has detractors, however. Senator Declan O’Scanlon says the plan is just “a shell game” where data centers will simply pass additional costs on to consumers. He said any added fees are “going to come right back to the end users” by adding costs to “our phones, our data plans, etcetera.” But Assemblyman Dave Bailey, a sponsor of the bill, said, “We want to be married to data centers” and we “want them to come here,” but “we need a prenup.”
Assemblyman Bailey’s comment captures a central conflict between data centers and regulators. Data centers bring tax revenue and further the vision of Senator Andy Kim and Governor Sherrill, who hope to transform New Jersey into the “Einstein Corridor.” But they are also a drain on resources, and governments around the nation are grappling with how to manage the effects of their presence. In a June 12, 2025 statement opposing A-5462, the New Jersey Business and Industry Association pointed out that Pennsylvania, our “neighbor to the west,” has “decided to embrace data centers by ensuring it has sufficient energy for their functions,” which has resulted in Amazon investing $20 billion in data center development. The Association said that the bill “sends the message that we are not serious” about our claim that New Jersey wants to “be the AI capital of the country,” highlighting the risk that aggressive rate-shifting measures may protect New Jersey’s businesses and residents but harm the long-term growth for which the State hopes.
If the bill passes, any New Jersey entity with a monthly electricity demand exceeding 100 megawatts will have to pay at least 85 percent of its service costs. Practically speaking, the bill targets only large facilities. A business with a combined energy usage of 100 megawatts among several outposts need not be alarmed, however. The New Jersey Business and Industry Association formally opposed an earlier version of the bill, which would have measured the 100-megawatt floor based on combined usage. An amendment to the bill clarified that usage will not be measured by combining usage across the state. The New Jersey Business and Industry Association is now neutral on the bill.
Such state-level actions may be rendered moot by new proposed federal legislation. A bipartisan bill, the Guaranteeing Rate Insulation from Data Centers (GRID) Act, is sponsored by Senators Josh Hawley (R-Mo.) and Richard Blumenthal (D-Conn.). The GRID Act would require that data centers get off of the grid altogether. New data centers would have to find off-grid energy sources, and existing data centers would have ten years to find a new energy supply. As with similar legislative actions, the GRID Act aims to protect small businesses and residential consumers from “the burden of the rising electricity costs produced by data centers,” according to Senator Hawley.
Although it could take months, if not years, before we see final legislation that holds data centers accountable for their downstream effects on the grid or legislation that decouples New Jersey’s data centers from the PJM grid altogether, New Jersey’s businesses should be on the lookout. New fees imposed on high energy consumers will require data centers to come into compliance and will mitigate the increasing costs imposed on the rest of the State’s businesses.
The information contained in this article is not legal advice and has not been updated to include changes in the law since this article was originally published.