WA lawmakers look to make data centers pay for energy cost hikes

Staring down a dwindling energy supply and cracks in the grid's reliability, Washington lawmakers aim to reel in the largely unregulated industry sucking up much of the region's power: data centers.

A set of bills making their way through the statehouse propose a sweeping set of regulations to raise rates for data centers, require them to disclose the natural resources they use and ensure they're among the first electrical users cut during energy shortages.

The time is now, said state Sen. Sharon Shewmake, D-Bellingham. Data centers are popping up across the country. They're drawing vast quantities of energy and water and driving up costs for neighboring ratepayers. And their thirst for electricity will only continue to rise.

"The growth is coming," Shewmake said. "And we need to be prepared."

Others, however, warned that additional regulation could drive future data centers out of the state, costing rural communities the tax boosts on which they've come to depend.

The companion measures - House Bill 2515 and Senate Bill 6171 - started off with public hearings in committees last week.

Early in his term, Gov. Bob Ferguson convened a working group to investigate the effects of data centers on Washington's economy, tax revenue, energy use and environment. The decision came after a 2024 Seattle Times and ProPublica investigation into the clean energy and economic impacts of the state's data center industry. The group included lawmakers, utilities, environmental advocates, tribes and scientists. They published their findings and recommendations in November, some of which are reflected in the measures now under consideration.

The bills would require public and private utilities to propose a new set of tariffs for data centers, effectively higher electric rates. Data centers with contracts or existing tariffs in place would be able to rely on their current agreements for a time.

The idea is to ensure the data centers pay for additional grid infrastructure they require to meet their massive demand. It would also aim to offset any rate increases from the facilities that might otherwise be pushed onto regular ratepayers.

This trend has been felt across the country. As data centers gobble up much of the available, less-expensive power in their regions, utilities must rely on more expensive options (often generated by fossil fuels) to meet rising demand, resulting in higher rates for people living in the area.

Data centers need to pay their fair share, Shewmake said, and ensure they don't jack up electric rates on "grandma."

Utilities would have to propose their increased rates for data centers by October, the bills say.

The data centers would also have to shoulder a flat fee, half a penny for every kilowatt hour of energy they use, said Zachariah Baker, regional and state policy director for the NW Energy Coalition. That money would go toward low-income bill assistance, weatherization projects and artificial intelligence education programs.

While data centers are known to draw large quantities of power and water, state officials don't have a comprehensive understanding on the specifics. Often, that information can only be found between disparate utilities or service providers. The proposed measures would require new sustainability reporting on water and chemical use, Shewmake said. This would help state officials understand the size and scope of the problem before taking further action.

In support of the bill, Jeremy Takala, a council member with the Confederated Tribes and Bands of the Yakama Nation, testified Friday before the state Senate Committee on Environment, Energy & Technology. The rapid growth of data centers will increase the chance of power blackouts or brownouts more than 13% in a given year, Takala said.

The space between energy supply and demand is thinning in the Pacific Northwest with each passing year. Experts have warned that as early as 2030, energy demand could outpace supply during heat waves or cold snaps.

Baker pointed to a 2025 report from the Northwest Power and Conservation Council, which found that within the next five years, energy demand from the tech sector - largely driven by data centers - will increase so much that it would be as if two to four cities the size of Seattle had been added to the grid.

The proposed measures would ensure that during times of energy shortages, data centers would take power cuts before other, more critical customers like hospitals, said Shewmake, who chairs the Senate committee.

Laws like the Clean Energy Transformation Act already require utilities to shift away from fossil fuels but the proposed measures would expedite those rules for data centers, Baker said. By 2030, 80% of their power would have to come from new and renewable sources and five years later they'd have to consume exclusively renewable energy.

Sure, these measures pack in a lot of new regulation for the burgeoning industry, Baker said. But such a comprehensive approach is needed to protect ratepayers, grid reliability and the environment.

Not everybody agrees.

During the House and Senate's public hearings last week, industry representatives alongside some local government officials testified against the package. They called the bills overly prescriptive and said that despite rising energy use and rates across the country, the tech industry is already doing enough to protect their neighbors.

Dan Diorio, vice president of state policy for the Data Center Coalition, said the new regulations would unfairly single out data centers when instead all large energy users should be treated the same. Such a sweeping package would make Washington state a standout across the country. And, he noted that during times of insufficient energy supply, data centers can't simply be turned off. Instead they'd be forced to rely on backup generation.

Others, representing local governments in Eastern Washington, also spoke against the measures. Data centers have taken over as a huge boon for the local economy and additional regulation could place that cash flow at risk.

Pat Haley, city administrator for Quincy, referred to the explosion of data centers in his community as the "Quincy miracle." To date, nearly half of the city's family-wage jobs stem from the industry and around 57% of its property tax base comes from data centers, he said.

These bills would inject uncertainty into the fast-growing industry and make Washington a less-appealing destination for new projects, opponents said.

Shewmake and Baker pushed back, though. Electricity in Washington is pretty affordable, compared with much of the rest of the country, they said. While these bills would increase rates for data centers, the state would remain a competitive destination for the industry.

Conversations surrounding the proposed data center regulations are sure to continue and face tweaks. While House and Senate committees held public hearings on the package last week, the measures have not yet gone to a vote.

Tribune Regional WA-SEA only