The federal government has staked out its position on data centers, the facilities that power the digital economy. Last week, President Donald Trump announced in his State of the Union address that he will be making “rate payer protection pledges,” with tech companies to prevent new data center construction from spiking electricity prices.
A Politico poll shows that a majority of Americans back building data centers in the U.S., but costs are the dealbreaker. Among those polled who would support a new local data center, a majority (52 percent) still supported the project if it meant a $10 per month increase in their energy bills. Support dropped to 39 percent if the data center increased bills by $25 per month. Voters also worry about blackouts (24 percent) and taxpayer costs (23 percent).
States are rapidly defining their approaches to attract—and sometimes deter—data center development. In Colorado, for instance, two competing bills have emerged, both sponsored by Democrats, that impose onerous environmental and renewable energy procurement requirements. The marginally more-favorable bill includes a 100 percent sales tax exemption if companies can meet the litany of environmental and labor requirements. The other bill, however, offers no carrots—only sticks.
Other localities are hoping to press the pause button while they decide what to do. The City of Denver has announced a moratorium on new data center development for at least “several months” while the city reviews its environmental regulations. Several states, including New York, South Dakota, and Oklahoma, have introduced moratorium bills, though none have yet passed. Some states are reconsidering their current tax incentives, including Illinois and Virginia.
Some states are attempting to get the best of both worlds in attracting projects while protecting ratepayers. Despite tough rhetoric on AI, Florida Gov. Ron DeSantis is backing a bill that requires companies building data centers to pay when they’re adding capacity and infrastructure to the grid. Pennsylvania Democratic Governor Josh Shapiro has proposed much the same idea.
Data centers offer real economic benefits to the communities hosting them, including thousands of construction jobs during the 18 to 24-month building phase, permanent positions in IT and facilities management, and significant property tax revenue. In Virginia’s Loudoun County, data center tax revenue has allowed the county to lower residential property tax rates, saving the average homeowner an estimated $3,000 per year. At least 37 states currently offer some form of tax incentive to attract data center investment.
Consumer-regulated electricity (CRE) offers a free-market approach. CRE allows private companies to build their own off-grid power generation to serve large commercial and industrial customers without being subject to traditional utility regulation. New Hampshire led the way in 2025 by passing HB 672, a short bill that lets private generators serve non-residential customers as long as they remain physically separate from the existing grid. At the federal level, Senator Tom Cotton introduced the DATA Act of 2026 to extend the same principle nationally, creating a new “consumer-regulated electric utility” category exempt from Federal Power Act regulation. Six other states are now considering CRE legislation, and the American Legislative Exchange Council has published model policy language for state adoption.
The states that welcome data center investment while protecting ratepayers will be the ones that capture the economic benefits of the AI boom to the benefit of their residents. The policy choices being made right now will determine which communities thrive in the digital economy and which are left behind.