Oregon’s POWER Act, signed in August 2025, covers facilities at 20 MW and above — a lower threshold that captures a broader share of the market

Decision Lens

The foundational assumption supporting a decade of data center expansion — that grid infrastructure costs are socialized across ratepayers — is being dismantled at the state level. Texas enacted this shift in June 2025. Oregon followed in August 2025. Illinois, California, Maryland, Washington, and others are moving in the same direction, some with mandatory 10-year PPAs, some with mandatory on-site storage, and some with outright construction moratoria. For Global Heads of Data Center Energy, the immediate exposure is not philosophical: it is embedded in financial models, interconnection queue assumptions, and PPA structures negotiated under a different cost regime.

90-Second Brief

As the week closes, a wave of state-level regulation is restructuring how data centers pay for the grid capacity they consume, shifting infrastructure costs from general ratepayers to operators above defined MW thresholds. Texas and Oregon have enacted binding law; Illinois, California, and several others have active legislation moving through committees. Parallel to cost-shifting, at least four states have proposed multi-year construction moratoria that would freeze new capacity in affected markets. Tax incentive frameworks that anchored site selection in Georgia, Virginia, Indiana, and Oklahoma are simultaneously being restructured or repealed.

What’s Actually Happening

The mechanism is straightforward: state legislatures and public utility commissions are reclassifying large data center loads from general commercial customers into a distinct regulatory category, then assigning the incremental grid costs those loads generate to operators rather than the broader ratepayer pool.

Texas moved first at scale. S.B. 6, enacted in June 2025, applies to facilities with demand of 75 MW or more within ERCOT. It requires developers to fund interconnection studies and infrastructure upgrades, demonstrate financial assurance, disclose duplicate interconnection requests, and accept utility-initiated disconnection protocols during grid-stress events. The co-location restrictions embedded in the law also directly constrain behind-the-meter generation arrangements.

Oregon’s POWER Act, signed in August 2025, covers facilities at 20 MW and above — a lower threshold that captures a broader share of the market. It mandates a separate rate class and requires new entrants to commit to minimum 10-year PPAs covering projected load and any new transmission infrastructure their connection requires.

Illinois’ proposed POWER Act targets hyperscale facilities above 50 MW peak demand and goes further: it requires operators to self-supply energy from new renewable generation and storage, pay for distribution and transmission infrastructure, comply with water use permitting, complete cumulative environmental impact assessments before siting near environmental justice communities, and execute legally binding community benefits agreements. California’s S.B. 886, under active consideration, would impose a 25 MW threshold, require mandatory on-site zero-carbon storage, mandate demand response participation, and attach a 15-year early termination fee to tariff eligibility.

Why It Matters for Global Heads of Data Center Energy?

Each of these frameworks attacks a different lever in your cost and capacity model. The Texas and Oregon laws are already shaping interconnection economics in ERCOT and the Pacific Northwest. The Illinois and California proposals, if enacted, would fundamentally alter self-supply obligations in two of the most capital-intensive data center markets in the country.

Oregon’s 10-year PPA mandate is the clearest near-term operational constraint: it locks offtake commitments to grid infrastructure timelines that operators have historically managed separately. For portfolios with multiple assets in a single state, that creates basis risk concentration and limits flexibility to rebalance load across sites.

The Illinois self-supply requirement — mandating energy from new renewable generation and storage — is more structurally aggressive. It effectively requires additionality at the asset level, not just at the portfolio level. That collapses the distinction between REC-based Scope 2 accounting and 24/7 CFE compliance, and it does so through regulatory mandate rather than voluntary commitment.

Construction moratoria in New York, Vermont, Oklahoma, and formerly South Dakota introduce a different risk: stranded capacity. Sites in pre-development or early permitting stages in moratorium-prone states carry execution risk that was not present eighteen months ago. The South Dakota Legislature’s passage of S.B. 135 — affirming local governments’ authority to regulate or prohibit data center development — signals that even states where statewide moratoria failed may see localized blocking.

The simultaneous rollback of tax incentives in Georgia, Indiana, Virginia, and Oklahoma forces a re-examination of NPV models built on incentive assumptions that could disappear within the current budget cycle.

The Forward View

The legislative pattern emerging across states suggests convergence on four operational requirements: mandatory cost-shifting for grid infrastructure, minimum PPA duration tied to interconnection, on-site storage or demand response as a condition of service, and enhanced siting scrutiny for environmental justice and community impact. Illinois and California, if enacted, would represent the most comprehensive versions of this template and would likely accelerate adoption in states tracking their progress.

The federal dimension adds a second layer. The source legislation references the White House Ratepayer Protection Pledge and FERC’s co-location framework as parallel developments. State and federal frameworks are not yet fully harmonized, creating transitional ambiguity in markets where FERC jurisdiction and state PUC authority intersect — particularly for wholesale market participants with behind-the-meter generation or co-location arrangements.

Virginia’s budget session, beginning April 23, will resolve the conflict between eliminating and preserving its data center Sales and Use Tax Exemption. The outcome will be closely watched as a signal of how legacy incentive states are calibrating their response to ratepayer pressure.

What We’re Uncertain About?

  • Enactment timelines for pending legislation: Illinois, California, Maryland, and Washington bills remain in committee as of mid-April 2026. The pace of committee action, amendment risk, and veto probability are not yet determinable. Tracking floor votes and governor signaling would materially change the exposure calculus.

  • Threshold applicability across portfolio configurations: Thresholds range from 20 MW (Oregon) to 150 MW (Alabama). Whether co-located campuses, phased build-outs, or multi-tenant facilities aggregate to trigger thresholds remains subject to regulatory interpretation in most states. Formal utility commission guidance or legal clarification would resolve this.

  • Federal-state interaction on co-location rules: FERC’s co-location framework and state PUC authority over large-load tariffs are not yet fully reconciled. Operators with behind-the-meter generation or active co-location arrangements face overlapping jurisdictional requirements whose precedence order is unresolved.

  • Moratorium durability and market re-entry conditions: New York’s proposed three-year moratorium and Vermont’s proposal through July 2030 cite pending regulatory study as the trigger for lifting restrictions. What conditions satisfy those studies — and whether final rules would be more or less restrictive than current proposals — is genuinely unknown.

One Question to Bring to Your Team

Which sites in your current development pipeline sit in states where cost-shifting mandates, mandatory PPA terms, or construction moratoria are active or advancing — and have your interconnection, offtake, and NPV models been stress-tested against those regulatory outcomes?

Sources

  • Afslaw — State Regulation of Data Centers in 2026 – A Shifting Landscape (Link)

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