New York Tells Data Centers They Must Pay More for Power
(Bloomberg) -- New York plans to require data center operators to shoulder more of the cost of powering their energy-hungry facilities, aiming to prevent surging electricity demand from pushing up household utility bills.
Under a new initiative Governor Kathy Hochul is unveiling Tuesday, large power users that don’t deliver significant job growth or other benefits to the state would be required to either generate their own electricity or pay more for energy from the grid.
The initiative seeks to balance protections for ratepayers with the state’s push to attract data centers and other electricity-intensive industries to support economic growth. It also includes steps to modernize and accelerate the process of connecting new facilities to the grid, currently a time-consuming bottleneck.
Hochul announced the Energize NY Development initiative during her annual State of the State address, underscoring her focus on rising household expenses as she campaigns for reelection this year. Electricity consumption is climbing across the US, driven largely by data centers supporting artificial intelligence. That trend has lifted utility bills and made power costs a growing component of the affordability squeeze.
“Massive data centers are driving up electricity demand faster than the grid can keep up, pushing costs onto working families and small businesses who can’t afford higher bills,” Hochul said in a statement. “We must grow responsibly, ensuring affordability comes first and those profiting from data growth pay their fair share.”
The Federal Energy Regulatory Commission issued guidelines last month that would prevent big data centers from taking over power from existing generators without paying for investments needed to maintain grid reliability. Details will be hashed out over the coming months.
A Bloomberg News investigation last year that analyzed thousands of power pricing nodes across most of the US found prices typically rose faster closer to data center clusters. Costs to ensure there are enough power supplies on the largest US grid operated by PJM Interconnection LLC, which serves more than 67 million American, soared to a record $47.2 billion in three consecutive auctions. While New York operates its own grid next door, the entire country is watching PJM because it is home to the greatest concentration of data centers in the world in and has become the canary of for soaring costs.
New York is also looking to add more nuclear capacity as demand accelerates. Hochul last year announced a plan to add 1 gigawatt of new reactors, but is now targeting 5 gigawatts, more than doubling the state’s existing fission output.
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