New Jersey lawmakers on June 30 passed a bill that would force large data centers to bear the costs of connecting to the state's power grid, rather than sticking ordinary ratepayers with the tab. The measure, bill A796, now heads to Democratic Gov. Mikie Sherrill, who bill sponsors say helped shape the legislation.
The bill directs the state's Board of Public Utilities to develop tariff standards for any data center drawing at least 50 megawatts of peak monthly power. That threshold is half the 100 MW floor set in an earlier version of the legislation, a version former Gov. Phil Murphy quietly killed by pocket veto earlier this year, letting it die unsigned before his term expired.
The core question is straightforward: who pays when tech giants plug massive facilities into a grid built for homes, hospitals, and small businesses? New Jersey's answer, if Sherrill signs, would put the burden squarely on the data centers themselves.
The legislation, as Utility Dive reported, covers both new and existing data centers at or above the 50 MW mark. It tasks the BPU with building out several layers of ratepayer protection.
Prospective data centers would need to demonstrate that their project is unique and not duplicative. They would also have to post financial guarantees committing to take, or pay for, at least 85% of the electricity service they request, locked in for a minimum of ten years. That provision alone addresses a real concern: that a data center operator could reserve enormous grid capacity, force expensive upgrades to accommodate it, and then walk away, leaving residential customers to absorb the stranded costs.
The bill also mandates demand-response and efficiency programs, flexibility commitments with performance reporting to the BPU, and, critically, priority curtailment of large data center customers before residential customers during system emergencies. In plain terms: if the grid gets stressed, the data centers get their power cut before your lights go out.
The BPU would also gain authority to impose transmission security agreements and other stipulations related to generation, distribution, or substation facilities as it sees fit to protect ratepayers.
One provision targets a common corporate workaround. The bill's text defines "large data center" by aggregating facilities under common ownership or control that sit on the same site, share infrastructure, or are otherwise interconnected. The language from the bill itself is explicit:
"For the purpose of defining 'large data center,' the board shall aggregate the peak monthly energy demand of any data centers that are under common ownership or control, located on the same site or contiguous sites, or share substantial physical, operational, or interconnection infrastructure, and shall treat such aggregated facilities as a single large data center."
That means a company cannot split a 60 MW operation into two adjacent 30 MW buildings and duck the threshold. Whether the BPU has the staff and will to enforce that aggregation standard is another matter, one the bill's text does not resolve.
This is not New Jersey's first attempt at data center tariff legislation. A similar bill reached Murphy's desk earlier in 2026. He never signed it, effectively killing it through inaction before leaving office. The new version lowers the qualifying threshold from 100 MW to 50 MW and extends coverage to existing facilities, not just new ones.
Assemblyman David Bailey Jr., the Democratic sponsor, told Utility Dive that Sherrill's office helped shape the latest version. He expressed confidence the governor would sign it, noting that Sherrill has made energy affordability a central issue.
Bailey also reported little resistance from the utility industry itself:
"We really did not get much, if any, pushback from the utilities. They've been receptive to the process."
That lack of opposition is worth noting. Utilities may welcome a framework that clarifies cost allocation and reduces their own risk exposure when a massive new customer shows up demanding grid capacity. The question is whether the framework protects ratepayers as effectively as it protects utility balance sheets.
The bill also includes an incentive for data centers willing to bring their own power. The BPU would prioritize interconnection for facilities making binding commitments to supply their own clean generation or energy storage. That provision aligns with New Jersey's broader climate goals, and with the preferences of environmental groups that endorsed the legislation.
Dawone Robinson, managing director of the Natural Resources Defense Council, praised the bill as a "balanced path forward for data center growth." Robinson added:
"Establishing this kind of framework will deliver cost savings to households faster and more effectively, and ensures any 'bring your own capacity' framework adopted by PJM [Interconnection] will support New Jersey's climate targets."
The NRDC's endorsement signals that the bill threads a political needle, satisfying environmental advocates while addressing the bread-and-butter concern of electricity costs for families and small businesses.
Bailey has suggested the legislation could serve as a model for other states grappling with the same problem. The explosion of AI-driven computing and cloud infrastructure has sent data center power demand surging nationwide. Every state with an attractive grid and available land faces the same calculation: how to welcome the jobs and tax revenue without letting a handful of corporate tenants reshape the cost structure for millions of existing customers.
New Jersey's answer is regulatory. The bill does not ban data centers or cap their growth. It imposes conditions, financial guarantees, curtailment priority, efficiency mandates, anti-gaming definitions, designed to ensure that the companies profiting from massive electricity consumption also carry the costs they impose on the system.
Whether those conditions survive contact with well-lawyered tech companies and a regulatory board that must write the actual rules remains an open question. The bill grants the BPU broad authority but does not specify timelines for implementation or detail penalties for noncompliance. That leaves significant discretion, and significant room for delay or dilution, in the hands of unelected regulators.
Several practical questions remain unanswered. The vote counts in the legislature have not been publicly detailed. Sherrill has not made a public statement committing to sign the bill, though her office's involvement in drafting it suggests she is inclined to do so. It is also unclear how many data centers currently operating in New Jersey meet the 50 MW threshold and would immediately fall under the new rules.
The bill's fate now rests with a governor who has staked her political brand on affordability. Murphy's pocket veto of the earlier, weaker version suggests the politics of data center regulation in Trenton are not as simple as they appear. Sherrill will have to decide whether the tighter provisions Bailey and her own office crafted are enough to earn her signature, or whether industry pressure finds a way to slow the process again.
Ratepayers deserve to know the answer soon. They are the ones who will pay if the answer is no.
