The Hydrogen Center for Artificial Intelligence

NewsletterNo. 5

Who pays for the power?

A bill to make data centers cover their own grid costs stalled in the Senate. Maryland shows what is at stake on the bill, and voters are pushing back town by town.

By Yonathan Shanko, Founding Editor

The story: The data center bill hits a wall

In September, the House passed the Ratepayer Protection Act 417 to 3. The idea is simple: very large power users, like AI data centers, should pay for the grid upgrades built to serve them, instead of passing the cost to everyone else.

On September 30, the bill failed in the Senate, Roll Call reported. The vote to move forward was 57 to 43, short of the 60 needed. Four Democrats voted yes. It was the second time the Senate had blocked it.

The disagreement is not about the goal. It is about whether the rule should be optional. The bill directs states to consider a standard, but does not require them to adopt one. Senate Minority Leader Chuck Schumer called it "toothless" and said Democrats want data centers to cover their costs by law. Majority Leader John Thune called the bill "common sense" and accused Democrats of denying Republicans a win in an election year.

Why it matters in Maryland

Maryland sits inside PJM, the regional grid that serves 13 states and Washington, D.C. According to the Maryland Office of People's Counsel, the state's consumer advocate, prices in a recent PJM capacity auction rose 800%, a total increase of $12.5 billion across the region.

One estimate cited by the office attributes $9.3 billion of that increase to data centers, most of them outside Maryland. Another driver was an error that left two power plants near Baltimore out of the auction. The office has filed a complaint with federal regulators and says customers could see refunds if it succeeds.

The office is also clear that data centers are not the whole story. It says rising distribution rates and extreme weather are the biggest drivers of higher Maryland bills.

Voters are pushing back

In a Gallup poll conducted in March, 71% of Americans said they would oppose an AI data center being built in their area. Opposition crossed party lines: about three in four Democrats and independents, and close to two in three Republicans. Opponents most often cited water and energy use. Supporters most often cited jobs.

Some places are acting on that. Maine's legislature passed what would have been the nation's first statewide moratorium on data centers in April, but Governor Janet Mills vetoed it, the Bangor Daily News reported. Since then, at least 21 Maine towns have adopted their own limits, and eight more put bans or temporary moratoriums before voters on November 3.

Our read. Data centers bring investment and tax revenue, and someone has to pay for the power they need. The real fight is over who, and whether the answer is written into law or left to voluntary pledges. That question is now part of how voters judge AI, whether or not they ever use it.

One fundamental: What is a capacity auction?

A grid has to have enough power plants available for the hottest afternoon or the coldest morning of the year, not just an average day.

A capacity auction is how a grid operator like PJM pays for that insurance. Power plant owners bid to promise they will be available years in advance. The grid buys enough of those promises to cover expected peak demand, and the price is set by the auction.

When forecasts say demand will jump, as they have with data centers, the grid needs more promises, and the price rises. That cost lands in the supply portion of every customer's bill, including households that have nothing to do with the new demand. That is the cost the Ratepayer Protection Act is trying to reassign.

Sources

If you have an evidence-based argument about AI, especially one that disagrees with ours, send us a pitch.