A bill has been proposed in Pennsylvania that could create a new rate class for data centers to protect ratepayers from rising energy costs associated with the development of the facilities.

House Bill 1834, which was introduced by Rep. Robert Matzie, a Democrat representing Beaver, would provide the Pennsylvania Public Utility Commission (PUC) the ability to establish rules and guidelines for the development of data centers. It would also give the PUC the ability to evaluate whether data center contracts impact the PJM grid and ratepayers.

Under the proposal, the new rate would apply to facilities with a capacity of 25MW or more and prohibit public utilities from shifting the costs of new generation and transmission infrastructure onto ratepayers.

“A public utility may not recover from ratepayers, whether through base rates, riders, surcharges, or any other ratemaking mechanism, costs that are directly attributable to the provision of electric service to a commercial data center,” read the proposal.

In addition, the bill would require utilities to ensure that at least 25 percent of the electricity it supplies under contract is generated from renewable energy sources. During the hearing, several stakeholders voiced concerns that such a provision would challenge energy affordability.

The bill would also mandate data centers to pay out based on peak demand for a proposed fund that would enhance the Low-Income Home Energy Assistance Program. The federally funded program provides financial support to low-income households for their energy bills. Under the bill, data centers that use 100MW or more of energy would have to pay $500,000 per year into the program.

Data center stakeholders expressed concern about the proposed legislation. Dan Diorio, vice president of state policy for the Data Center Coalition, argued that the bill would prevent the industry from effectively deploying its capital for clean energy. He went on to say that the bill's language was “prescriptive” and would lead to inflexibility.

“HB1834 imposes disparate treatment on the data center industry without verifiable cost-based reasoning,” Diorio said.

Pennsylvania is one of the larger US markets for data centers. According to Data Center Map, there are 97 operational facilities across the state, most of which are located in and around Philadelphia and Pittsburgh. Operators in the state include Iron Mountain, EdgeConneX, Ark, DataBank, Equinix, and 365 Data Centers, among others.

Pennsylvania is not the only state to have enacted new legislation creating a new ratepayer class for data centers.

Earlier this year, the Public Utilities Commission of Ohio approved the introduction of a new rate class for data centers, which would require new data center customers in Ohio to pay for a portion of their energy requests, even if they use less, to cover the cost of the infrastructure required to bring electricity to those facilities. AEP introduced the new rate class in an effort to shield other ratepayers from bearing the cost of large data centers, which are proliferating across the state.

Before this, the Oregon legislature passed a bill to ensure that data centers and cryptocurrency operations cover a fair share of the costs associated with new power plants and transmission lines.