Electric Bills Being Driven Up By AI Data Centers In NJ, New Report Says

NEW JERSEY — Huge artificial intelligence “data centers” that are popping up across New Jersey are fueling a massive surge in demand for electricity across the region – and sticking Garden State residents with the bill, a new report claims.

New electricity rates kicked in earlier this month for customers of Atlantic City Electric, PSE&G, Jersey Central Power & Light and Rockland Energy – all of whom can expect to see between a 17.2 and 20.2 percent increase on their electricity bills.

The latest hikes are due to the results of last year’s annual New Jersey Basic Generation Service auction, which determines the cost companies pay for power generated outside of the state. The New Jersey Board of Public Utilities (NJBPU) said a rise in demand and a stressed power grid are also behind the rise in prices. See Related: NJ Electric Bills Set To Skyrocket As Hikes Begin

The former – a spike in demand for energy – can be largely attributed to the rapidly growing artificial intelligence (AI) industry, according to New Jersey Policy Perspective (NJPP).

The nonprofit advocacy group recently released a report that lays out their argument, which can be seen online here.

According to the report – which also calls for more “clean energy” options – AI data centers account for nearly 70 percent of the projected increase for PJM, the company that manages the electric grid in New Jersey and 12 other states.

Putting it simply: supply is not keeping up with demand, researchers said.

“Families are being asked to pay more, while clean energy projects that could lower costs sit in a long line waiting for approval,” said Alex Ambrose, a policy analyst with the NJPP.

“Meanwhile, data centers powering AI are fueling a huge increase in electricity demand,” Ambrose said. “PJM hasn’t adapted fast enough – and now regular people are stuck with the bill.”

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PROPOSED LAW

Some New Jersey lawmakers have also been taking a closer look at the impact of AI processing – and asking for more regulation in the meanwhile.

Last month, a proposed state law involving data centers advanced out of the Senate Environment and Energy Committee. If it crosses the finish line, S-4293 would require owners or operators of data centers to submit quarterly reports to the state Board of Public Utilities detailing their water and energy usage, performance calculations and indicators, and their “sustainability indicators.”

The bill is in “direct response to mounting concerns over surging electricity demand,” driven in part by the rise of data centers across the region, its sponsors said.

“Data centers consume an extraordinary amount of energy and water, using as much in a single day as hundreds of homes,” Sen. Teresa Ruiz said.

“As their growth continues to surge, we must be diligent in assessing their environmental footprint and economic impact,” Ruiz said.

Sen. Renee Burgess agreed with her legislative peer, saying that as more data centers move into the region, the strain on New Jersey’s electric grid will grow.

“Tracking energy and water consumption at data centers is key to ensuring this new technology does not place an undue burden on New Jersey communities,” Burgess said.

• See Related: NJ Senator Fights ‘Exploitative’ Electricity Hikes With New Proposed Laws

SPECIAL TARIFF

Another proposed state law, A5462, would require electric public utilities to develop and apply a special tariff for data centers.

According to the bill’s text, here’s what it would do if it becomes law:

“The bill would require the tariff to be designed to: (1) ensure that non-data center ratepayers are protected from any increased costs that result from increased electricity demand caused by data centers; and (2) incentivize data centers to develop and utilize methods to increase energy efficiency, including through the use of technologies that capture and utilize the heat produced by the data center. Commencing one year after the bill's enactment, the bill would require electric public utilities to apply the tariff to each data center located in their service area.”

Assemblyman Dave Bailey Jr., one of the bill’s sponsors, has pushed for more regulation of data centers in the past.

“Data centers use huge amounts of energy and require serious infrastructure to connect to the grid, which can seriously affect rates for all consumers,” he wrote, speaking about a separate piece of legislation in May.

“We need to ensure AI developers like Amazon, Meta, and Microsoft pay their fair share and create rules that prevent you from footing their bills,” Bailey said.

Not everyone is chomping at the bit for more regulation, however.

The New Jersey Business & Industry Association (NJBIA) recently put out a statement opposing A5462, predicting that the bill would discourage the construction of data centers in New Jersey – and the economic activity and jobs they bring with them.

“We fully understand the sponsor's concerns with recent rate increases, in part due to the demand created by data centers in the PJM region,” NJBIA Deputy Chief Government Affairs Officer Ray Cantor said in testimony to the Assembly Telecommunications and Utilities Committee.

“However, we believe the answer to the capacity issues is not to discourage new demand, and thus economic growth, but to encourage the development of more generation to accommodate that growth,” Cantor said.

Cantor pointed out that data centers located anywhere in the 13-state PJM region impact the region’s energy capacity market. Therefore, a New Jersey law that uses tariffs to discourage construction of data centers here harms only New Jersey’s economy – while the AI infrastructure gets built in surrounding states, he argued.

Cantor said that because neighboring Pennsylvania has opted to embrace this economic development, not discourage it with tariffs, Amazon Web Services (AWS) announced earlier this week it was investing $20 billion there to advance AI innovation and expand its cloud computing infrastructure.

“While Pennsylvania will benefit from a massive construction and jobs project, we are considering a bill to disincentivize their location in New Jersey,” Cantor told the committee. “Pennsylvania has also reduced its corporate taxes while New Jersey has increased its Corporation Business Tax to be the highest in the nation.”

“Is there any surprise that they are getting $20 billion in investment while New Jersey is not?” he asked.

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