How New Jersey is trying to rein in data centers and lower electric bills
New Jersey Gov. Mikie Sherrill signed a suite of new laws on Tuesday aimed at lowering electric utility bills and ensuring data center developers pay for power grid upgrades.
Electricity bills are rising nationwide, and the Garden State has been no exception. The governor’s office cited an environmental consulting firm’s report stating that the three new laws and other actions by Sherrill’s administration will save New Jersey ratepayers $1 billion per year.
Sherrill touted the legislation as delivering on her campaign promise to rein in costs.
“For too long, New Jersey families have paid the price for poor oversight, outdated policies and rising demand on our electric grid by unchecked actors,” Sherrill said in a press release.
After years of flat demand for power, the rise of artificial intelligence is causing a spike in how much electricity is needed on the grid. Meanwhile, electricity costs are among the largest drivers of inflation.
New Jersey is part of a 13-state regional power grid PJM, which has the nation’s highest concentration of data centers, largely in Virginia.
“A major portion of recent price increases are due to increases in wholesale electricity prices in PJM, driven by the massive and rapid deployment of data centers,” Frank Felder, an independent electric power industry consultant and former director of the Rutgers Energy Institute, told Straight Arrow. “New Jersey can take steps to dampen these increases but a lot is out of its direct control.”
How will New Jersey handle data center demand?
New Jersey’s Senate Bill 371 establishes a distinct utility customer class for data centers capable of drawing 50 megawatts or more power from the grid. That amount of electricity can power at least 30,000 homes.
The large load customer class is separate from residential and commercial customers, as well as more traditional industrial electric customers such as manufacturing plants. When new infrastructure including transmission lines, substations, power plants or solar farms are built primarily to serve data centers, the new customer class alone will be responsible for paying the cost through electricity rates.
The law also aims to protect ratepayers from potential stranded assets if new infrastructure is built for a data center that is later scaled back or canceled. Developers will have to sign 10-year agreements to pay for 85% of new costs even if their electricity consumption is lower than anticipated.
Another component of the law tackles grid emergencies. The law states that in an emergency where power supply is too low for overall grid demand, data centers will have their power cut before residential customers. And it encourages tech firms to invest in new electricity sources.
Alex Ambrose, senior policy analyst at New Jersey Policy Perspective, described the legislation as “holding data centers accountable for their role in rising electricity prices” to “ensure working-class families aren’t footing the bill.”
How else is New Jersey trying to bring down costs?
The other two laws focus on increasing oversight of new utility projects and limiting how much of a customers’ monthly payment goes to utility company profits.
The Advanced Grid Technologies Act closes a loophole that allowed some infrastructure investments to bypass state regulatory authority. The costs of these “supplemental projects” are passed onto ratepayers. By giving the New Jersey Board of Public Utilities regulatory authority, the law aims to ensure projects are more cost-effective.
“The emphasis on more accountability for utility investments both at the distribution and transmission levels is a welcome development,” Felder said. But he added that similar measures should be applied to the state’s clean energy program, where Felder said the state’s utilities board “has not implemented rigorous strategic and programmatic controls.”
The final new law, Senate Bill 1673, will effectively decrease the guaranteed profit margin most utilities can collect from customers by half a percentage point. The average return on equity for U.S. utility companies is between 9% and 10%.
Sherrill also unveiled a one-time $25 credit for all of New Jersey’s 3.6 million electric customers to help pay for summer electricity bills. Qualifying low-income households will receive an additional $150 bill credit. In 2025, the average New Jersey customer spent more $211 on electricity from June to August.
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Ella Rae Greene, Editor In Chief
