New Jersey Moves to Rein in Data Center Growth Amid Rising Power Cost Concerns and Grid Strain
New Jersey lawmakers have taken a significant step toward increasing control over the fast-growing data center industry, passing a set of new bills aimed at reducing financial pressure on electricity customers and improving transparency around energy and water usage.
The legislative action comes as demand for data centers continues to surge across the United States, largely driven by the rapid expansion of artificial intelligence and cloud computing services. While these facilities are seen as important for economic development and digital infrastructure, concerns have been rising in New Jersey about their heavy energy consumption and the potential impact on utility bills for residents and small businesses.
On Tuesday, state lawmakers approved three separate measures that together mark a stricter regulatory approach toward large-scale energy users.
One of the key bills, known as S4390 and referred to as the “End Data Center Tax Credits Act,” would remove the remaining $250 million in state tax incentives that had been reserved for certain artificial intelligence and data center projects under the Next New Jersey Program. However, the legislation maintains previously approved tax credit awards, meaning existing commitments will not be reversed.
A second measure, S731, focuses on how utility costs are distributed. It directs utility providers to establish separate pricing structures and service rules for large electricity consumers such as data centers. The goal is to prevent households and small businesses from being indirectly responsible for the expensive grid upgrades needed to support these high-demand facilities. The bill also encourages large energy users to invest in their own power capacity to reduce pressure on the public grid.
The third bill, S3379, introduces new reporting requirements for data center operators. Under this measure, companies would be required to submit reports twice a year detailing their energy and water consumption. These reports would be reviewed by the New Jersey Board of Public Utilities and made publicly available, increasing transparency around the environmental and infrastructure impact of these facilities.
Together, the three bills reflect a growing concern among policymakers about balancing economic growth with infrastructure sustainability. While data centers are increasingly viewed as critical to supporting modern digital services and artificial intelligence systems, their rapid expansion has raised questions about long-term energy planning, environmental impact, and fairness in utility pricing.
Supporters of the legislation argue that the measures are necessary to protect ratepayers and ensure that infrastructure costs are fairly distributed. At the same time, the move signals that New Jersey is becoming more cautious about offering broad incentives to energy-intensive industries without stricter accountability measures in place.
As the data center industry continues to expand nationwide, New Jersey’s latest action highlights a broader policy debate playing out across several states: how to support technological growth while preventing rising costs from being passed on to everyday consumers.
Sources:
New Jersey Legislature records
New Jersey Board of Public Utilities (BPU) policy framework
Next New Jersey Program documentation
State Senate Bills S4390, S731, S3379 legislative summaries
