House panel reviews bill to regulate large data centers, citing ratepayer, water and siting concerns

Representative Kathleen James convened a House Energy and Digital Infrastructure committee meeting that opened with a walkthrough of H.727, identified in testimony as the "Vermont Sustainable Data Centers Act," aimed at establishing state rules for large, power‑intensive data centers.

The bill sponsor said the measure is intended to "create clarity" before proposals arrive and noted that data centers "use an extraordinary amount of electricity, water," produce community noise, and typically contribute property tax revenue but relatively few permanent local jobs. Maria Royal of Legislative Council told the committee the draft targets facilities with the capacity to use at least 20 megawatts of power and described the bill’s structure: a separate PUC tariff/rate class, siting criteria tied to a Certificate of Public Good (CPG), demand‑side management requirements, reporting and disclosure, and PUC rulemaking authority.

Why it matters: Royal flagged several practical effects of a large facility of this scale — she cited that 20 megawatts is roughly equivalent to powering about 15,000 homes and that some large facilities can pull about 1,000,000 gallons of water per day for cooling — and she warned of risks that transmission or distribution upgrades could impose stranded costs on other ratepayers without careful contract and tariff design.

Key provisions discussed: The committee heard that the bill would require the Public Utility Commission to establish a distinct data‑center rate class and standardized tariff structures to ensure costs are allocated in proportion to the cost of providing service to the data center, and to mitigate the risk that other customer classes would pay for upgrades incurred solely to serve the center. The draft also spells out mandatory contract terms Royal read to the committee: a contract term not less than 10 years, an estimated in‑service date, an obligation tied to projected electricity usage (minimum payment or percentage), excess‑demand charges, and collateral sufficient to mitigate stranded‑cost risk. Committee members discussed adding explicit decommissioning language to those requirements.

Siting and review: H.727 would require a CPG before site preparation or construction. Royal said the PUC must find that a proposed data center "promotes the general good" and meets criteria including consistency with municipal and regional plans, not adversely affecting grid reliability, producing an economic benefit (or not harming state residents), avoiding adverse effects on aesthetics, historic sites, air and water purity, natural resources and public health, and avoiding harms to waters designated as outstanding resource waters.

Demand‑side management and on‑site resources: The draft authorizes the PUC to develop a demand‑side management program that could include requirements for on‑site renewable procurement, batteries, microgrids, water conservation practices (including recycled water for cooling), and authorization for some data centers to procure their own energy. Royal noted some states are considering prohibitions on fossil‑fuel power purchase agreements that provide discounted rates to data centers as a policy option.

Reporting, oversight and financing: Owners would have to begin submitting portal reports to the PUC and Department of Public Service within three months of becoming operational, including water and energy usage and descriptions of interconnection requests. The Department would also file an annual report to the relevant standing committees assessing energy, environmental and economic impacts. The bill contemplates identifying legislative intent for a financial structure to allocate a portion of tax revenue (property, sales or income taxes, or a gross receipts mechanism) to fund state and local benefits and to cover regulatory costs.

Concerns and context: Committee members and Legislative Council staff raised questions about noise standards, statutory overlaps with existing permitting (references were made to §248/§248a and Act 250), the federal picture (executive orders and national AI permitting frameworks discussed), and how demand‑response or curtailment might work operationally for continuous server loads. Royal emphasized the draft is modeled in part on provisions used for other large energy or telecom projects and is intended to give the PUC rulemaking parameters rather than prescriptive procedural language.

Next steps: The committee scheduled additional testimony on H.727 from the National Conference of State Legislatures later in the morning and noted the bill would apply only to data centers not already operational before the act’s effective date. The PUC rulemaking and any legislative approval of the commission’s program were identified as future implementation steps.