Committee reviews bill to regulate large data centers, setting 20 MW threshold and new water and contract rules

A state legislative committee on April 1 reviewed H727, a bill that would create a regulatory framework for large data centers in Vermont, focusing on grid impacts, water use and protections for existing ratepayers.

Maria Royal, who identified herself as with Glen's Lake Council, told the committee that the bill uses a 20‑megawatt threshold to trigger requirements and that ‘‘20 megawatts of power is roughly equivalent to serving 20,000 households,’’ noting that open‑loop evaporative cooling could use ‘‘about 500,000 gallons a day’’ while closed‑loop systems greatly reduce water withdrawals but often require more power. Royal and other presenters said the threshold aligns with practices in other states and is intended to capture facilities that impose significant demands on transmission and local infrastructure.

The bill would require a 'large‑load service' contract between a data center and the distribution utility to be approved by the Public Utility Commission (PUC). The contract must include a method for allocating costs proportionally to the cost of providing service, minimum‑payment or percentage obligations tied to projected usage, collateral to address stranded‑cost risk, demand‑management provisions and contributions for any infrastructure upgrades. The presenter said those contractual requirements are designed to ‘‘mitigate the risks of other ratepayer classes paying unwarranted costs.’’

Committee members pressed how the bill would interact with regional cost‑allocation practices run by ISO‑New England and whether upgrades paid for in Vermont might generate benefits for neighboring states; presenters said existing regional allocation rules would not automatically be superseded but that the bill seeks to ensure Vermont’s share of costs and benefits is handled by existing regulators.

Water use and cooling systems drew sustained attention. Counsel described the bill’s preference for closed‑loop cooling systems ‘‘to minimize impacts to the quality and quantity of surface and ground water unless the district commission determines that the use of a closed‑loop cooling system is not feasible.’’ The counsel also described two options for defining PFAS in monitoring rules — a narrower EPA PFOS definition (about 1,400 chemicals) or a broader PFAS class (about 15,000 chemicals) — and said the committee had chosen the narrower EPA definition because monitoring for the full class is technically and analytically more difficult.

H727 would add data centers to Act 250 review for land‑use impacts, require quarterly facility reports to the PUC and Department of Public Service on energy and water usage (including peak daily use and payments toward shared infrastructure), and direct the Department of Public Service, in consultation with the Secretary of Natural Resources and other stakeholders, to recommend a decommissioning model with requirements such as bonds or other financial assurance, site restoration standards, and documented data‑sanitation procedures. The presenter said the House passed an earlier reading of H727 and that an as‑passed House version would be used as the draft text examined by the committee.

The discussion closed with members noting potential gaps to tighten collateral language and other contract terms so ratepayers are protected if a data center ceases operations, and with staff and agencies flagged to return with technical recommendations on monitoring, permit timing and interactions with federal programs. No formal vote on H727 occurred at the hearing.

The committee recessed and later moved on to other items on its agenda.