Senate Finance reviews H.727 to limit grid and water impacts of large data centers

Senate Finance on [date] reviewed H.727, a bill that would create a "Vermont Sustainable Data Centers Act" and impose new regulatory requirements on data centers capable of using 20 megawatts or more of electricity.

Committee members were told the 20-megawatt threshold is meant to focus the law on AI-scale facilities; the presenter said that level of continuous load is roughly equivalent to powering about 20,000 households. The bill requires every covered data center to take service under a large-load service equity contract approved by the Public Utility Commission (PUC), with provisions intended to ensure that other ratepayers do not shoulder new or stranded costs.

The measure would require PUC-approved contracts to include: an equitable allocation of embedded and transmission costs; a minimum payment or usage-based charge for the contract duration; collateral sufficient to mitigate stranded-cost risk if a center ceases operations; demand charges for usage above projected levels; and operational obligations for demand-side management (including load shifting and the use of storage). The presenter said the PUC must also find, before approving a contract, that it will not harm grid reliability, will likely produce an economic benefit to the state or residents, and will be consistent with the distribution utility's least-cost integrated plan.

Environmental and water issues are addressed in separate sections of the bill. The proposal would bring data-center construction within Act 250 jurisdiction and add Act 250-specific water-use and discharge requirements. The presenter gave a non-normative example that a 20 MW facility using an open-loop evaporative cooling system could use on the order of 500,000 gallons of water per day, and said the bill prefers closed-loop cooling where feasible to limit withdrawals. The bill would also require quarterly reporting to the PUC and Department of Public Service on energy and water usage, including daily peak usage and payments toward shared infrastructure.

On decommissioning, the bill directs the Department of Public Service, in consultation with the Agency of Natural Resources and the Land Use Review Board, to produce a recommended regulatory model by Dec. 15. That model must cover approval of decommissioning plans, regulatory oversight (including site inspections), financial assurance (bonding), data sanitization and chain-of-custody for storage assets, hazardous-material handling and site restoration, and timelines for completion.

James of the Joint Fiscal Office told the committee the fiscal implications are minimal: "The bill does not appropriate funds or raise new state revenue or establish new permits or fees," and agencies told the fiscal office they expect permit reviews would fit into current workflows. Agencies did flag possible resource needs if multiple projects appear; the Department of Public Service requested a $50,000 appropriation to support its role on a decommissioning task force, and ANR warned that monitoring PFAS-related data submissions could be administratively significant.

Committee members raised several unresolved items they said the PUC should explicitly consider when approving contracts, including how to define the required "economic benefit" to the state, how to protect other ratepayers from long-term transmission or generation upgrades needed to serve large loads, and how to weigh trade-offs between lower-water cooling technologies that consume more electricity and higher-water cooling that could stress local supplies.

The committee did not take a final vote on H.727 at the hearing and scheduled additional testimony; members asked staff to work with the PUC, utilities and ANR to flesh out definitions and financial-assurance language before further action.

The hearing record shows the committee prioritized grid stability, ratepayer protection, water-use limits, and a binding decommissioning regime as core elements to resolve before advancing the bill.