Why Some Politicians (and the people who support them) are Clueless When It Comes to Data Centers

When I see politicians leverage their bully pulpit to rail against data centers—stoking public outrage just to harvest votes—it shows how unimaginative and out of touch they really are.

Many municipalities, regional utilities, and states across the U.S. enforce provisions requiring data center operators to pay directly for the localized utility capacity, grid buildouts, and water infrastructure upgrades that they trigger, which honestly should be a no-brainer.

How is it that these aforementioned politicians, and the people who support them, don't see this as a viable path to make money and establish sound future infrastructures?

WHY? It's because these politicians are not creative and they are poor managers.

Historically, local governments used tax abatements to attract data centers. However, as localized power and water grids face unprecedented strain, cities and public utility commissions have found the need to pivot toward:

• Pay Your Way Models, 
• Large-Load Tariffs, and 
• Proffers/Impact Fees 

--- as it should be. It's just basic business practice. 

You’ve got land, they’ve got money. C’est tout!

Don't give it away, make money from it for the citizens who live there and create forward thinking infrastructure.

Here are a few smart examples of this:

_______Cities & Regions Forcing Data Centers to Pay for Water

Cooling hyperscale data centers requires millions of gallons of water per day, prompting local water authorities to make developers shoulder the bill for municipal upgrades.
 
Quincy, Washington: A major data center hub for Microsoft and Yahoo, Quincy established dedicated utility financing structures where technology companies pay impact fees and special utility rates. These funds directly pay for municipal industrial wastewater treatment plants and reclaimed water systems, ensuring data centers do not deplete the town's potable water supply.

Mesa and Phoenix, Arizona: Located in the arid Southwest, the City of Mesa mandates that data center operators fund the construction of dedicated on-site water recycling facilities and pay higher industrial water rates to offset local infrastructure expansion. Many developers in the Phoenix metro area are required to pay for non-potable/reclaimed water pipelines rather than tapping into municipal drinking water reserves.

Newark and Santa Clara, California: To address local aquifer concerns, Northern California municipalities have required data centers to fund multi-million-dollar extensions of municipal recycled water pipelines, completely offsetting the burden on civic drinking water systems.


________Cities & States Forcing Data Centers to Pay for Power Grid Upgrades

Data centers requiring massive power (often hundreds of megawatts) require utilities to build new substations, transmission lines, and transformers. These are known and established facts and from the get-go should be part of the negotiation process. To protect residential consumers from subsidizing these costs, many jurisdictions enforce strict cost-allocation rules: 

Region / Jurisdiction	Policy Provision	What the Data Center Pays For
Northern Virginia (Loudoun & Prince William Counties)	High-Voltage Interconnection Cost Agreements	Operators must fund line extensions, substations, and transmission upgrades directly to Dominion Energy rather than rolling them into broad ratepayer bases.
Ohio (AEP Ohio Service Area)	"Large Load" Tariff Regulations	Data centers must guarantee long-term payment plans covering up to 85% of reserved power capacities, even if they end up using less, ensuring grid expansion costs are paid by the developer.
Louisiana (Entergy Service Area)	Direct Infrastructure Deals	Tech firms (e.g., Meta) sign agreements where they fund dedicated power plants, solar developments, and over 200 miles of transmission upgrades specific to their facilities.
Minnesota (Xcel Energy Territory)	Fully Funded Clean Infrastructure Agreements	Tech companies (e.g., Google) fully fund regional wind, solar, battery storage, and local grid connection hardware needed to power their campuses.

Key Frameworks Used by Cities & Utilities

• Large-Load Rate Tariffs: Over 30 states and municipal utilities have introduced specialized tariffs for "large-load" customers. These require data centers to pay premium rates or sign minimum take-or-pay contracts so the financial risk of grid expansion stays on the corporation not the citizenry.

• System Impact & Connection Fees: Utilities increasingly require upfront payments—often running into tens or hundreds of millions of dollars—before allowing data centers to connect to the local grid or water main. This scenario triggers a divergent, rather than convergent, operational trajectory. Instead of moving toward a single, standardized path to integration, both sides find themselves navigating a rapidly expanding web of variables, and you must do an impact study and assess connection fees.

• Closed-Loop & On-Site Mandates: Many desert and high-growth cities now outright prohibit "evaporative cooling" (water-intensive cooling) unless the developer builds air-cooled chillers or closed-loop recycling plants at their own expense. This is a fair restriction and the landowner must insist upon this.

Data Centers are not going to go away, (please see my other blog about Holyoke, Massachusetts, long-standing, successful data center), just like artificial intelligence is not. The train has left the station. Politicians who are naysayers are the unfortunate ludites who will soon be in the unemployment line and wonder how they got there.

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