Data Centers – NJ Bill A-7961R Directed At Large Electricity Consumers

The New Jersey Assembly has joined a growing list of legislative bodies nationally that are taking a look at and working on legislation to attempt to make larger users, including data centers, responsible for some of the cost of continued increasing rates that are currently being borne by residential customers. In other words, various legislative bodies, including New Jersey, are drafting and reviewing bills, like A-7961R (the “Bill”), that seek to create a separate tariff that will apply to large energy consumers separate from the rate that will apply to a typical residential consumer. The stated goal of the legislation is to seek to hold large energy consumers responsible for the increased cost of electricity that is attributable to their desired need and use of electricity.

Under A-7961R, a “large load customer” is defined to mean a commercial customer for retail electric service that is a centralized facility or facilities with a monthly demand of more than 100 megawatts (MW). The target of the legislation is, of course, among other things, planned new data centers with more than the 100 MW of monthly demand.

The Bill requires that within 180 days after the effective date, that each electric public utility would be required to file an application with the Board of Public Utilities to establish a tariff for the provision of electricity to large load customers. The Bill goes on to state that the tariff should be designed to: 

(1) ensure that other electric public utility customers do not subsidize large load customers and all costs attributable to the electric public utility's large load customers are assigned to the large load customers as determined by the PUC;

(2) contain protections necessary to ensure that other electric public utility customers are not placed at risk for paying stranded costs associated with the electric public utility serving the large load customer; and

(3) incentivize large load customers to develop and utilize methods to increase energy efficiency, including through the use of technologies that capture and utilize the heat produced by the large load customer.

The Bill would also require that within one year after the effective date, applicable electric public utilities would apply the tariff developed under the Bill as approved by the PUC, to each large load customer within the electric public utility's service area. 

The current draft of the Bill also seeks to require that any large load customer be required to provide financial guarantees of their ability to pay at least 85% of the service requested for a period of no less than 10 years. This provision is intended to make sure that the capacity being requested from the PUC is actually used by the large load customer and that the PUC is not left with a stranded cost for creating the capacity which is not used.

Bits and Bytes  – While the Bill is in its early stages (currently being worked on in the Assembly Telecommunications and Uility Committee) and has not received a formal vote in the Assembly or the Senate, it is expected that some form of the Bill will indeed make it out of both bodies of the Legislature and be sent on the Governor. Gov for signature. Governor Sherrill ran on, among other things, reducing electricity rates to the residential consumer base so it is highly likely that the Governor will be supportive of this type of targeted rate-based allocation to attempt to have the user who needs the capacity pay for the costs to add the capacity to the system.

This type of specific targeting of large industrial users of electricity is not a new thing, rather, it has been building over the last two plus years as various states have seen electricity rates rise over 21% since 2023 depending upon what market they are in. These states are looking for ways to appropriately and fairly allocate costs while not killing the golden goose that is data center development given the ratables the sites will create and the construction jobs that tend to be a part of this every growing sector. We will continue to keep an eye on A 7961R iun NJ and on SB 253 in VA and other state proposals that are targeting data centers and will attempt to keep you, our readers, up to warp speed.

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