Kentucky Bill Would Require Data Centers to Pay Upfront for Power, Shielding Ratepayers

FILE – The sun sets behind high-tension power lines, Sept. 23, 2024, in the Porter Ranch section of Los Angeles.

As demand for data centers rises and available power generation remains limited, Kentucky lawmakers are advancing a proposal that would require those facilities to cover related energy costs. The measure aims to prevent Kentucky ratepayers from seeing their electric bills increase as a result.

A U.S. Department of Energy report found that data centers, which power artificial intelligence operations, could account for 6.7% to 12% of total U.S. electricity consumption by 2028.

Lawmakers have raised concerns that these energy-intensive facilities could drive up electricity costs for consumers. Ratepayers might also be left responsible for funding new power plants that become unnecessary if planned projects fail to materialize.

House Bill 593 outlines three options for data centers seeking to operate in Kentucky. They could generate their own power, purchase electricity on the national open market, or, “the third way, if we have to increase generation, if we have to increase transmission, then the data center should pay for all those expenses upfront.”

Rep. Josh Bray, the bill’s sponsor, also proposes a $75,000 application fee for companies planning to build data centers. He said the fee would help distinguish serious proposals from those likely to be abandoned and assist utilities in covering pre-planning expenses.

“I feel like we are always on the backside of fixing problems here in Frankfort and this is a bill that gets ahead of the game,” Rep. William Lawrence said. “We’re setting the parameters, we’re setting the guardrails, as we should.”

Advocacy groups, however, argue that the impact of data centers extends beyond financial costs. They are urging lawmakers to consider environmental and broader community effects.

Rep. Nima Kulkarni alluded to those concerns.

“I want to also make sure we address environmental impacts of these data centers, so there’s going to be a lot of areas where we need to regulate them, but I appreciate you taking the first step,” she told the sponsor.

Kentucky Utilities and Louisville Gas & Electric informed lawmakers in 2025 that they had 20 data center projects under consideration.

The bill is now headed to the full House for consideration.