Gov. Sherrill signs first in the nation AI data center law to lower electric bills
⚡ Gov. Mikie Sherrill signs three energy bills, including a new law targeting AI data centers.
💰 State officials say the package could save New Jersey electric customers more than $1 billion a year.
➡️ One new law requires AI data centers to cover more of the costs they place on the electric grid.
ALLOWAY — New Jersey is the first state in the United States to put meaningful guardrails on AI data centers that are driving up electric rates.
On Tuesday, Gov. Mikie Sherrill signed three energy bills into law at a home in Alloway, which is a 25-minute drive from the Salem Nuclear Power Plant. In April, Sherrill lifted a moratorium on building new nuclear plants.
The governor's actions, including signing these bills, could save New Jersey ratepayers more than $1 billion each year, according to a report from Synapse Energy Economics.
New laws target New Jersey transmission costs
One new law (S1673) requires all transmission facilities in New Jersey to join grid operator PJM. It repeals the ROE adder — essentially a subsidy for utility companies — which could save ratepayers $60 million annually, according to Evergreen Action.
The second law Sherrill signed on Tuesday is the Advanced Grid Technologies Act (S-4411). Utility companies must now get approval from the state to pursue new supplemental transmission projects to upgrade wires, poles, and substations.
According to the governor's office, this spending made up 79% of New Jersey ratepayer transmission expenses from 2008-2025.
AI data centers will pay a separate electric rate
The most highly anticipated new law, though, is the Data Center Fair Share Act (A5462), spearheaded by Assemblyman Dave Bailey, D-Salem. It had previously passed in the final moments of the last legislative session, but was pocket-vetoed by outgoing Gov. Phil Murphy.
Signed by Sherrill on the kitchen table of Bailey's mother's home in Alloway, the law puts data centers in a new class of ratepayers, meaning they'll pay a separate rate and cover their own costs. Citing grid operator PJM, Sherrill said that data centers drove 70% of new electricity demand last year.
"Instead of asking New Jerseyans to subsidize big tech, we'll use their investments to level up our grid and lower costs for your families," Sherrill said.
This third law also gives operators of AI data centers an incentive to build their own clean energy generation, and requires data centers to cut back when the grid is strained before residential ratepayers are impacted.
New Jersey towns push back on AI data centers
The action on Tuesday comes after the Democratic governor promised to crack down on power-hungry data centers, but not ban them.
Several New Jersey towns have banned AI data centers from going up in their backyards. In Burlington County, Pemberton Township was the first municipality to adopt a ban. That was in February.
Other towns have followed suit with bans, or are moving in that direction, including Andover, Millville, Waterford, Monroe, Logan and Phillipsburg.
Two Vineland residents have filed a federal lawsuit to block a massive data center in their town that is more than halfway built. It is expected to consume 300 megawatts of power.
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