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CUB spearheads nation-leading legislation to protect ratepayers from the costs to serve data centers

July 9, 2025
Annie Levenson-Falk
wires connected to a server

This article is the next in a series from CUB discussing the ongoing conversations around data centers and their potential impacts on Minnesota’s residential ratepayers. Find previous entries in the series below.

The data center industry is booming, bringing with it an enormous new demand for electricity.  As we get into later in this article, evidence is mounting that, without careful oversight by state regulators, data centers’ demand is likely to increase the cost of electricity. Shielding ratepayers from costs or risks created by data centers was one of CUB’s top priorities for the 2025 legislative session—and we’re happy to share that Minnesota now has some of the nation’s strongest legal protections to ensure that data centers cover their own costs. 

In its special session on June 9, the Legislature passed HF16. CUB worked hard to ensure that this package of data center-related policies included protections for electricity ratepayers. We sat down with data center companies, utilities, the Minnesota Department of Commerce, and others to hammer out language that all parties supported.  

Minnesota’s ratepayer protections 

The result is a provision titled “Service to Very Large Customers.” Here’s what the new statute requires. 

  • The Minnesota Public Utilities Commission (aka the PUC, the state agency that sets electric and gas rates and regulates utility companies) must segregate new “very large customers” into a separate rate class. This allows for a more transparent analysis of the true cost of providing power to data centers, separate from the cost to serve homes, business, and other industry.  
  • Data centers must pay their full cost of service, and no costs may be shifted to other ratepayers.
  • Ratepayers must not bear the risk of paying for stranded assets built to serve data centers. Data centers will require new transmission lines, power plants, and other infrastructure. Such capital-intensive investments are typically paid down through electric rates over decades. However, the data center industry is fairly volatile at the moment, and it’s difficult to make decades-long predictions. What if, in 15 years, advancements in technology halve the amount of energy needed to run a data center? What if a data company moves operations to another state, or goes bankrupt? If any of that happens before the infrastructure is fully paid down, it could leave a “stranded asset”—money owed on a capital investment that is no longer being used by the customer for whom it was built. Minnesota’s new law prohibits the costs of such stranded assets from being passed to other ratepayers.
  • The electricity provided to serve the data center must achieve Minnesota’s renewable and carbon-free standards. Minnesota has set a standard that requires electric utilities to provide customers with carbon-free energy by 2040, with several interim targets along the way. Extending service to data centers must not cause delays in meeting these targets.  

In separate sections of the bill, the law now requires each large data center to contribute $2 to $5 million dollars annually to support home weatherization and energy efficiency for income-qualified Minnesotans. This program follows the model of one developed in Indiana through a settlement between companies, utilities, and ratepayer advocates – but Minnesota’s program is an order of magnitude larger. (Shout out to the Center for Energy and Environment for leading the charge on this program.) 

It also requires utilities to offer a clean energy tariff: an optional rate for commercial and industrial customers who choose to serve all or part of their electricity demand with clean resources.  

With this bill, Minnesota establishes itself as a national leader in protecting ratepayers from the cost of building and operating new data centers — a growing concern nationwide. Oregon passed similar ratepayer protections this year, and more than 30 states considered legislation related to data centers’ energy use this year.  

As Minnesota continues to grapple with how to address data center risks, CUB will remain a steadfast voice for residential customers at the legislature and in regulatory proceedings. 

Why this legislation is needed 

Despite optimism among some in the industry, a mounting body of evidence suggests that data centers’ enormous electricity demand will lead to higher energy costs and, without very careful regulatory oversight, other ratepayers may end up bearing a portion of these new costs.  

Data centers’ power needs are, as the Star Tribune put it, “staggering.” The paper found that 10 data centers proposed for development in the state as of January 2025 “could consume as much electricity as every home in Minnesota.” Many other states are seeing similar proposals. At the same time, electricity demand is also growing due to industrial expansion, electric vehicles, and the electrification of heating in buildings.  

Industry consulting firm ICF International found: "The next several years of demand growth could be especially challenging, since the sudden surge in new demand is happening at a relatively fast pace compared to the time it takes to build new generation, transmission, and distribution." Power suppliers will need to build generation and transmission capacity, and quickly. (Incidentally, federal legislation passed by Congress last week is expected to slow the deployment of new electricity resources—particularly wind, solar, and energy storage, the resources ICF had projected to be most critical in meeting new demand.)  

Increasing electricity demand while supply is constrained means that costs will go up. ICF, for example, predicts that a sample Midwestern utility will see a rate increase of nearly 50% by 2035 with rates about doubling by 2050. 

Experience from other states shows that, whether intentional or not, the cost of serving data centers can overflow to other utility customers. A study conducted for the Virginia legislature found that, it is very difficult to prevent the cost of accommodating data center electric load from shifting to other ratepayers. Consumer advocates in Oregon say that residential electric rates have already increased due to the growth in data centers there. 

This is why Minnesota’s new law is so important. It provides a legal backstop, prohibiting data center costs from being shifted to other customers. We are grateful to legislative leaders for carrying this provision; to state agencies, tech companies, and utilities for working through the language with us to reach consensus; and to all of you who contacted legislators in support of this proposal.  

What’s next 

The PUC will initiate one or more proceedings relatively soon to begin implementing the new law. A “very large customer” rate class must be established for each utility by December 2026. CUB expects to participate in these discussions, as well as separate proceedings in which proposed electric rates are approved and reviewed. We will continue to share updates as the process moves forward.