Data Centers in Minnesota
The expansion of the data center industry is top of mind for Minnesotans across the state. Today’s “hyperscale” data centers require massive amounts of electricity, and that means more power generation, more transmission lines, more grid upgrades, and more ongoing maintenance.
As a ratepayer advocate, CUB is focused on establishing protections so that Minnesotans aren’t left footing the bill for data centers’ enormous power demand. CUB helped pass nation-leading ratepayer protection legislation in 2025. Now, we are focused on the hard work of implementing those protections in utility- and project-specific proceedings at the Minnesota Public Utilities Commission.
CUB is neither for nor against data center development. We also do not weigh in on issues related to water, siting, noise, or the environmental impacts from data centers. However, we are experts in ratepayer protection, and we are working hard to ensure that large data centers, if they are built in Minnesota, don’t increase household energy bills.
Protections under Minnesota law
There are three essential elements to protecting Minnesota ratepayers when it comes to data centers’ energy use, each of which is now required by state law for the electric utilities that are regulated by the Minnesota Public Utilities Commission. The law does not apply to municipal utilities or most cooperatives, but it provides a framework that those utilities and their local boards could adopt.
Data centers and other new “very large customers” must pay all utility costs attributable to them. This includes any new generation, power lines, or other infrastructure built to serve data centers ("incremental costs”) as well as the data centers’ share of existing infrastructure, personnel, and administrative costs (“embedded costs").
To help ensure costs are allocated correctly, the law requires these very large customers be placed into their own rate class, separate from residential, commercial, or industrial customers of the utility. This makes it easier to identify the costs of providing service to these customers, and isolate them from the rates charged to households and other businesses.
Utility infrastructure typically lasts for decades, and customers pay down the cost gradually through their rates over the time that an asset is expected to operate. For example, a solar or wind farm may be paid down over 30 years or more.
A utility asset is “stranded” when it’s no longer being used before it’s been fully paid off. Assets built to serve data centers might become stranded if those data centers close or reduce their operations, or if a technological advancement allows data centers to process more data while using less electricity.
Minnesota’s law requires safeguards be put in place so that a utility’s ratepayers will not be on the hook for paying for stranded assets should one of these scenarios occur. The legislation leaves it to the PUC to determine how to set up these safeguards. One option is to require data centers to sign contracts for electric service that are long enough to fully pay down the assets, and charge fees if they reduce energy use or terminate their contracts early. Other options include requiring data centers to pay down asset costs more quickly via higher utility rates, or requiring any remaining balances be paid off if the data center chooses not to continue service at the end of its contract term.
Separate from the data center law, Minnesota electric utilities are required to reach 100% carbon-free electricity by 2040, with interim benchmarks to meet in 2030 and 2035. The data center law emphasizes that all electricity provided to a data center by a utility is required to meet each of these benchmarks. Each time a data center wants to receive service, the utility must show how it will provide power to the facility in compliance with the carbon-free standard.
Minnesota law also requires large data centers to contribute toward weatherization and energy conservation efforts for low-income Minnesotans. Data centers that use at least 100 MW of power will contribute between $2 and $5 million per year, depending on their size. This requirement applies to any large data center, regardless of whether it receives electricity from a state-regulated utility, a cooperative, or a municipality.
Are data centers driving up my bill?
In parts of the country where large data centers are concentrated, evidence indicates that data centers have driven up people’s electricity bills. Minnesota has not seen the scale of hyperscale data center development that has occurred in some other parts of the U.S., so data centers have not yet had the same level of impact on local utilities. Minnesota’s first hyperscale data center, a Meta project in Rosemount, is just being completed in the summer of 2026.
However, data centers are also affecting energy systems in ways that are beyond the control of any one state. In the PJM Interconnection, the grid operator that serves areas from the mid-Atlantic to Illinois, data center demand drove up costs by more than $9 billion in a year. Data centers’ enormous demand for natural gas power generation could increase gas prices nationwide, causing heating and electricity bills to rise for everyone. The surging demand could also make natural gas markets more susceptible to price spikes, not to mention the air quality and climate impacts of adding that much fossil fuel generation. And data centers' demand is exacerbating already tight supply chains for essential grid components like transformers, which could also increase costs and vulnerabilities across electrical systems. While CUB will be monitoring impacts like these, they must be addressed at a regional or national level.
Here in Minnesota, we have the opportunity to learn from the experiences of other states and develop strong protections that shield ratepayers from the costs and risks of data centers . The legislation CUB helped to pass provides a strong starting point, and Minnesota has advantages over some other states, like existing requirements for electric utilities to conduct transparent planning for supply and demand. But there is still a lot of work left to be done. Utility tariffs need to be developed, individual contracts for power need to be analyzed, and protective measures need to be implemented to ensure Minnesotans aren’t left paying for data centers’ electricity needs.
Implementing the protections
Tariffs
The first steps to ensure that data centers abide by the requirements of state law are underway at the PUC. In a May 2026 hearing, the PUC approved a "very large customer tariff” for Xcel, which sets the basic rules of the road for any new, large data centers that will be powered by Xcel. The other electric utilities that are regulated by the PUC—Minnesota Power, Otter Tail Power, and Dakota Electric Association—have all filed similar tariff proposals that are in the process of being reviewed. The PUC will make a decision on each of these proposals before the end of 2026.
Electric Service Agreements (ESAs)
Each new large data center that seeks to join a utility system will also sign a contract with the utility that sets out the terms of its service, called an electric service agreement (ESA). These types of contracts are commonly used when utilities provide service to large customers, like mines or factories, and are tailored to the circumstances of each customer. For data centers, the agreements will likely detail the costs the data center will be charged for electricity service, the resources that will be built to provide electricity, and various other provisions that are unique to the specific facility.
In some instances, additional protections beyond those included in the tariff will be developed as part of the agreement, or a data center may commit to provide extra benefits, like more funding for home energy conservation programs. Like the tariffs, state-regulated utilities need PUC approval for each electric service agreement they enter into. Unfortunately, portions of electric service agreements are often designated as trade secret and not viewable to the public.
Data center updates, by utility
Here is the latest on where each utility stands in this process. Though several sites around the state are undergoing permitting or other development to potentially host data centers, we only list projects for which the local regulated utility has filed a proposed electric service agreement with the PUC.
