On behalf of our members that make NJBIA the largest, most impactful association representing job creators in New Jersey, we respectfully oppose S4307A5462 which would require public utilities to develop and apply special tariffs for large load data centers. While the bill is framed as a protective measure to protect non-data center ratepayers from cost increases attributed to the high energy demands of data centers, the approach taken in S4307/A5462 is misguided and risks increasing costs for New Jersey consumers indirectly by discouraging economic growth in a rapidly evolving industry, and distracting from the real solutions to rising energy costs.
While this legislation is introduced in good faith and meant to protect consumers from increasing costs, in practice, those costs are passed on to someone. As we have seen through the federal government’s use of tariffs, the economic burden created still reaches the consumer and, in this case, will only make New Jersey a more expensive place to live and do business and risks our regional competitiveness in the industry.
By targeting data centers with special rate structures, we risk increasing operational costs without guaranteeing savings for residential ratepayers. Further, this legislation discourages investment and job creation from a rapidly growing sector of the economy. In fact, this industry accounted for 18,440 jobs created and over $1.9 billion in state and local taxes in 2023 alone. This tariff is not a long-term cost control mechanism. It merely shifts the burden temporarily without addressing the underlying cause of high energy prices – insufficient energy supply and generation capacity in the state.
Rather than penalizing large energy users, New Jersey should be encouraging expanded energy generation and capacity within the state by utilizing every form of energy production so that demand growth does not outpace supply.
Contrary to popular misunderstandings of data centers, large load data centers are major economic drivers that bring investment, jobs, and technological infrastructure to a state. According to the Data Center Coalition, for every job created within a data center, six more across the economy are created. As well, in 2023, the industry accounted for $17.31 billion toward the state’s GDP.
And while this legislation is targeting large load data centers, special tariffs could inadvertently affect small businesses if utilities adjust general rate structures in the process, something the bill does not prevent. Imposing policies that have uncertain net benefits may add to the cost-burden consumers are facing. Without strong, empirical evidence that the special tariffs will net reduce consumer rates, this bill adds to much unnecessary risk to New Jersey’s future in this industry.
It is for these reasons that we respectfully oppose this legislation and recommend that the Legislature prioritize policies that expand in-state energy generation and supply.
