Data centers are buildings filled with computers and networking equipment that store, process, and deliver digital information. They power email, cloud storage, streaming video and artificial intelligence (AI). Many people use data centers every day without realizing it. Vermont has had some smaller data centers that support local businesses, hospitals, schools, and communications systems for years. Those facilities operate in the background and help provide “in the cloud” services.

Vermont’s new legislative approach focuses on large data centers, facilities using 20 megawatts (MW) or more of electricity. Vermont does not have any data centers currently of this size. For context, 20 MW is enough electricity to power thousands of homes. Under H.727, a “data center” is defined as a facility using or capable of using 20 MW or more for data processing and hosting services.

A “hyperscale” data center is a very large facility built by major technology companies such as Amazon, Microsoft, Google, Meta, or OpenAI partners. These facilities are designed to support cloud computing and AI systems at enormous scale. Many hyperscale campuses consume hundreds of megawatts of electricity and millions of gallons of water for cooling.

Across the country, states and towns are rushing to mitigate the impacts these projects can have on electric grids, water systems, and utility rates. Analysts project that data centers could consume as much as 12% of all U.S. electricity by 2028, driven largely by AI growth. In several states, rapid hyper-scale growth has raised concerns about electric infrastructure costs being shifted onto other ratepayers, increased strain on transmission systems, significant water use for cooling, land use and environmental impacts, and uncertainty about who pays for new grid investments. Those larger and emerging debates are one of the reasons Vermont chose to act before large-scale projects arrive here.

At the federal level, both the Biden and Trump administrations prioritized rapid AI infrastructure development, but with very different approaches. President Biden’s executive order emphasized federal oversight, safety standards, cybersecurity, worker protections, and pairing AI growth with new clean energy development. President Trump’s executive order takes a more deregulatory approach focused on accelerating AI development, limiting state-by-state regulation, and reducing barriers to infrastructure deployment in order to strengthen U.S. competitiveness in AI.

Importantly for Vermont, President Trump’s order does specifically recognize that states have the right to regulate issues related to siting, utility oversight, and environmental review.

Vermont is not considered a likely destination for hyperscale development because electricity prices in New England are generally higher than in many other parts of the country. However, the House and Senate believed it was important to establish rules now so that if a large project is proposed in the future, Vermont will already have a regulatory framework in place.

The goal of H.727, the Vermont Sustainable Data Centers Act, is to provide certainty and transparency for developers, utilities, and communities while also protecting existing ratepayers and natural resources from unintended costs.

The bill requires any large data center to enter into a “large load service equity contract” with the utility serving it. The contract must ensure the data center pays costs proportional to the infrastructure needed to serve it and protects other ratepayer classes from subsidizing those costs.

The legislation also requires review by the Public Utility Commission and consideration of grid reliability, environmental impacts, economic benefit, environmental justice, transmission impacts, and consistency with Vermont energy plans.

On water use, the bill requires data centers to disclose their cooling methods, encourages closed-loop cooling systems, and establishes protections related to groundwater withdrawals and PFAS contamination. The bill also requires quarterly public reporting on water and energy use.

I introduced this legislation because of what we are seeing happen in other parts of the country. Communities elsewhere are struggling with how to manage the electric demand, water use, and infrastructure costs associated with very large data centers. Vermont is in a position to learn from those experiences before facing similar pressures ourselves.

This bill is neither a moratorium on data centers nor an open invitation for unchecked development. Instead, it establishes a transparent, thorough regulatory process that gives communities, utilities, regulators, and developers clearer expectations from the outset while protecting Vermonters and Vermont itself.

For Vermonters concerned about large-scale development, the bill establishes oversight, environmental protections, and cost-allocation requirements. At the same time, for those seeking regulatory certainty, the bill provides a predictable framework for how Vermont would evaluate any future project.

H.727 passed the Vermont House in March on a voice vote. The Senate later amended the bill and passed it by a vote of 26–3 last week. The House has now concurred with the Senate amendments, and as of May 22, 2026, the bill is awaiting the Governor’s signature.

An overview of the legislation and its national significance was recently published in E+E Leader under the headline “Vermont Moves to Make Data Centers Pay for Their Grid Impact.” The article describes Vermont’s proposal as one of the more comprehensive state frameworks in the country for addressing electric system costs, environmental review, water usage, and long-term accountability for large data centers.