Lawmakers argue about legislative data center memo that one calls ‘a very opinionated piece’

A South Dakota state senator employed by a utility company criticized a legislative staff report on large data centers as “very opinionated,” drawing pushback from some fellow lawmakers who said the report fulfilled its purpose.

Sen. Steve Kolbeck, R-Brandon, is an executive for Xcel Energy, a multi-state provider of electricity and natural gas. He is also a former member of the South Dakota Public Utilities Commission, which regulates investor-owned utilities. 

During a Tuesday meeting in Pierre of the Legislature’s Executive Board, Kolbeck criticized Legislative Research Council staff attorney Rachel Hale’s 17-page “Hyperscale Data Centers” issue memorandum. Kolbeck went on to cast the lone no vote against accepting the memorandum. 

“I was just kind of trying to figure out where LRC staff came up with a very opinionated piece,” Kolbeck said, calling some of the memorandum’s sources “not necessarily factual.”

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He asked whether Hale consulted electric cooperatives, investor-owned utilities or the Public Utilities Commission.

Hale said she had not interviewed stakeholders. The assignment from the board in April was to “summarize the documented effects and challenges, particularly on water and electricity, of hyperscale data centers in other states and those states’ regulatory actions in response,” according to the board’s minutes. Hale’s sources included government publications, academic research, law review articles and news reports.

Kolbeck said he found parts of the report inaccurate, particularly its discussion of potential electricity rate increases. The memorandum acknowledges disagreement over whether data centers increase electricity rates.

Kolbeck said the Legislature had addressed electricity cost concerns earlier this year through Senate Bill 135, which was signed into law.

That law — as explained in the Legislative Research Council memo — requires data centers with peak electrical use of 10 megawatts or greater to cover any costs associated with meeting their power demand, including costs if a data center unexpectedly stops operating. It also bars the state from preempting local laws limiting, banning or regulating data centers. Data center projects additionally have to notify local water providers about their proposed projects, and the providers must determine whether the data center’s projected consumption is compatible with the local water supply. 

The memo also outlines competing research and arguments about data centers. For example, it cites research from Lawrence Berkeley National Laboratory finding that infrastructure upgrades, rather than data centers, were the primary drivers of recent electrical rate increases. It also notes that some states experiencing substantial data center growth experienced declining electricity rates.

The report contrasts those findings with research warning that large data centers can strain electrical grids, require costly infrastructure upgrades and potentially shift expenses onto residential customers.

State House Speaker Jon Hansen, R-Dell Rapids, the House prime sponsor of the new data center law, challenged Kolbeck’s characterization of the report.

“I read this with sort of the eye of trying to make sure that it was just laying out the facts and presented neutrally, and I did think you did a really good job at that,” Hansen told Hale. “So, I just want to push back on some of the criticism that was leveled earlier.” 

House Majority Leader Scott Odenbach, R-Spearfish, called the memorandum a “thorough and dispassionate look” at the issue.

Legislative Research Council Director Doug Decker defended the work, saying the memorandum addressed the assignment lawmakers provided.

“It was a dispassionate presentation of both sides of the issue, and it met the charge that was given,” Decker said. 

Some lawmakers acknowledged that more research could be useful, but Decker said additional questions should be addressed in another memorandum rather than “a criticism of this one.”

A 2026 South Dakota Legislative Research Council issue memorandum on data centers.