Data center policy a ‘ubiquitous’ and ‘pressing’ issue for state lawmakers

When Iowa lawmakers return to Des Moines in January for the 2027 legislative session, they’ll need to address the state’s role in regulating data centers, which while not new, have increased in the state alongside an explosion of technology such as artificial intelligence and cloud storage. 

An Iowa legislator and utility stakeholders said recently in a webinar that policy decisions to bring data centers online should consider stakeholders across the spectrum and take into account the long-term planning associated with connecting to the grid. 

The webinar was hosted by Legible, a platform that tracks legislation across states, with leadership of the platform stating that public policy around data centers has arisen as a “ubiquitous, as well as pressing, issue being talked about this year.” 

States, local governments and lawmakers in Washington, D.C., are grappling with data center policy. Some have initiated moratoriums on the projects, Congress has considered legislation aimed at protecting ratepayers from spillover costs associated with data centers, and policy stances around the tech-buildouts were an issue for voters in the recent midterm elections. 

Rep. Hans Wilz, R-Ottumwa, said on the call there is a “punchlist” of factors a community must assess when determining whether a data center is fitting for the community: power, land, infrastructure, workforce, and state and local policy. But power, he said, is the “number one, overreaching” factor. 

Already, Iowa has seen a number of energy projects initiated to account for the energy demands created by large data centers. Google, for example, has an agreement with the Duane Arnold Energy Center in Palo to purchase more than 90% of the energy produced by the nuclear energy facility once it is restarted. 

Wilz said from a policy perspective, “you want to make sure that your state is also open and welcome to these opportunities.” He said high-energy users, be they a data center or a manufacturing facility, are beneficial — especially to rural communities.

Researchers expect ‘biggest year yet’ for energy siting bills in 2027

“We put in a hyperscaler (data center) in a rural area that makes sense with all those things we mentioned earlier, and that’s like building 1,000 homes as far as the taxation and the energy use,” Wilz said. “All those things are going to benefit the grid, the ratepayer and the community.” 

Proponents of data centers argue that increased energy demand on a system and a big user that can shoulder a larger percentage of the fixed cost of the system, can actually lower energy costs for ratepayers. 

Chaz Allen, executive director of the Iowa Utility Association, said that a number of large data centers, run by Microsoft, Google and Apple, have been operating in Iowa and the states’ major utilities have not had to shift costs to customers because of it. 

“Because of the way we’re regulated and the fact that we’ve signed large load tariffs and individual customer rates for these big load users to pay their way, we’ve not been hit as hard as other states have,” Allen said. 

A number of energy, environmental and community groups have opposed efforts from utilities to build additional natural gas plants that utilities say are not tied to data centers. One clean-energy group has raised concerns around the plants and argued the utilities should prove that the plants are in the public’s best interest before their permits are approved. 

Strategic locations to connect to the grid

Building a data center — or another high-energy user — and the power to support it, can be a long, complex process. Maison Bleam, the regional director of state regulatory affairs at the Midcontinent Independent System Operator, or MISO, said the regional grid operator is working with utilities, stakeholders and policymakers to address the energy build out, which he said doesn’t stop at state lines. 

“As data centers and AI drive unprecedented growth in electric demand, our role is to make sure, really, that the grid is prepared to support that growth, while maintaining reliability for the millions of people, that I mentioned, and businesses who depend on that delivery of energy,” Bleam said on the webinar. 

Bleam said historically, energy demand was “relatively predictable” but with data centers, reshored manufacturing and general increases in electrification, it means MISO has to “plan for both what we know today and what could happen tomorrow.”

Bleam said transmission projects, which are necessary if a site doesn’t already have a connection to the grid, can take seven to 10 years, which can create a “mismatch in timing.” Bleam said this is why the power pool is trying to send the “right signals” to utilities to “build generation that can be utilized, so that we don’t get caught in a situation where we have a mismatch.” 

DOE to loan up to $5.1 billion to Alliant Energy for Iowa and Wisconsin energy projects

Allen said big energy users, like a data center or the proposed $15 billion steel plant slated for southeast Iowa, are aware of these challenges and typically will talk to utilities early on in the process and try to pick sites that are along existing or planned transmission lines. 

Allen said much of the infrastructure in Iowa is being built out not for data centers, but for things like MISO’s Tranche 1.0 and Tranche 2.1 long-range transmission plans.

He said a lot of projects have been drawn to Iowa because it has this planned energy and transmission build out, not the other way around.

What will the legislature do?

Allen said mandates would “wrongly” impact economic development. 

“Iowa got to where it got with renewables not because it was mandated, but because it was the technology at the time that made the most sense,” Allen said, referring to Iowa’s status as a leader in wind energy adoption.

Iowa Gov.-elect Rob Sand has said legislation around data centers is something he hopes to see early on in the upcoming legislative session. Sand has called for an end to tax breaks for data centers, and for setback regulations, transparency in negotiations and assurances that data center operators pay for increases in utility costs. 

Environmental groups and community groups are urging local governments to initiate their own regulations on data centers, and a growing number of counties and municipalities have pass moratoriums and restrictions.

Wilz, who serves on the House Commerce Committee which typically tackles legislation related to utilities, said it will be important to have “everybody at the table” when drafting policy around the issue. He said industry, transmission, energy, the local community and water are all part of the discussion. 

“These are all things that have to be considered as we write policy, whether it be at the state level and/or working with our locals to make sure that we write something that’s not so restrictive that it doesn’t lead to a development agreement,” Wilz said. 

In a conversation with Iowa Capital Dispatch, Wilz said he has been in contact with Sand’s team about several issues already, but that he hasn’t had conversations with them yet about data center policy. 

“We need more conversation before we have legislation to ensure everybody has a seat at the table, to make sure we can create a path forward for Iowa that makes sense to keep Iowa moving forward,” Wilz said.