In response to concerns over new data center projects attempting to locate in Kentucky, legislation was filed in Frankfort last week to put guardrails on any potential development — particularly around costs borne by the computing facilities’ enormous energy usage.
House Bill 593, filed by GOP Rep. Josh Bray of Mount Vernon, would only allow large data centers to have electric service from a public utility if they sign a contract agreeing to cover any transmission or infrastructure costs attributable to serving that data center, ensuring those costs are not passed onto other existing utility customers.
Bray told Kentucky Public Radio this week that while hyperscale data centers and the artificial intelligence services they host are vital to the future economy, he wants to make sure that Kentuckians “don't subsidize data centers themselves.”
“That's what this bill aims to do, is to make sure we've got good energy policies in place to make sure we know the costs associated with data centers, and that they pay their own way, that the consumers aren't subsidizing them,” Bray said.
Companies have been scrambling to try to locate hyperscale data centers in Kentucky over the past year to take advantage of new statewide tax incentives passed into law in the 2025 legislative session. The reaction to that law has been swift, from both the electric utility providers offering to serve the large customers and local residents who are deeply skeptical about new proposals in their rural communities.
Louisville Gas & Electric and Kentucky Utilities — the largest electric utility in the state — sought and received permission from regulators to spend $3 billion on two new gas power plants, largely based on the forecasted needs of data centers they expect to be built.
Consumer advocacy groups have raised alarms that this expensive infrastructure buildout to serve new data centers will be passed on to existing customers with higher bills, citing trends in other states where data centers have already proliferated. However, LG&E/KU and other utilities have also proposed new tariffs to the state’s utility regulators at the Kentucky Public Service Commission that they say will protect existing customers, outlining service rates for data centers that include contracted terms and conditions on payments and services.
Though they want legislation to go further on environmental protections related to data centers, both the Kentucky Resources Council and Kentucky chapter of the Sierra Club call the current version of HB 593 a positive “first step” on protecting ratepayers from subsidizing the new computing warehouses.
Beyond fears over higher bills, local governments and critics have also put roadblocks on data center projects in Oldham, Simpson and Meade counties due to various concerns about zoning and land use, pollution and transparency — despite promises of enormous local tax revenues from developers. Bray’s HB 593 addresses some of those concerns with a provision tying data centers’ tax breaks to their compliance with all “local requirements.”
Bray also included a provision that is meant to address what one Republican leader in the Kentucky General Assembly calls “cowboy speculators” — developers who secure desirable land for a data center, but have no strong ties to companies who could actually operate them.
The bill adds a $75,000 application fee for any company seeking utility service for a data center, which Bray said might “separate the wheat from the chaff” — narrowing down real prospects from more speculative ones.
Bray says that process would also help ensure that available power generation remained for Kentucky to attract new advanced manufacturing projects, which would provide more in the way of jobs and tax revenue for the state than data centers.
“These large economic development projects that are tied to advanced manufacturing, they all have these huge needs for energy,” Bray said. “And I'm concerned that if we load up on data centers, we're not going to have enough excess capacity to do advanced manufacturing. I don't want to see us go down the road of taking quick opportunities to the detriment of future growth.”
Bray seeks to enshrine ‘principle’ of data centers paying own costs
Bray, who has co-chaired the General Assembly’s artificial intelligence task force over the past two years, said his bill was informed by feedback and testimony they received from a wide variety of stakeholders on the opportunities and challenges of massive hyperscale data centers.
To put their gargantuan energy usage in perspective, the one data center project in Kentucky that has received final clearance to proceed is a Louisville development that plans to use up to 525 megawatts of power. That’s more than three-quarters of the entire 691-megawatt generating capacity of LG&E’s Cane Run power plant.
HB 593 includes several provisions to ensure that if utilities are building new transmission and generation infrastructure to serve these new customers, data centers companies are the ones footing the bill. These include:
- Data center customers must sign a contract with the utility provider agreeing that it will prepay for any infrastructure needed to serve them and that other utility customers will not subsidize those costs through rate increases. State regulators at the Public Service Commission would also have to approve the terms of the contract and related tariffs.
- Prospective data center customers would have to pay an upfront and non-refundable application fee of $75,000.
- The contract would require a “dedicated resource” of energy to serve any data center whose peak load exceeds 250 megawatts.
- The data center must certify that it will comply with all local and state requirements related to its operation if it is to remain eligible for the existing state tax incentives, which grant a 50-year exemption to all sales and use taxes on computer equipment at large data center developments.
Unlike the “extremely high load factor” tariff that LG&E/KU proposed for data center customers in its pending PSC case that laid out very specific terms and conditions, Bray says HB 594 largely consists of setting a principle that others customers won’t subsidize data centers, leaving the specifics to companies, utilities and the PSC.
The pending LG&E/KU tariff would require data center customers to sign a 15-year contract guaranteeing to pay for at least 80% of the energy they say they will consume each month, even if they end up using less. The utility company says this would ensure data centers cover the costs of building its new gas power plant in Louisville and protect existing ratepayers.
Last year, Democratic Rep. Adam Moore of Lexington drafted a bill that was nearly identical to this LG&E/KU tariff, requiring the same terms for any data center customer of any electric utility in Kentucky.
Moore filed House Bill 544 earlier this month, which takes a different tack, laying out in more broad terms that data center customers must agree to contracts or tariffs requiring them to cover the costs of new infrastructure needed to serve them, instead of other customers. He told Kentucky Public Radio that the passage of either his bill or Bray’s bill would be “a strong step toward putting people over corporations.”
In a statement responding to questions about the bills of Bray and Moore, LG&E/KU said they “appreciate the legislature’s desire to establish guardrails to protect customers from cost increases due to unprecedented load growth” and would “pursue a legislative solution that works for the entire commonwealth.”
In its pending rate case seeking approval of its data center tariff, LG&E/KU indicated that there are dozens of prospective economic development projects interested in locating in Kentucky that would use a combined 9.3 gigawatts of power (mostly data centers), which far surpasses its current excess capacity and the 1.4 gigawatts of power its two new gas plants will generate. The utility says its tariff would protect existing customers, while still attracting data centers and their significant tax revenue to parts of Kentucky.
Asked what feedback he’s received from LG&E/KU and other electric utility providers, Bray said they all agree in principle that existing customers shouldn’t subsidize data centers, but some prefer they be allowed to make their own tariffs without specific mandates from the state.
“Just looking at what other states have done, I'm a little bit concerned,” Bray said. “I want to just make sure that going forward we've got these principles enshrined somewhere.”
Bray said he has considered adding more specific contract and tariff terms for data centers in his bill — such as minimum contract length, minimum monthly payments and termination fees if a data center shuts down — adding that it is still “subject to change.”
Beyond just public and municipal utility providers, he said he has sought feedback on his bill from a wide variety of stakeholders to ensure it is “reasonable” and “realistic,” including the giant tech companies that would operate them, the Public Service Commission and Cabinet for Economic Development officials in the administration of Gov. Andy Beshear.
“I've heard from pretty much anybody and everybody you can think of tied to data centers,” Bray said. “And based on what's happening to my email inbox, it looks like that's going to continue on.”
Environmental groups call bill a good ‘first step,’ but want more
Two of the environmental groups that have been the most critical and skeptical of data centers in Kentucky had early positive reviews of Bray's HB 593.
Ashley Wilmes, the executive director of the Kentucky Resources Council, told Kentucky Public Radio the group appreciates that Bray’s bill “takes an important step toward making sure hyperscale data centers carry the full cost of their energy use, rather than shifting those costs onto everyday ratepayers who, in today’s economy, can least afford additional rate increases.”
Sierra Club Kentucky in a statement called HB 593 “a strong and necessary step in the right direction” when it comes to protecting ratepayers from rising energy costs, as “families should never be forced to subsidize the massive electricity demands of some of the world’s most profitable corporations.”
However, both groups felt the bill, or perhaps a separate bill, still needed to go further in other areas to protect the environment and ensure local residents near a data center are not negatively impacted.
Wilmes said the legislature needs to create “a clear, predictable process” to review where new data centers are sited across Kentucky, recommending their locations approved by the state’s Electric Generation and Transmission Siting Board under the PSC. This board is made all the more relevant by some data center projects — like the one in Franklin — indicating they plan to build massive new power generation on site instead of receiving power from the energy grid.
“Given their scale, data centers should be carefully evaluated to ensure they fit into the surrounding built and natural environment, that water and infrastructure demands are not shifted onto the public, and that nearby communities and land uses are not negatively impacted,” Wilmes stated.
The Kentucky chapter of the Sierra Club added that while HB 593 requires a “dedicated” power source for large data centers, “it provides no guardrails to ensure that source is clean, affordable and forward-looking.” The group said this may lead to data centers being powered by fossil fuels that not only contribute to the climate change crisis, but discourage companies that are interested in clean energy sources — citing Kentucky’s recent loss of a $5 billion green aluminum smelter to Oklahoma.
The Sierra Club also wants legislation mandating data center developers to provide full transparency with the local communities where they are trying to locate, “moving beyond the confidential studies and non-public contracts allowed under the current proposals, to a process with meaningful public disclosure and input before permits are issued.”
Bray says the current version of his bill would not affect the ability of a data center company building on-site power generation as its lone energy source. However, he added that an earlier draft did include the siting board in the process — just as his recent bill did for solar power sites — and he’s still considering whether to put it back in.
As for local control over where new data centers can be located, Bray pointed to the one provision of HB 593 making their 50-year tax breaks from the state dependent on abiding by local land use requirements.
“If there's something going into a local community, it should be the local community who decides whether that's a good thing or bad thing for them,” Bray said. “We're trying to preserve that eligibility for local control on that.”
‘Cowboy speculators’ and making energy room for manufacturers
While utility providers and big tech companies initially sound on board with the principles of his bill, Bray said he expects opposition from private developers who hope to land a data center project before they’ve signed a contract with a big tech company like Google, Meta or Amazon to operate it.
The requirement of a $75,000 application fee “kind of helps weed out your legitimate ones from the people that are just kicking the ties,” Bray said, adding that this would give the state and utilities a better idea of how many high-energy prospective economic development projects are realistic.
Kentucky Senate President Robert Stivers of Manchester, who led the push for the statewide data center tax incentives last year, said those speculative developers are the reason that some guardrails should be added this session.
“They’re cowboy speculators,” Stivers said, singling out the developers who tried to locate a hyperscale data center in Oldham County last year despite having no apparent ties to a big tech company to operate one. “They just came in and bought land or took options on land.”
Stivers added that local residents and governments have a right to be skeptical if data center developers don’t prove their past experience with other projects.
“If entity B or A or Z or X comes in, say ‘show me your relationship papers that you’ve done this for somebody else before,’” Stivers said. “And if they can’t? Run.”
Bray says the main benefit of weeding out speculative developers is that the state only has so much excess capacity on power generation, and the top prize for economic development is landing a major manufacturer that would employ many more people than even a massive data center.
“If you look at what Virginia has done on data centers, they've really loaded up,” Bray said. “And I don't know that they've got capacity to grow in manufacturing. So I'm worried that if we don't do anything, we're not going to have enough capacity going forward to have any big projects, and that's my primary concern on this.”
Bray’s HB 593 will get its first committee hearing in the House on Thursday morning.
