As power-hungry data centers proliferate, states are searching for ways to protect utility customers from the steep costs of upgrading the electrical grid, trying instead to shift the cost to AI-driven tech companies. (Dana DiFilippo/New Jersey Monitor)

A new proposal from a pair of legislative Democrats would institute a number of labor, energy and sustainability requirements on tech companies seeking to build data centers in Wisconsin. 

The proposal from Sen. Jodi Habush Sinykin (D-Whitefish Bay) and Rep. Angela Stroud (D-Ashland) comes as data centers have continued to pop up across the state — largely in southeast Wisconsin — sparking heated local debates about land use, local jobs and the centers’ heavy use of water and electricity. 

There are now 47 data centers in Wisconsin, with more under consideration by local governments. The data centers house computer servers to store information for cloud-based software and, increasingly, to support the expansion of artificial intelligence. 

For local governments, the construction of data centers offers an easy opportunity for property tax revenue from a business that won’t require many local government services. But the servers have high energy and water needs, are often sited on land that has long been used for farming and raise concerns associated with AI. Experts and advocates have been looking for the state government to weigh in more forcefully on how to regulate the centers, the Wisconsin Examiner reported last month. 

So far, the only mentions of data centers in state law are a provision in the 2023-25 state budget which exempts data center construction costs from the sales tax and a law enacted earlier this year to study the growth of nuclear power in the state. 

The proposal from Habush Sinykin and Stroud, announced Thursday, would establish rules beyond current incentives for data center growth. 

“The new legislation being proposed today is about making sure that we have clear, statewide guardrails in place that provide people in communities across Wisconsin with the information and transparency they need to engage in the local decision-making process in an informed, effective manner from the start,” Habush Sinykin, whose district includes a controversial data center project in Port Washington, said in a statement.

Under the proposal, electric companies in the state will be required to submit quarterly reports to the Public Service Commission on the amount of energy being used by data centers in the state. Those reports will be required to include information on the source of the energy and be made public. Water utilities in the state will also be required to publicly report when a single customer will account for more than 25% of the total water usage in the district. 

The data center companies would be required to pay an annual fee to the Department of Administration, which will put that money towards renewable energy programs. Data center buildings would also be required to obtain sustainability certifications. 

The bill would also give data centers an incentive to encourage utility companies to expand clean energy and it would also require the PSC to establish a class of “very large customers” and ensure that normal ratepayers aren’t bearing the increased energy costs caused by the data centers’ growing energy demands. 

“It’s mind-blowing that the only regulations we have on the books are to just incentivize data centers with no expectations for them being good environmental partners with the communities they’re going to be located in,” says Jen Giegerich, the government affairs director at Wisconsin Conservation Voters, which was involved in helping draft the proposal. 

“It’s really important that what this bill does is actually make sure that the data centers are paying their own way,” Giegerich continues. “We’ve just seen energy costs rising, and the fact that we would continue to put costs for energy development for tech giants who are making unheard-of profits, and then expecting Wisconsin ratepayers to pay for that is really a problem. So this bill rectifies that, and I think it’s sorely needed.”

The proposal also includes labor requirements for data center construction. Under the bill, any workers at construction sites for data centers must be paid the local prevailing wage rate or, if the worker is a member of a union, the wage rate in that worker’s collective bargaining agreement. The data center company will have to pay whichever wage is higher. 

To qualify for the sales tax exemptions already available for data centers under current state law, the companies would be required to meet the labor requirements in the bill and source at least 70% of their energy from renewable sources. 

Steve Kwaterski, a spokesperson for the Wisconsin Laborers’ District Council, says data center projects have already been a source of consistent, good paying construction jobs for his members and the bill will go towards ensuring that these jobs support families in the state. 

“We want to make sure that any project that’s as complex as a data center is being done with the most skilled and trained workforce that’s out there,” he says. “That ensures that it’s being done right on time, on budget, and done safely as well.”