For months, Pennsylvania Gov. Josh Shapiro promised a plan to blunt fast-rising energy costs in the state by pushing power-hungry AI data centers to pay their own way. Now his office has formally released details on how he intends to turn BYOE—“bring your own energy”—into more than just a slogan.

The question now is whether it can deliver on curbing consumer energy cost increases in a state on the front lines of AI data center development, where average household electricity rates jumped nearly 14 percent in the last year. Another question: whether Shapiro’s efforts will score enough political points in a swing state in which the governorship, state legislature and several competitive congressional districts are up for grabs this fall.

Requiring data centers to bring their own energy sources is a top promise made by political leaders across the country, not just Shapiro. But experts say the specific policy details are crucial.

John Quigley, a former secretary of the state’s Department of Environmental Protection and now senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, notes that the primary fuel powering the data center development rush so far is natural gas. But with a yearslong queue for back orders of new gas turbines and more of the gas itself being liquefied and shipped overseas, he questions whether it’s even feasible as a short-term solution to require data centers to generate new electricity.

That’s to say nothing of the climate considerations of burning more gas, which Elizabeth Marx, executive director of the Pennsylvania Utility Law Project, notes has driven some advocates to propose a different policy: BYONCE.

“That’s the buzzword of the moment—Bring Your Own New Clean Energy,” Marx said.

Consumer advocates like Marx, along with tech companies, industrial developers, politicians and everyday Pennsylvanians, have waited months to see what Shapiro would come up with. The governor has been a major proponent of bringing the AI data center industry to Pennsylvania, but tacked hard in messaging this year as public sentiment turned against such facilities. The stakes are high for the first-term governor, who could use a successful reelection campaign as a springboard for a presidential run in 2028.

During a February budget address, Shapiro introduced the “Governor’s Responsible Infrastructure Development (GRID) Standards,” a set of policy principles he said would address data center concerns. A top pledge: that data centers would have to provide their own energy to obtain state support.

But many questions remained. What kinds of carrots and sticks could Shapiro wield to ensure compliance? How much help would he need from Pennsylvania’s divided legislature? Would he include provisions for clean energy? Would GRID address the transmission and distribution costs that would otherwise hit consumers in the wallet?

The policy details released Wednesday provide some answers, while making clear the governor understands the public mood.

“I’ve heard directly from Pennsylvanians who are concerned about the impact data center development could have on their communities, the environment, and their utility bills,” Shapiro said in a prepared statement. “That’s why I am putting clear guardrails in place to hold developers accountable to protect consumers, strengthen communities, and put Pennsylvanians first.”

The GRID standards cover four areas: energy affordability first, followed by transparency, economic development and environmental protection. On energy, developers “must agree to build, bring online, or buy incremental electric capacity needed to meet new energy demand while paying the full cost of the capacity,” the administration said.

That new energy generation must be within the same region of the grid as the data center, and the developer must also agree to use an escalating portion of “clean firm” energy sources: 10 percent in 2027, 14.5 percent in 2030 and 32 percent in 2035. Shapiro’s office defined those energy sources as “nuclear energy, hydroelectric power… geothermal energy, fuel cells, solar energy, including solar energy paired with storage resources, wind energy, including wind energy paired with storage resources, clean hydrogen-fueled energy generation, and long-duration storage resources.”

Under the standards, data centers developers would also have to pay for “all costs” associated with grid infrastructure upgrades triggered by their project.

“As Pennsylvania continues to compete for major economic development projects and lead on innovation, we have a responsibility to set strict accountability standards and ensure these projects create real opportunity for our communities,” Shapiro added.

Quigley says many of the provisions around BYOE and infrastructure costs are a “big step in the right direction.” But as a whole, he said, GRID is a mixed bag with a big weakness: Pennsylvania’s divided legislature. 

“Major pieces of this program still require passage of legislation by the General Assembly, and until then won’t change the facts on the ground in host communities,” Quigley said.

That’s a concern the the nonprofit Food & Water Watch also hit on, calling GRID a “naive effort” to use voluntary measures to rein in “corporations who want to exploit our state for profit.”

For its part, the Shapiro administration said it would work with legislative leaders “to introduce accompanying legislation that will codify the GRID Standards into law.”

“As Clean as Possible”

Policy experts will be combing through the details and watching closely how Shapiro executes his plan. Claire Lang-Ree, clean energy advocate at the Natural Resources Defense Council (NRDC), is particularly focused on BYONCE—adding more policy preferences for renewable energy sources—to address both short-term consumer cost concerns and support long-term climate mitigation. In 2024 alone, a dozen of the country’s $1 billion weather disasters hit Pennsylvania, according to the National Oceanic and Atmospheric Administration, and other analyses predict the state could be dealing with $15 billion in climate costs by 2040.

“[This moment] could be a great opportunity for states to meet their clean energy targets, especially by doubling down on things like battery storage that are very capable of serving data centers, can get built really quickly and can be paired with renewable resources to be as clean as possible,” Lang-Ree said.

Robert Routh, a Pennsylvania policy director for NRDC, said the GRID standards are among “important steps” policymakers in the state are making to advance clean energy affordability, noting one provision to require the roofs of all data centers with over 100,000 square feet of floor space to be built “solar ready.”

Then there’s ensuring that data centers also pay for transmission upgrades, an infrastructure cost often socialized through utility bills. Marx, the consumer advocate, said the swift rise in regional energy bills has so far been largely driven by forecasts of impending scarcity in energy generation. But if unaccounted for, the looming costs to also build new poles, wires and transformers to deliver new energy will hit consumers hard in a second wave.

“We have yet to see the transmission cost increases that are coming, because a lot of transmission is currently being built to transport energy” and the tab won’t show up for consumers until it’s done, Marx said. “So we’re not seeing that spike yet, but it’s coming.”

“Right now, the problem is that there are no rules. We’re dealing with outdated forms of regulation that don’t fit this new thing that we’re trying to figure out.”

— Elizabeth Marx, Pennsylvania Utility Law Project

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There are yet wonkier policy considerations. And they don’t make for good slogans.

“The real solution is bring your own incremental clean energy, batteries, load flexibility and demand response,” Quigley said with a chuckle. “That’s what we need.”

In Quigley’s view, addressing energy costs will not only require building new, clean energy generation and accounting for transmission costs, but also modernizing the grid in a way that makes more use of existing generation. That could involve everything from improving forecasting of how many data centers will actually be built, to better integrating battery storage into the grid, to asking data centers to shift their peak-use times or curtail their operations during times of grid stress.

“We can get a lot more out of the existing grid,” Quigley said. “We shouldn’t default to incredibly expensive new development.”

Identifying the proper suite of energy policy solutions is complicated enough for any lawmaker. But for Shapiro’s office, implementation is the greater hurdle. Experts say his office will have to interface with the Federal Energy Regulatory Commission (FERC), regional grid operator PJM Interconnection, the Pennsylvania Public Utility Commission (PUC) and state legislators to get anything comprehensive done.

And some, like Marx, fear that many agencies are still playing catch-up in this new era of energy scarcity.

“Right now, the problem is that there are no rules,” Marx said. “We’re dealing with outdated forms of regulation that don’t fit this new thing that we’re trying to figure out.”

Going Nuclear

If there’s a standard-bearer for “bring your own energy” in Pennsylvania, it might be on Three Mile Island, where Microsoft has agreed to a deal with Constellation Energy to restart a shuttered nuclear power plant and provide carbon-free power to its data centers. 

But there’s a complication that is emblematic of the challenge ahead for policymakers: Microsoft appears primed to send its electrons out of state.

Unlike some other mega deals in Pennsylvania, in which data centers are co-locating near and connecting directly to power sources, Microsoft has not announced any plans to build an AI data center near the nuclear plant (now renamed the Crane Clean Energy Center), nor anywhere else in Pennsylvania. 

But the company does have significant data center holdings in not-too-distant Northern Virginia, which the company claims to already power with out-of-state nuclear energy. Microsoft also plans to build a large data center in West Virginia, powered by off-grid natural gas, which some analysts calculate could increase the climate-conscious company’s greenhouse gas emissions by 44 percent.

Exactly where Microsoft plans to take credit for the carbon-free electrons generated by Crane is unclear, and the company declined to specify in an email to Inside Climate News. 

Regardless, Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative, said that energy from the plant will inevitably funnel into the PJM grid, theoretically helping to address scarcity in a 13-state region that includes Pennsylvania, and potentially having outsized reliability and economic effects in its host state.

“It’s complicated, but my suspicion would be that putting more energy in Pennsylvania is ultimately going to be good for Pennsylvanians,” Peskoe said.

But another complication is that grid operator PJM recently informed Constellation it would have to wait until 2031 to restart the nuclear power plant. That was due in large part to delays in the construction of new transmission lines “as far away as southern Virginia and West Virginia,” according to FERC filings.

That raises the question of when the Microsoft-Constellation deal would bring relief to ratepayers, and whether the project could ultimately add to energy bills via transmission costs.

An initial PJM analysis of the Three Mile Island restart shows Constellation will be on the hook for about $97 million in infrastructure costs, including to string new high-voltage wires along the Susquehanna River in South Central Pennsylvania, a project currently undergoing state-level review for wetland impacts.

But the PJM report shows the plant will also rely on publicly financed projects in surrounding states, such as high-voltage transmission lines that are part of larger, multibillion-dollar grid upgrade plans. The bill for much of that could find its way to consumers: In Maryland, the state Office of People’s Counsel has filed a federal complaint that $1.6 billion in “data-center transmission costs” will be paid by its residents over the next 10 years.

Pennsylvanians are already up in arms over a similar project, a 222-mile, high-voltage “Kammer-Juniata” transmission line running from a location near Three Mile Island to West Virginia. That’s now being opposed by both the PUC and consumer advocates over fears that costs will be pushed onto Pennsylvania ratepayers. 

PJM already approved the project in February, but the PUC and Pennsylvania Office of Consumer Advocate have both asked the grid operator to withhold financial incentives, noting the Crane power plant has yet to receive necessary state-level reviews, including for the withdrawal of up to 73 million gallons of water a day from the Susquehanna River to operate.

It can be hard to calculate how much any individual data center or new power source is contributing to the need to build such expensive transmission projects. Constellation, for its part, did not respond to a question asking who will pay for any such infrastructure the nuclear plant reopening requires. 

But the cost for many grid upgrades is ultimately borne by consumers, Quigley said. Transmission expenses are approaching 35 percent of electricity bills within PJM, which approved another $12 billion in infrastructure projects in February, he noted.

“It’s basically all to serve data centers,” Quigley said. 

Power Plays

In its new GRID white paper, Shapiro’s office says it has accounted for the numerous challenges in getting data center policy right—from hidden costs to climate considerations.

For example, on May 13, the state’s Public Utility Commission released an anticipated “model tariff” on data centers, essentially a set of new rules that the agency suggests electric utilities across the state adopt to ensure consumers don’t shoulder the costs for data center development. 

Shapiro recently butted heads with the independent PUC as he used his bully pulpit to lean into its territory of utility regulation. But in the GRID details released Wednesday, Shapiro’s office said it would now lean on the commission’s model tariff: If a data center developer meets the PUC’s recommendations for paying for transmission costs, that would also check the box for the governor’s GRID standards.

But how much power Shapiro and the PUC ultimately have to coerce utilities and data centers is another question. On its own, Shapiro’s office has just one carrot to dangle: continued access to a “Fast Track” permitting program that several early data center developers in Pennsylvania utilized. But developers are not required to use it to build.

Similarly, the PUC by statute cannot require utilities to adopt a model tariff. That puts significant focus on Pennsylvania’s divided legislature, where the Democratically controlled House and Republican-controlled Senate have agreed on scant energy policy in recent years. 

Members of both parties have introduced data center legislation this year. Notably, House Bill 1834, introduced by Democratic Rep. Robert Matzie, would implement regulation via the PUC and has both BYOE and clean-energy provisions.

Shapiro’s office referred directly to the bill in its Wednesday release, noting it had adopted its policy preferences for “clean, firm” energy. His office is also calling for new legislation to change a valuable tax exemption for the industry—estimated at more than $517 million annually by 2030—to require that recipients meet GRID standards.

But the governor’s office has yet to reveal how his administration is working to build policy consensus in the legislature. And numerous legislative offices, including Matzie’s, did not respond to interview requests. 

Matzie’s bill, which passed the House in March, has been sitting in a Senate committee ever since, and Senate Republican Majority Leader Joe Pittman recently told a reporter he had no plans to move data center legislation.

Adding to the challenge, the Pennsylvania Utility Law Project’s Marx notes, is that FERC and PJM remain outside the reach of state lawmakers, with the exception of Shapiro’s musing over an unprecedented exit from the grid operator and legal action, including a successful 2024 lawsuit against PJM over cost increases.

“What’s a little confounding is that a lot of the pieces of the regulatory puzzle for data centers are decided at PJM and FERC … mainly things that impact interstate commerce and transmission lines,” Marx said.

NRDC’s Lang-Ree notes that PJM has proposed requiring data centers to either provide new energy generation or get kicked to the back of the line when supply runs tight and blackouts loom. But she added that PJM would still rely on state regulators to identify noncompliance and keep costs from shifting to consumers.

Quigley said that underscores the complexity of getting the policy right.

“Nobody has all the marbles here,” he said.