• Gov. Mike Braun is set to sign a law requiring tech firms to cover 80% of new power costs.
• But critics argue the bill won't shield residents from higher bills, including for nuclear power.
• Big Tech companies like AWS and Google plan to invest about $15 billion in Indiana.

Indiana is on the front line of a question facing the nation as it races toward an AI future: Who should pay for the electricity needed to fuel the technology?

Gov. Mike Braun is expected to sign a bill that would require large energy users like Big Tech's AI data centers to cover 80% of the costs of new power needed to run them if they seek a faster regulatory approval process, making it the first state to do so.

A second law Braun recently signed allows utilities to pass the cost to consumers of exploring a source of power that isn't operating at scale in the US yet. Big Tech companies have bet that a new generation of "small modular nuclear reactors," or SMRs, could soon provide around-the-clock power to data centers.

Consumer advocates said the two bills will ultimately hike energy bills for everyday Hoosiers and put them on the hook for nuclear projects that may never get up and running.

The debate in Indiana reflects one playing out across the country over the cost and environmental implications of the spike in energy demand from AI data centers.

Kerwin Olson, executive director of Citizens Action Coalition, a consumer advocacy group, called the bills "a disaster for Hoosier ratepayers" and said it will "exacerbate the utility affordability crisis."

Republican Rep. Ed Soliday, who co-sponsored the bills, other GOP lawmakers, and a trade group representing utilities in Indiana argued the bills contain sufficient safeguards for consumers and that SMRs are the future of clean and affordable energy as demand from data centers and new manufacturing plants grows.

Indiana's $15 billion data center pipeline

While Indiana doesn't top the list of major US data center hubs, the Rust Belt state is attracting more development due to tax incentives and a reliable power supply.

Big Tech companies, including Amazon Web Services, Google, Microsoft, and Meta, plan to invest about $15 billion combined in Indiana. In January, President Donald Trump announced that a billionaire in Dubai planned to invest $20 billion in data centers across the US, including in Indiana.

Data centers require around-the-clock electricity to power and cool the racks of servers fundamental to cloud computing and storage. These projects could demand thousands of megawatts of electricity by 2035 — more power than the nearly 7 million residents in Indiana combined, according to utility forecasts analyzed by the Citizens Action Coalition.

A bet on small nuclear

So far, most of the demand is expected to be met by fossil fuels. But many tech companies and utilities have promised to shift to cleaner energy and are therefore exploring SMRs, which don't produce carbon emissions.

SMRs are about one-third the size of traditional nuclear power plants, which could make them less expensive and quicker to build. To date, none are operating in the US, and only a few exist in Russia and China. It's unclear when the first plant might come online, with forecasts range from five to 15 years.

Cost estimates for SMR projects vary widely, from $2.4 billion to $4 billion, depending on the start-up.

A law Braun signed in April allows utilities to recoup the costs of exploring SMR projects from customers, even if they never supply power to the grid.

The utility Indiana Michigan Power is evaluating the potential of SMRs at a coal-fired plant in Rockport, and the aerospace manufacturer Rolls-Royce is considering SMRs for a plant in Indianapolis.

Soliday told Business Insider that allowing utilities to recover dollars from customers in real time for their early-stage activities will save Indiana residents money in the long run. Otherwise, utilities would have to fund the projects by raising capital, leading to extra costs that residents would ultimately pay for, he said. Soliday added that state regulators must approve the costs and determine they aren't overly expensive for customers.

Democratic Rep. Matt Pierce, who opposed the law, said it isn't fair to let utilities burn money investigating a technology that may never produce power, and then charge customers for it. Pierce noted that a federally funded SMR project by NuScale Power in Utah was canceled in 2023 due in part to escalating costs.

Braun appeared to agree in February, when he told News 10 that he supported nuclear power but that utilities should shoulder the costs. "They are out there as investor-owned, and some of that is going to have to be the risk that they take," Braun said.

When asked why he signed a law allowing the opposite, Braun's spokesperson, Griffin Reid, said it would address Indiana's high energy demand.

"Indiana is committed to pursuing diverse generation options, from fossil fuels to renewable energy to nuclear power, wherever they prove practical," Reid said.

Critics call out loopholes

Consumer advocates said the other bill passed by Indiana legislators isn't broad enough to shield residents from higher energy bills to cover the cost of new infrastructure for AI data centers.

While the bill requires tech companies to pay for 80% of the new power generation needed to serve them, this requirement is not guaranteed to apply to every project.

Danielle McGrath, president of the Indiana Energy Association, said in an email that the 80% requirement only applies if utilities pursue the new voluntary, fast-tracked approval process for big power projects.

"The legislation addressed concerns expressed by some large customers that speed was critical to their decision making and that longer timelines could serve as a deterrent to locating their projects," McGrath said.

Pierce and Olson said utilities can pursue other pathways outside the new fast-track process to recover the costs of new power plants and other infrastructure, which could ultimately raise customer rates. That includes special contracts hidden from public view that may not require large energy users like data centers to pay 80% of the bill.

Soliday told BI that the 80% cost-share applies no matter what pathway utilities seek to get projects approved by state regulators.

"You are not going to get any utility to build in the state of Indiana for a large load customer without that customer paying 80%," Soliday said. "Whether they take plan A or B to get there, they're paying it."

New infrastructure needed to serve Indiana Michigan Power's pipeline of data centers could cost up to $1 billion, according to a cost-share agreement the utility reached with the Citizens Action Coalition, Amazon Data Services, Google, Microsoft, and others.

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• Big Tech's secretive electricity deals with utilities may raise costs for Americans, Harvard researchers reported.
• Data centers could consume 12% of US electricity by 2028, up from 4% in 2023.
• Researchers call for more scrutiny of contracts to protect consumers from higher bills.

Tech companies racing to secure power for their data centers have struck dozens of secretive electricity deals with utilities that could cost average Americans a "staggering" amount, Harvard research found.

With data center construction on the rise and utility costs top-of-mind for many Americans, the Harvard Electricity Law Initiative reviewed 40 special contracts that state regulators have approved between utilities and data centers. If these contracts offer discounted electricity rates to data centers, and new power grid infrastructure is needed to serve them, other customers may end up paying for the shortfall through higher utility bills.

But it's nearly impossible to know the exact price tag of any cost shifts because the terms of these special contracts are hidden from public view, the report found. State regulators usually approve utilities' requests for confidentiality, limiting public scrutiny. That means billion-dollar contracts are getting approved without a transparent accounting of the costs and benefits, researchers said.

"When we have potentially billions of dollars going through these secret contracts where there's just not a lot of investigation about what's going on, we think there's reason to be suspicious that utilities may be offering discounts that are subsidized by everybody else," said Ari Peskoe, director of The Harvard Electricity Law Initiative and coauthor of the paper with Eliza Martin, a legal fellow.

The report lands as data center construction is booming, in part to serve Big Tech's artificial intelligence race. Some AI data center complexes need as much power as entire cities and by 2028, the industry could account for 12% of US electricity consumption — up from 4% in 2023, according to federal estimates. The trend is leading some citizens, state policymakers, and at least one utility to try to shield households from rising bills.

Utilities and tech companies have told Business Insider that the contracts they negotiate should cover the costs of any power grid upgrades required to serve data centers. Lucas Fykes, director of energy policy for the Data Center Coalition, which represents companies including Amazon Web Services, Google, Microsoft, and Meta, said in an emailed statement that the industry is committed to paying its full cost of service.

Fykes added that the Harvard research overlooks a finding in Virginia — the world's largest data center market — that the industry is paying the appropriate costs for its energy use. In December, an independent study commissioned by Virginia's Joint Legislative Audit and Review Commission found that rates "appropriately allocate costs to the customers responsible for incurring them, including data center customers."

The report also said that data centers' increased energy demand will likely increase costs for everyone, including residents and businesses. A large amount of new power plants and transmission lines will be built that otherwise wouldn't be needed, if not for data centers. A typical residential customer in Virginia could see an extra $14 to $37 each month on their utility bill by 2040. The report said creating a separate category for data centers and changing the way costs are allocated across customers could help insulate households from statewide cost increases.

Peskoe recommended greater scrutiny and regulation of special contracts, as well.

"We didn't realize how extensive these secret contracts were," Peskoe said. "The more we dug, the more we kept finding."

Regulators are required to protect the public from 'cutthroat' practices. Researchers are skeptical.

State and federal regulators allow most utilities to spread the cost of power grid upgrades across their customer base. This is typically done through what's known as a rate case increase, a lengthy and public process at state public utility commissions. Consumer advocates, environmental and industrial groups, and other outside parties regularly intervene.

By contrast, most of the special contracts that Peskoe and Martin reviewed were approved by public utility commissions with "only cursory analysis" and little or no public evidence to back up claims that data center energy costs would be isolated from other customers' bills. While regulators in many states are required to protect the public from "cutthroat" practices that harm ratepayers, Peskoe said he's skeptical.

Peskoe said state regulators can face political pressure to approve big economic investments already touted by elected officials for their economic impacts. He added that utilities have a long history of "exploiting their monopolies" to attract competitive lines of business.

Peskoe pointed to an antitrust lawsuit that a small non-profit utility brought against Duke Energy. Court documents revealed that Duke offered Fayetteville, North Carolina, a special contract with a $325 million discount and acknowledged that it would lose $100 million on the deal, but planned to recoup those losses by raising rates on other customers. Duke Energy, which argued its conduct was legitimate price competition and lawful, petitioned the Supreme Court to review the case in February.

Duke declined to comment, and the Edison Electric Institute, a trade group that represents investor-owned utilities, didn't return a request for comment.

While the case doesn't involve data centers, Peskoe said it illustrates how utilities compete for big energy customers and can hide how they pass those costs onto other customers.

The Harvard study said states could have stricter rules for special contracts, similar to those in Kentucky, where public utility commissioners only allow utilities to offer discounted rates for five years, and there must be more than enough power supply available on the system. The rate also must exceed the utility's costs to serve the customer, the study said.

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• Brenda Duncan Cusick moved from California to Arizona due to rising wildfire risks and living costs.
• Cusick's monthly expenses dropped by a couple of thousand dollars living in Prescott, Arizona.
• After retiring from the insurance industry, she started a local food tour.

After living in Moorpark, California, for nearly two decades, Brenda Duncan Cusick had become an expert in wildfire evacuations.

Cusick, 61, told Business Insider that she's had to flee the home she shared with her husband and two children at least five times. Moorpark is an hour's drive northwest of Los Angeles, close to where the deadly Woolsey Fire in 2018 destroyed tens of thousands of homes. Over time, she saw how the blazes were becoming more difficult to control.

The wildfires also affected Cusick's career as an insurance agent. Between 2015 and 2023, she sold homeowners, commercial, and auto policies, including for Farmers Insurance. But it became harder to keep and attract clients as rates tripled in some cases due to a combination of factors, including fire risks, the rising costs of reinsurance, and California regulations, Cusick said.

"I lost a lot of sales because people wanted to save on their insurance, but I would advise they carry more coverage," Cusick said. "They'd own a $1 million home and a small business, and I'd tell them they could lose everything they've worked for for being underinsured."

Cusick said that rising wildfire risks — combined with higher insurance premiums, utility bills, gas prices, and car registration fees for her family of four — made her realize it was impossible to retire in California.

She's not alone. Hundreds of thousands of Californians have moved out of the state in recent years, often driven by high prices and, in some cases, natural disaster risks.

Residents have among the highest average energy bills in the country, in part because utility companies have spent billions of dollars on wildfire-related costs that are partially passed on to customers. California also has aggressive climate policies that make oil and gas more expensive.

When the COVID-19 pandemic gave Cusick and her husband the freedom to work remotely in 2020, they decided to sell their home and move to Prescott, Arizona. They joined the many older Americans who have flocked to Arizona for retirement, citing lower costs of living and comfortable weather. While there is little data indicating climate-fueled disasters are directly causing massive migration, Cusick's story suggests that the costly ripple effects of wildfires on insurance and utility bills may help motivate people to leave their longtime homes.

Saving thousands a month and starting a local food tour

Cusick said that at first, it was "daunting" to consider leaving her home state.

"But once we did, we realized that there are so many lovely places to live all over the US," she said, adding that her monthly expenses have dropped by a couple of thousand dollars.

They downsized from their 4-bedroom, 3-bathroom home in Moorpark to a 3-bedroom, 2-bathroom property in Prescott. Cusick said selling their California home gave them enough cash for a large down payment on the new place in Arizona. Their monthly mortgage payment is now $1,672, compared to $3,309 in California, according to bank statements reviewed by Business Insider. Their utility and HOA bills in Arizona average about $373 a month, while in California, they could range from about $400 to $1,200.

Cusick said Prescott reminds her of growing up in California.

"It's a very western town in the mountains of Arizona," she said, noting that Prescott is surrounded by a national forest.

Prescott was the capital of Arizona Territory until the late 1800s, and every Fourth of July, it hosts a big rodeo. The downtown reminds Cusick of a Hallmark move, she said. Prescott's history, cooler summer temperatures, and location between Phoenix and the Grand Canyon help it attract thousands of tourists every year.

After Cusick retired from the insurance industry, she got involved with a local charity and started the Prescott Food Tour.

"It's completely the opposite of selling boring, impossible insurance," she said. "I by no means make anywhere near what I did before, but when you're retired, you get to do things like this."

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