Oregon lawmakers have passed an energy bill that aims to re-allocate the costs of the growing power demands of the state’s data center boom.

House Bill 3546, also known as the POWER Act, recently cleared both the House and Senate and is expected to be signed into law by Governor Tina Kotek, who has expressed support for the measure.

The bill directs the Oregon Public Utility Commission (PUC) to create a new classification and tariff structure specifically for “large energy use facilities,” which includes data centers and cryptocurrency mining operations that use 20 MW or more of electricity. The intent is to prevent residential and small business ratepayers from subsidizing the steep infrastructure costs needed to power the large facilities.

Rep. Pam Marsh (D-Ashland), the bill’s lead sponsor, said in an interview that the legislation was crafted in response to evidence that consumers are already bearing the burden of data center-related utility investments. One cited case involved a USD 200m infrastructure investment by Portland General Electric (PGE), believed to have been driven by data center demand and ultimately paid for by residential customers.

“We need to put all the information out to study it and to make sure that the rate that is developed by the PUC, with lots of input from other people, really reflects the costs to serve those entities,” Marsh said.

She added that the next energy policy-related conversations in Oregon will involve how to provide the generation necessary for the influx of data center demand, as well as how that demand might impact the state’s ambitious renewable energy goals.

The bill requires large energy users to sign contracts with utilities for a minimum of 10 years and to pay for a base level of energy use regardless of actual consumption. The contracts may also include penalties for excess demand, further insulating other ratepayers from volatile spikes in energy usage.

The need for HB 3546 had become urgent as Oregon experiences explosive growth in data centers, Marsh said. According to the Oregon Citizens’ Utility Board (CUB), data centers added demand equivalent to 406,000 people on PGE’s grid between 2019 and 2024, equivalent to nearly 10% of the state’s population. Meanwhile, household electricity prices have jumped 7.63 cents per kilowatt-hour, compared to just a 2.08 cent increase for large industrial users in the same period, the Oregon CUB found.

The legislation follows a 2021 Oregon law that set renewable energy targets and prohibited the Oregon Energy Facility Siting Council from issuing certificates for new fossil fuel generation. However, Marsh acknowledged there may be some ambiguity around how that law applies to privately developed, behind-the-meter fossil fuel facilities, which could be a loophole that allows data centers to build their own on-site gas plants. “That’s a question I’m not 100% clear on,” Marsh said, but added that she would expect public pushback on new fossil fuel generation proposals.

While the POWER Act doesn’t directly address how Oregon will generate or transmit the power needed to meet escalating demand, Marsh said it sets the stage for crucial next steps. “Now that we understand what is happening, we need to go back and look at what this means for our clean electricity goals,” she said, referencing Oregon’s target of 80% clean energy by 2030 and 100% by 2040.

Marsh was also frank that the state doesn’t yet have a clear plan to generate the renewable power required to serve this load. “We have to figure it out,” she said. However, the bill intentionally avoids restricting data centers from sourcing their own clean energy or locating near independent generators to ease pressure on the grid.

The POWER Act is backed by a coalition of climate, consumer, and social justice groups, including Oregon PSR, the BlueGreen Alliance, Oregon Consumer Justice, and 350 PDX. It applies only to investor-owned utilities like PGE, Pacific Power, and Idaho Power.

Though some critics argue the bill unfairly singles out data centers, Marsh said the facilities merit unique treatment due to the rapid and unpredictable nature of their energy demands. “When a data center can be on the ground in 18 months and demand as much energy as the city of Ashland, we’re in a whole new territory,” she said.

“We should not be subsidizing data centers by involving the general ratepayer population,” Marsh said. “If we choose to support them, that should be done through economic development incentives.”