House Bill 646 would cut a controversial sales tax break in half for future data centers, set new water-use standards, and require the energy-hungry facilities to pay their connection costs.
“This bill is just a first step,” Sen. Brian Chavez, a Marietta Republican, said. “We’re not done considering this issue by any means.”
Supporters call the bill a long-overdue step toward reining in an industry that reshaped Ohio seemingly overnight.
But the Ohio Chamber of Commerce warned that cutting the tax exemption could make Ohio less competitive and drive away an industry it says has been worth every dollar.
On the flip side, environmental groups and data center neighbors told lawmakers HB 646 didn’t go nearly far enough.
The sweetheart tax agreements signed with Amazon, Google and Meta that stretch into the 2050s aren’t impacted. Neither are the non-disclosure agreements that have kept nearby residents in the dark.
With industry groups saying the bill goes too far and residents saying it doesn’t go far enough, the question hanging over Wednesday’s vote is simple: Is this real reform, a heavy-handed mistake, or is Ohio merely closing the barn door after the horses have escaped?
Tax breaks
The bill would limit Ohio’s sales tax exemption for new data center projects to 50%. To receive the tax break, companies would need to bring additional power to the state rather than relying on electricity already available on the grid.
That could mean building their own generation facilities or signing long-term agreements with existing power plants. Meta recently announced such an arrangement with Vistra to upgrade the Perry Nuclear Power Plant.
Existing agreements would not be affected. Amazon, Google and Meta would continue operating under contracts that extend into the 2050s and cover future facilities built in Ohio.
The bill would also limit local tax abatements to 50%.
Who pays for power?
One of the biggest questions surrounding Ohio’s data center boom is who should pay for the new power lines, substations and other infrastructure needed to serve the energy-hungry facilities.
Ohio utility regulators have already begun grappling with that issue. Last summer, regulators at the Public Utilities Commission of Ohio required new data centers in AEP Ohio’s territory to shoulder more of the costs they create.
In May, regulators ordered FirstEnergy’s Ohio utilities to develop similar rules after warning that future grid costs should be properly assigned to data centers rather than other customers.
HB 646 would take that idea statewide.
The legislation would create a separate category for data center customers and require utilities to develop special rates for them.
The proposal has drawn opposition from some industry groups. The Ohio Manufacturers’ Association has argued it’s unfair to single out one type of customer for different treatment.
“Ratemaking is an economic and technical issue. It’s not a civil rights issue,” Ohio Energy Group Director Joe Price told lawmakers Tuesday evening. “It’s who is going to pay what costs and under what terms.”
He noted Ohio already has different rates for schools, churches, hospitals and other types of customers. The question, he said, is whether data centers create unique costs that justify a separate rate structure.
The bill would also mandate that data centers with electricity demands greater than 250 megawatts bring their own power.
Water standards
HB 646 would establish statewide water-use standards for data centers and require operators to report annual water consumption.
Facilities would be required to use closed-loop cooling systems or other water-conservation measures and meet efficiency standards set by state regulators.
HB 646 would establish statewide water-use standards for data centers and require operators to report annual water consumption.
Facilities would be required to use closed-loop cooling systems or other water-conservation measures and meet efficiency standards set by state regulators.
Environmental groups welcomed the effort but cautioned that lawmakers are moving too quickly to create a comprehensive policy.
Helena Volzer, senior source water policy manager for the Alliance for the Great Lakes, said the bill is an important first step but leaves unanswered questions about enforcement, water rates and the long-term impact data centers could have on local water systems.
She noted the legislation does not give regulators clear authority to penalize companies that fail to meet the new standards and does not require studies examining how large data centers could affect wastewater rates.
More broadly, Volzer questioned whether lawmakers have had enough time to fully consider the issue.
“While we appreciate the urgency...,” she told the committee, “this pace has not left enough time for careful consideration and creation of a comprehensive framework for managing large-scale water use.”
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