Gov. Phil Murphy conditionally vetoed legislation Monday that would require data centers to report their water and electricity use, asking lawmakers to add provisions directing state regulators to weigh whether those data centers' power and cooling demands are unduly burdening other ratepayers.
The redrafted bill would require the Board of Public Utilities to ask whether New Jersey ratepayers unreasonably subsidize data centers, examine whether they are funding infrastructure that solely or mostly serves data centers, and estimate how much of New Jerseyans' utility bills are attributable to data centers' demands as part of a study called for under existing law.
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"These changes are designed to streamline related efforts to evaluate the impacts of data centers on State and regional resources, and to create an initial assessment after which future reporting requirements may be considered based upon the information gathered," Murphy said in his veto statement.
Portions of the original bill requiring data centers to report their water and electricity use to regulators would remain intact if lawmakers agree with Murphy's veto, though such reporting would be much delayed compared to the bill legislators approved in late June.
As originally drafted, data center operators would have been required to report their utility use within six months of the bill's signing. The governor's conditional veto would extend that timeline, requiring those reports be filed by January 2027.
Bill sponsor Sen. Teresa Ruiz, D-Essex, questioned the proposed delay, noting that data center operators already collected some information about their own utility use and could readily comply with the bill's disclosure requirements.
"Delaying action by folding this into a two-year study — while keeping critical data hidden from the public — undermines transparency and weakens our ability to respond effectively," said Ruiz, the senate's majority leader. "By the time the BPU completes its report, irreversible impacts may already be in place. New Jersey must lead with foresight, not complacency."
It's not clear whether legislators will concur with Murphy's conditional veto. They have that opportunity in the lame-duck session following this year's gubernatorial and Assembly elections. Ruiz signaled it could be an issue solved under the governor who takes office in January. Murphy, a Democrat, is barred from seeking a third term in November.
"While we may have lost the opportunity to be a national leader in this space, this issue will remain a top policy priority of mine in the 2026 legislative session," she said. "We will not let critical oversight fall by the wayside while the industry continues to expand."
Assembly Republicans opposed the original bill, but it won bipartisan support in the Senate.
The governor's conditional veto directs the Board of Public Utilities to identify and weigh policies to defray data centers' impact on rates and to gauge the economic benefits such centers bring to New Jersey. And it asks the board to determine whether data centers should be required to benchmark their energy and water use using a federal portal, mirroring an existing requirement for certain buildings of at least 25,000 square feet.
Murphy also seeks to bar the release of information about data centers' utility use under public records laws, except for anonymized information disclosed in the report on data centers' utility use.
Mammoth power demands have turned artificial intelligence data centers into a major focal point of policy and political campaigning in the Garden State.
New Jerseyans' electricity rates rose roughly 20% at the start of June as a result of price-setting capacity auctions that soared to new highs on the promise of data centers' electricity needs. Power prices are expected to rise again next June.
Murphy has pursued AI as a source of economic growth for New Jersey. He has launched an AI task force within the state's innovation office, extended tax credits to AI firms and startups, and sought to integrate its use into parts of the public workforce.
"Generative artificial intelligence is a fast-developing industry, and while that development brings exciting possibilities to our State, we must always take seriously our responsibility to manage our resources to support a sustainable and affordable future," the governor said in his veto statement.
New Jersey Monitor is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. New Jersey Monitor maintains editorial independence. Contact Editor Terrence T. McDonald for questions: info@newjerseymonitor.com.