On June 4, 2026, the New York State Legislature passed the Responsible Data Center Development Act. The Act would establish a one-year moratorium on certain permits for new large data centers, direct State agencies to examine data center impacts and impose new requirements regarding utility rates, renewable energy use and community benefits.
Data centers have become an increasingly prominent issue concerning energy and economic development in New York State. Supporters of the moratorium argue that a pause is necessary to protect utility customers and give State agencies time to evaluate the effect that data centers have on the electric grid, environmental resources and local communities. Opponents of the moratorium warn that it could discourage investment and cause New York to lose projects and jobs to other states.
If signed by Governor Kathy Hochul, the Act would prohibit the New York State Department of Environmental Conservation (DEC) from issuing new permits, licenses, registrations, certificates or other approvals to any “large data centers” for one year.
The moratorium defines a large data center as a data center with a peak demand of at least 20 megawatts (MW). The Act would exclude facilities that are majority-owned, operated or controlled by public research institutions and used for research purposes. The moratorium would not apply to the modification, renewal, reissuance or recertification of prior approvals, meaning that large data centers that began construction before the Act’s effective date could proceed.
The Act would require DEC to prepare an environmental impact report examining data center development throughout New York State. The report would include existing and projected data center growth as well as its effects on electricity use, water consumption, land use, pollution, disadvantaged communities, public incentives, and other environmental and economic considerations. The report would also recommend new legislation and regulations to mitigate the impact of data centers.
The Act would direct the New York State Public Service Commission (PSC) to establish separate electric, gas and water service classifications for large data centers by June 1, 2030. Under those classifications, large data centers would be required to cover the costs of any infrastructure upgrades and other costs “necessary to facilitate and maintain service.” Utilities would be barred from obtaining rate increase approvals from the PSC until such separate classifications are implemented.
The Act would establish a “host community benefits” program. Under the program, new and expanded large data centers would be required to fund local benefits such as residential energy upgrades, drinking water, broadband infrastructure and renewable energy systems, as well as impact mitigation. Further, large data centers would be required to hold an in-person public hearing in at least one host community before DEC could issue a permit. Data center operators would also be required to disclose information concerning the project, the State and local economic incentives.
Finally, the Act seeks to encourage data center energy efficiency and require use of renewable energy. The Act would direct NYSERDA to determine energy efficiency goals for new and existing data centers to utilize waste heat as an energy source. The Act would also require data centers with peak loads of 5+ MW to obtain at least one-third of their electricity from renewable energy systems beginning in 2030, two-thirds beginning in 2035, and 90% beginning in 2040.
Earlier this year on February 12, 2026, the PSC opened a proceeding to advance Governor Hochul’s Energize NY Development initiative to evaluate how data centers and other large electric loads connect to the grid, how infrastructure costs should be allocated, and what protections are necessary to preserve affordability and reliability. The Proceeding on the Motion of the Commission to Address Interconnection Reforms for Large Loads will review the planning and interconnection processes, cost-allocation mechanisms and tariff structures relating to the integration of large loads within the State’s transmission and distribution systems.
The PSC’s stated goals are to improve the speed, transparency and predictability of the interconnection process; maintain system reliability; protect existing ratepayers; support economic development; and ensure consistency with New York’s climate policies. The PSC is also considering whether large loads should be required to provide their own generation or storage, reduce consumption during periods of grid stress, enter into long-term utility contracts or pay special charges designed to protect other customers.
The PSC solicited public comments from stakeholders on a variety of topics related to large load interconnection. These comments reveal broad agreement on several issues.
Many commenters advised the PSC to distinguish between speculative and confirmed projects for purposes of long-term grid infrastructure planning. Commenters proposed to confirm projects through safeguards like deposits, signed interconnection agreements, minimum billing requirements and penalties for withdrawing a project.
New York’s electricity market monitory unit, Potomac Economics, highlighted that existing grid planning frameworks do not adequately prevent large load projects from proceeding before reliability impacts are fully understood. Other commenters highlighted the need for collaboration across federal and state entities and acknowledged the pending proceeding at the U.S. Federal Energy Regulatory Commission to address large load interconnection.
There is also widespread support for the “beneficiary pays” principle, requiring data centers to bear the costs they impose on the electric system. In addition, commenters expressed concern that data centers may become stranded assets.
Environmental organizations generally urged the PSC to require data centers to support New York’s climate goals. Their recommendations included renewable energy procurement, energy storage, demand response, zero emission on site resources, grid enhancing technologies and protection for disadvantaged communities.
Stakeholders differ more substantially over how strict the final requirements should be. Some environmental and community organizations support a moratorium or other significant restrictions until stronger protections are in place. Economic development and industrial groups caution that inflexible rules could discourage legitimate projects, interfere with economic development, or cause New York to lose investment and jobs to other states.
The Act will not take effect unless signed by Governor Hochul and the PSC proceeding is underway. While the Governor may seek changes to the legislation, it appears that a number of New York lawmakers are committed to taking a hard look at the costs and benefits of data center development. Stakeholders, including data center developers, municipalities, investors and community groups, should monitor both the legislation and PSC proceeding to understand how New York’s data center industry will evolve.
Additional Assistance
For more information, please contact a member of our Energy and Renewables Industry Team, Environmental Law Practice Team, Data Center Practice Team or the Phillips Lytle attorney with whom you have a relationship.
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