On May 27, 2026, New Jersey Governor Mikie Sherrill announced a Comprehensive Plan to regulate data centers in an effort to protect ratepayers from increased costs associated with high electricity demands imposed by large load data centers. Governor Sherrill’s announcement comes just weeks after a coalition of more than 60 New Jersey organizations urged the state to temporarily halt approval and construction of large-scale data centers.[1] While Sherrill’s Plan sets forth clear recommended guardrails, the specific legal mandates will require legislative action or formal regulatory rule-making before they have binding legal effect.
WHAT YOU NEED TO KNOW
- Governor Sherrill announced her Comprehensive Plan to regulate data centers in New Jersey.
- Sherrill’s Plan consists of four pillars which include shifting cost burdens associated with data center development from ratepayers to data centers; improving transparency through biannual data center reporting requirements; introducing standards and resources to municipalities for community benefits agreements; and supporting investment in local job creation related to data center development.
- While Sherrill’s Plan sets forth clear guardrails, the specific legal mandates will require further legislative action or formal regulatory rule-making.
- Sherrill’s Plan follows the introduction of Bill S731/A796 earlier this year that would require New Jersey public electric utilities to develop and submit a tariff to the Board of Public Utilities (BPU) for large load data centers.
- Data center developers can take proactive measures now, including actively monitoring local legislative dockets, engaging with the Public Utility Commission, optimizing water consumption, implementing community benefit agreements, and diversifying power sources.
New Jersey currently houses nearly 80 data centers,[2] some of which use up to 300 megawatts of energy,[3] the equivalent necessary to power entire towns in the state. Since last summer, electricity costs in New Jersey have increased by almost 20% with such increases acting as the main driver of inflation in the state.[4] By placing guardrails on data centers, the Sherrill Administration seeks to mitigate public concerns over electricity costs, water usage, environmental impacts, and transparency associated with data center development in the state.
According to Governor Sherrill, New Jersey’s Comprehensive Plan is the first comprehensive strategy regulating data centers in the nation and consists of four pillars:
(1) Implementing Fair-Share Rules: Data centers would be required to pay for infrastructure upgrades needed to connect their facilities to the electrical grid and cover the cost of improvements tied to their projects.
(2) Improving Transparency: Data centers would be required to report energy and water usage every six months so that the public could be informed about the impacts of large-scale data center facilities on municipalities, including those relating to the electrical grid and water resources.
(3) Developing Strong Statewide Standards for Community Benefits Agreements: State standards and resources would be used to increase the negotiating power of municipalities when it comes to addressing data center impacts, such as light, noise, and pollution, and incentivizing investment in local communities.
(4) Creating Jobs Related to Local Trades: Data centers would be incentivized to invest in jobs leveraging local trades.
Sherrill’s Plan follows the introduction of Bill S731/A796 in the New Jersey Legislature on January 13, 2026. In its current form, the Bill would require New Jersey public electric utilities to develop and submit a tariff to the Board of Public Utilities (BPU) for large load data centers, i.e., data centers with a peak electricity demand of 100 megawatts or more. The Bill has passed the New Jersey Assembly and currently awaits Senate approval.
Through her Comprehensive Plan, Governor Sherrill aims to hold data centers accountable without driving business away from the state. Whether the goals of her plan will be achieved remains to be seen. In the meantime, data centers can take proactive measures, including actively monitoring local legislative dockets, engaging with the Public Utility Commission, optimizing water consumption, implementing community benefit agreements, and diversifying power sources.
Saul Ewing’s Energy, Environmental, and Data Center Practices will track developments on the regulation of data centers in New Jersey and other states as they arise. Please do not hesitate to contact the authors of this alert, or your regular Saul Ewing point(s) of contact, with any questions about the substance of this alert.
[1] Pinelands Alliance. Petition to the Governor of New Jersey: A Three-Year Moratorium on New Data Centers. https://engage.pinelandsalliance.org/datacentersnj
[2] Nate Beck. NJ, Pa. Move For New Data Center Development Standards, Law 360 (May 27, 2026), https://www.law360.com/articles/2482434/nj-pa-move-for-new-data-center-development-standards
[3] Nyah Marshall. This N.J. farming town is fighting back against one of the East Coast’s largest AI data centers, NJ.com (March 22, 2026), https://www.nj.com/news/2026/03/this-nj-farming-town-is-fighting-back-against-one-of-the-east-coasts-largest-ai-data-centers.html
[4] Supra Note 2
