An act relating to sustainable data center deployment

Section 285 was renamed from 'Energy Efficiency Design' to 'Demand-Side Management' and substantially expanded to require site suitability analysis before permitting, restrict combustion-based backup generation to emergency use only, mandate maximization of on-site renewable energy, and require participation in a virtual power plant managed by the electric company.

Water use provisions (new section 6086c) now require a groundwater withdrawal permit for data centers regardless of the 57,600 gallons per day threshold that previously exempted smaller withdrawals, and require surface water withdrawal permits with mandatory cessation during drought conditions. A 150,000 gallons per day threshold triggers enhanced environmental impact assessments.

Section 284 now requires the Commission to conduct periodic reviews of approved large load service equity contracts at intervals not exceeding two years, and data centers are made ineligible to participate in energy savings accounts, customer credit programs, or self-managed energy efficiency programs.

A new 'energy transformation payment' requires data centers to pay annually an amount equal to 60 percent of their prior year electricity usage multiplied by the alternative compliance payment rate, with funds directed to energy transformation projects in the hosting community and surrounding areas.

A new decommissioning section requires the Commissioner of Public Service to recommend a regulatory model by December 15, 2026, including bond or financial assurance requirements, data sanitization standards referencing NSA/CSS Policy Manual 9-12, environmental remediation guidelines, and timelines for completing decommissioning after closure.

The effective date section now explicitly states the act applies to existing data centers using less than 20 MW of power that seek to expand their capacity to meet the 20 MW threshold, closing a potential loophole for smaller facilities to grow into regulated status without compliance.

Data center construction is now explicitly classified as 'development' under land use law including in Tier 1A areas (notwithstanding section 6034), subjecting such projects to the full permitting and review process in those zones.

The Agency of Natural Resources must submit a recommended standard for authorizing PFAS in data center cooling system discharges to surface waters by January 1, 2027, and the Public Utility Commission must report on regional renewable energy market conditions for 2027-2035 by January 15, 2027.

The purpose statement changed from ensuring responsible growth of an 'emerging industry' to an 'essential industry,' reflecting a shift in how the legislature characterizes data centers.

The application provision (Sec. 2) was narrowed. The unofficial version applied to both new data centers and existing smaller data centers seeking to expand capacity to meet the 20-megawatt threshold. The official version applies only to data centers not operational on or before the effective date, removing the expansion trigger for existing facilities.

Section 284 was restructured from requiring individual PUC approval of a 'large load service equity contract' for each data center to a framework where the PUC establishes a separate ratepayer class and general tariff with standardized structures applicable to all electric distribution companies. Individual contracts must still include specific provisions but are no longer subject to case-by-case PUC approval findings.

A new Section 285 requires that no person may begin site preparation or construction of a data center unless the PUC first issues a certificate of public good, with 14 specific findings covering environmental, economic, planning, and equity considerations. Procedures are modeled after Act 250 (sections 248 and 248a), including application fees, notice, review periods, and municipal participation.

A new Section 286 gives the PUC authority to establish a demand-side management program for data centers covering cositing of renewable energy, water conservation, microgrids, self-procurement of energy resources, prohibition on fossil fuel power purchase agreements with incentives or discount rates, and enhanced efficiency standards. The program requires legislative enactment to take effect.

Contracts between electric companies and data centers must now specify a duration of no less than 10 years, a requirement not present in the unofficial version.

The standardized tariff structures must promote or at minimum not impede an electric company's ability to meet renewable electricity targets under the Renewable Energy Standard, a provision absent from the unofficial version.

Quarterly reporting requirements changed: the official version requires data centers to report interconnection requests submitted in other states (new) but removes the requirement to itemize payments toward shared infrastructure constructed to support the data center (removed from unofficial).

A new Section 288 establishes legislative intent to create a financial structure supporting state and local energy, environmental, and economic benefits, to be financed through a percentage of data center tax revenue, a gross receipts tax, or another mechanism. The Commissioner of Public Service must submit findings and recommendations by January 1, 2028.

The annual departmental report date changed from January 15, 2028 to January 1, 2028. The official version also removes the condition that at least one data center must have entered into a contract before reporting begins, and specifies the report goes directly to named legislative committees rather than being included in the department's existing annual report.

Section 284 was restructured from a PUC-established tariff and ratepayer class system into a 'large load service equity contract' model. Data centers must now be served under a contract approved by the PUC rather than under a standardized tariff schedule. The minimum 10-year contract duration requirement was removed.

New contract requirements added in Section 284(b): demand-side management operational measures (demand response, flexible load management, load shifting, peak shaving, distributed energy resources) and provisions for collection of gross receipts taxes and energy efficiency charges.

The introduced bill's Section 286 'Demand-Side Management' was removed. This section had authorized the PUC to establish a program covering cositing of renewables and batteries, water conservation, data center microgrids, prohibition on fossil fuel power purchase agreements with incentive rates, and enhanced energy efficiency standards.

New Section 4 (10 V.S.A. section 6086a) establishes water use requirements: mandatory closed-loop cooling systems when water is used for cooling, groundwater withdrawal permits required regardless of the 57,600 gallons per day threshold, surface water withdrawal permits with drought cessation rules, a water quality certificate meeting federal Clean Water Act Section 401 criteria as of January 1, 2026, and a prohibition on PFAS in discharged water with mandatory PFAS monitoring plans.

Quarterly reporting requirements were modified: the passed version adds peak usage per day and itemization of payments toward shared infrastructure, while removing the requirement to describe interconnection requests submitted in other states. The annual report deadline changed from January 1, 2028 to January 15, 2028, and is now included in the Department's published annual report rather than submitted directly to legislative committees.

The introduced bill's Section 285 'Siting; Certificate of Public Good' with 14 detailed environmental findings (aesthetics, historic sites, air/water purity, agricultural soils, noise, greenhouse gas emissions, outstanding resource waters, Clean Air Act compliance, forest health, decommissioning) was removed. These were replaced by a simpler 6-factor approval test in Section 284(d).

The application provision (Section 2) was expanded. The introduced bill applied only to data centers not yet operational on the effective date. The passed version also applies to smaller, traditional data centers already operational that seek to expand capacity and meet the 20-megawatt threshold.

New Section 3 amends 10 V.S.A. section 6001 to explicitly include data center construction as a type of 'development' subject to Act 250 land use review, which was not in the introduced version.

Section 288 'Financing State and Local Benefits' was removed entirely. The introduced bill had directed the Commissioner of Public Service to develop findings and recommendations for a financial structure funded by tax revenue, gross receipts tax, or other mechanism, with a report due January 1, 2028.

New Section 6 requires the Commissioner of Public Service to submit draft legislation recommending a data center decommissioning regulatory model by December 15, 2026. The model must address plan approval, regulatory oversight, financial assurance (bond or other), data sanitization and chain of custody, environmental remediation and site restoration, and timelines.

New Section 5 requires the PUC to submit a report on projected regional renewable electric generation market conditions for 2027 through 2035 by January 15, 2027, with an opportunity for written stakeholder input.

New subsection 284(e) prohibits data centers from participating in energy savings accounts, customer credit programs under section 209(d)(3)(C), or self-managed energy efficiency programs under section 209(j).

The purpose statement changed from 'responsible growth of an essential industry' to 'responsible growth of an emerging industry,' reflecting a different characterization of the sector.