Sherrill signs energy package targeting utilities and data centers, announces electric bill credits

Recent actions will save ratepayers more than $1 billion annually, according to an analyst. Long-term savings remain to be seen.

Gov. Mikie Sherrill on Tuesday signed three energy bills aimed at lowering electricity costs by increasing oversight of utility spending, eliminating a transmission incentive for utilities and requiring large data centers to shoulder more of the costs they place on the electric grid.

The governor also announced immediate bill credits for millions of households as New Jersey residents continue to face high electric bills.

Under the plan, all 3.6 million residential electric customers will receive a one-time $25 credit through the state’s Residential Universal Bill Credit program. Lower- and moderate-income households eligible for the Residential Energy Assistance Payment program will receive an additional $150 credit.

The Sherrill administration said actions taken over the past six months, including the three bills signed Tuesday, will save New Jersey ratepayers more than $1 billion annually. That estimate comes from an analysis by Synapse Energy Economics. The administration did not release a breakdown showing the expected savings from each policy.

“For too long, New Jersey families have paid the price for poor oversight, outdated policies, and rising demand on our electric grid by unchecked actors,” Sherrill said in a statement. “Today, we’re putting money back into people’s pockets while holding utility companies and large data centers accountable through stronger oversight and smarter incentives that will drive down costs and strengthen our grid.”

One measure repeals what supporters describe as an outdated financial incentive that allows utilities participating in regional transmission organizations, such as PJM Interconnection, to earn an additional return on equity, which is ultimately recovered from ratepayers.

The bill makes participation in a regional transmission organization mandatory for New Jersey utilities. Because participation would no longer be voluntary, utilities would no longer qualify for the additional 50-basis-point return on equity, known as the RTO participation adder.

A second bill increases state oversight of certain transmission projects that utilities have historically been able to pursue without the approval of state regulators.

The legislation requires utilities to obtain a “Certificate of Public Convenience and Necessity” before constructing supplemental transmission projects such as substations, transmission lines, and other grid infrastructure. Those projects would undergo either a standard or expedited review process depending on whether advanced transmission technologies are used.

The administration said supplemental transmission projects accounted for roughly 79% of New Jersey ratepayer transmission costs between 2008 and 2025, totaling about $14.7 billion. Citing data from the Rocky Mountain Institute, officials said New Jersey accounts for about 12% of electricity demand within PJM, but nearly 22% of spending on supplemental transmission projects.

The third bill creates a separate rate class for large data centers, requiring them to pay for the energy infrastructure needed to serve their facilities rather than shifting those costs onto residential customers and smaller businesses. The law directs the New Jersey Board of Public Utilities to develop special electric service rules for data centers with peak electricity demand of at least 50 megawatts, though regulators could apply the rules to smaller facilities if warranted. It also requires financial guarantees intended to ensure data centers pay for at least 85% of the electric capacity they request for a minimum of 10 years, along with upfront deposits to help cover the cost of new transmission infrastructure.

The measure encourages data centers to bring new power supplies online and invest in energy efficiency while requiring them to reduce electricity use during periods of grid stress before residential customers are affected. It also establishes a program allowing large electricity users to offset capacity obligations by funding demand reductions elsewhere on the grid.

“Data center growth will drive up the cost of electricity if we don’t create guardrails,” said Dave Bailey Jr., the bill’s primary Assembly sponsor. “We want to make sure data centers pay for the energy they use and the infrastructure they need, not our constituents. This bill is about protecting ratepayers and preventing households and small businesses from paying for data centers to connect to the grid.”

The legislation follows growing concern that rapidly expanding data centers, driven in part by artificial intelligence, could place additional pressure on the electric grid and contribute to higher electricity prices for other customers.

In addition to the legislation, the administration said the New Jersey Board of Public Utilities has renewed the Summer Termination Program, which protects vulnerable households from utility shutoffs during periods of extreme heat, and has approved 12 new solar projects expected to generate enough electricity to power about 45,000 homes.

The governor also highlighted other energy actions taken since taking office in January, including executive orders freezing approved electric rate increases, support for changes to PJM’s electricity capacity market, the creation of a nuclear task force, the expansion of the state’s community solar program, the approval of additional clean energy projects, and the rollout of a statewide framework intended to regulate the growth of data centers while encouraging artificial intelligence development.