H 727

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 1  H.727
 2   Introduced by Representative Sibilia of Dover
 3   Referred to Committee on
 4   Date:
 5   Subject: Utilities; data centers; ratepayer class; siting; reporting
 6   Statement of purpose of bill as introduced: This bill proposes to regulate the
 7   deployment of data centers in Vermont for the purpose of ensuring electric
 8   service reliability and affordability for all Vermonters and preventing any
 9   adverse effects on the State’s environment, natural resources, local
10   communities, economy, and public health and welfare.
11      An act relating to sustainable data center deployment
12   It is hereby enacted by the General Assembly of the State of Vermont:
13   Sec. 1. 30 V.S.A. chapter 5, subchapter 3 is added to read:
14  Subchapter 3. Data Centers
15   § 281. SHORT TITLE
16      This subchapter shall be known and may be cited as the “Vermont
17   Sustainable Data Centers Act.”
18   § 282. PURPOSE
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 1      The purpose of this subchapter is to establish a regulatory framework that
 2   ensures responsible growth of an essential industry in a manner that protects
 3   existing electric ratepayers from unwarranted costs and promotes sustainable
 4   climate, environmental, community, and equity outcomes consistent with State
 5   policy.
 6   § 283. DEFINITIONS
 7      As used in this subchapter:
 8  (1) “Data center” means a facility that uses or is able to use 20
 9   megawatts or more of power and is engaged in providing data processing,
10   hosting, and related services as described under code 518210 of the 2022
11   North American Industry Classification System.
12  (2) “Facility” means all buildings, equipment, structures, and other
13   stationary items that are located on a single site or on contiguous or adjacent
14   sites and that are owned or operated by the same person or by any person that
15   controls, is controlled by, or is under common control with such person.
16   § 284. TARIFFS; CONTRACTS
17      (a) For the purpose of ensuring just and reasonable rates for all ratepayer
18   classes and mitigating the risk of financial exposure to electric distribution
19   companies and their existing ratepayers, the Public Utility Commission shall
20   establish a separate ratepayer class and tariff schedule applicable to data
21   centers and, in addition, shall require specific provisions in any contract for
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 1   electric service entered into by an electric distribution company and a data
 2   center as specified in subsection (c) of this section.
 3      (b) The Commission shall develop a general tariff with standardized
 4   structures applicable to all electric distribution companies with respect to the
 5   data center ratepayer class, and these requirements shall be reflected in each
 6   company’s individual tariff filings. The standardized structures shall:
 7  (1) include a method for allocating costs that is equal or proportional to
 8   the costs of providing electric service to data centers;
 9  (2) provide for equitable contributions to the efficiency, reliability, and
10   resiliency of the electricity network;
11  (3) mitigate the risk of other ratepayer classes paying unwarranted costs,
12   including any electric generation, distribution, and transmission infrastructure
13   costs incurred solely to meet the load requirements of a data center;
14  (4) promote or, at a minimum, not impede in any way an electric
15   company’s ability to meet renewable electricity targets pursuant to the
16   Renewable Energy Standard;
17  (5) reflect the mandatory contractual provisions specified in subsection
18   (c) of this section; and
19  (6) meet any other conditions the Commission may require consistent
20   with the purpose of this section and in the public interest.
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 1      (c) A contract for electric service entered into between an electric company
 2   and a data center shall:
 3  (1) specify the duration of the contract, which shall not be less than 10
 4   years;
 5  (2) specify the date or the estimated date that the electric company will
 6   begin to provide electric service to the data center;
 7  (3) obligate the data center to pay a minimum amount or percentage
 8   based on the data center’s projected electricity usage for the duration of the
 9   contract;
10  (4) include a reasonable charge for excess demand;
11  (5) include a collateral requirement sufficient to mitigate the risk of
12   stranded costs; and
13  (6) meet any other terms or conditions required by the Commission that
14   are consistent with the purpose of this section and in the public interest.
15   § 285. SITING; CERTIFICATE OF PUBLIC GOOD
16      (a) No person shall in any way begin site preparation for or commence
17   construction of a data center unless the Commission first finds that the same
18   will promote the general good of the State and issues a certificate of public
19   good to that effect pursuant to this section.
20      (b) Before the Commission issues a certificate of public good as required
21   under subsection (a) of this section, the Commission shall find that the
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 1   proposed data center, including any upgrades to electric generation,
 2   distribution, and transmission facilities necessary to power the data center:
 3  (1) will not unduly interfere with the orderly development of the region
 4   with due consideration having been given to the recommendations of the
 5   municipal and regional planning commissions, the recommendations of the
 6   municipal legislative bodies, and the land conservation measures contained in
 7   the plan of any affected municipality;
 8  (2) will not adversely affect the efficiency, reliability, and resilience of
 9   the electric power system;
10  (3) will result in an economic benefit to the State and its residents;
11  (4) will not have an undue adverse effect on aesthetics, historic sites, air
12   and water purity, the natural environment, the use of natural resources, and the
13   public health and safety, with due consideration having been given to the
14   criteria specified in 10 V.S.A. §§ 1424a(d) (outstanding resource waters) and
15   6086(a)(1)–(8) and (9)(K) (conditions and criteria for State land use and
16   development plans), impacts to primary agricultural soils as defined in
17   10 V.S.A. § 6001, community noise levels, and the attainment of the State’s
18   greenhouse gas emissions reduction requirements;
19  (5) is consistent with the principles for resource selection expressed in
20   the applicable electric distribution company’s approved least-cost integrated
21   plan;
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 1  (6) is consistent with the Electrical Energy Plan approved by the
 2   Department under section 202 of this title, or that there exists good cause to
 3   permit a variance;
 4  (7) is consistent with the Vermont Long-Range Transmission Plan
 5   prepared by the Vermont Electric Power Company, Inc.;
 6  (8) will not have an adverse effect on any segment of the waters of the
 7   State that have been designated as outstanding resource waters by the
 8   Secretary of Natural Resources;
 9  (9) can be served economically by existing or planned transmission
10   facilities without undue adverse effect on Vermont utilities or other retail
11   ratepayer classes;
12  (10) complies with applicable air pollution control requirements under
13   the federal Clean Air Act, 42 U.S.C. § 7401 et seq.;
14  (11) complies with harvesting procedures and procurement standards
15   that ensure long-term forest health and sustainability, including the guidelines
16   and standards adopted under 10 V.S.A. § 2750;
17  (12) is consistent with State energy efficiency requirements;
18  (13) is consistent with environmental justice and equity policy as
19   established pursuant to 3 V.S.A. chapter 72; and
20  (14) adequately accounts for potential facility decommissioning.
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 1      (c) The Commission shall adopt by rule procedures for implementing the
 2   requirements of this section that are modeled after sections 248 and 248a of
 3   this title, to the extent deemed reasonable and necessary by the Commission.
 4   Accordingly, the procedures shall include requirements related to: an
 5   application fee; notice; letter of intent; review period; exemptions from other
 6   law; participation by municipal bodies; consideration of municipal plans and
 7   recommendations; the retention of experts; fees for the participation of other
 8   State entities, as appropriate, including the Department of Public Service, the
 9   Agency of Natural Resources, the Agency of Agriculture, Food and Markets,
10   the Agency of Commerce and Community Development, and the
11   Environmental Justice Advisory Council; and a review process.
12   § 286. DEMAND-SIDE MANAGEMENT
13      (a) The Commission may establish a demand-side management program
14   applicable to data centers that includes requirements and standards applicable
15   to data center energy and water usage. In developing such a program, the
16   Commission shall consider:
17  (1) cositing requirements for renewable energy sources, batteries, and
18   other on-site generation and storage;
19  (2) water conservation initiatives, such as the use of recycled water for
20   cooling;
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 1  (3) the establishment of data center microgrids for critical services that
 2   would provide continuous and reliable energy for critical services, operate
 3   independently from an electric company’s power system, ensure uptime during
 4   outages, provide greater efficiencies for managing energy costs and carbon
 5   emissions, and enhance the resilience of the State’s electricity network;
 6  (4) authorization for a data center to procure its own energy resources;
 7  (5) a prohibition on fossil fuel power purchase agreements that provide
 8   incentives or discount rates to data centers;
 9  (6) enhanced energy efficiency standards; and
10  (7) any other standard or requirement deemed appropriate by the
11   Commission and consistent with the purpose of this subchapter and in the
12   public interest.
13      (b) Any program developed by the Commission pursuant to this section
14   shall take effect upon approval of the General Assembly by legislative
15   enactment.
16   § 287. QUARTERLY AND ANNUAL REPORTS
17      (a) Data center. Within three months after a data center becomes
18   operational, and in a form and manner determined by the Commission, the
19   owner of the data center shall begin submitting quarterly reports to the
20   Commission and the Department of Public Service. Each quarterly report
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 1   shall include the data center’s water and energy usage, as well as a description
 2   of any interconnection requests the owner has submitted in other states.
 3      (b) Department. Annually, beginning on or before January 1, 2028, the
 4   Commissioner of Public Service shall submit a written report on data centers
 5   to the House Committees on Energy and Digital Infrastructure, on
 6   Environment, and on Agriculture, Food Resiliency, and Forestry and to the
 7   Senate Committees on Finance, on Natural Resources and Energy, and on
 8   Agriculture. The report shall include findings and recommendations related to
 9   the energy, environmental, and economic impacts of data center construction
10   and deployment in Vermont, including any benefits to all electric ratepayers
11   from electric infrastructure projects undertaken to provide power to a data
12   center.
13   § 288. FINANCING STATE AND LOCAL BENEFITS
14      (a) It is the intent of the General Assembly to establish a financial structure
15   that will support State and local energy, environmental, and economic benefits
16   and to finance that structure with:
17  (1) a percentage of tax revenue generated from sales, property, or
18   income taxes applicable to data centers;
19  (2) a data center gross receipts tax; or
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 1  (3) another financing mechanism recommended by the Commissioner of
 2   Public Service that the Commissioner deems to be consistent with the purpose
 3   of this subchapter and in the public interest.
 4      (b) The Commissioner of Public Service, with input from the
 5   Commissioner of Taxes, shall develop findings and recommendations for
 6   implementing the legislative intent of this section, which shall be submitted in
 7   a written report to the House Committees on Energy and Digital Infrastructure,
 8   on Environment, on Ways and Means, and on Agriculture, Food Resiliency,
 9   and Forestry and to the Senate Committees on Finance, on Natural Resources
10   and Energy, and on Agriculture, on or before January 1, 2028.
11   § 289. RULES
12      In addition to the rules required by this subchapter, the Commission may
13   adopt any other rules it deems necessary to implement and enforce the
14   provisions of this subchapter consistent with its purpose and in the public
15   interest.
16   Sec. 2. APPLICATION
17      30 V.S.A. chapter 5, subchapter 3 (established in Sec. 1 of this act) shall
18   apply to any data center not operational on or before the effective date of this
19   act.
20   Sec. 3. EFFECTIVE DATE
21      This act shall take effect on passage.
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Sec. 1. 30 V.S.A. chapter 5, subchapter 3 is added to read:
                         Subchapter 3. Data Centers
§ 281. SHORT TITLE
   This subchapter shall be known and may be cited as the “Vermont
Sustainable Data Centers Act.”
§ 282. PURPOSE
   The purpose of this subchapter is to establish a regulatory framework that
ensures responsible growth of an emerging industry in a manner that protects
existing electric ratepayers from unwarranted costs and promotes sustainable
climate, environmental, community, and equity outcomes consistent with State
policies.
§ 283. DEFINITIONS
   As used in this subchapter:
      (1)   “Data center” means a facility that uses or is able to use 20
megawatts or more of power and is engaged in providing data processing,
hosting, and related services as described under code 518210 of the 2022
North American Industry Classification System.
      (2) “Facility” means all buildings, equipment, structures, and other
stationary items that are located on a single site or on contiguous or adjacent
sites and that are owned or operated by the same person or by any person that
controls, is controlled by, or is under common control with such person.
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§ 284. LARGE LOAD SERVICE EQUITY CONTRACT; APPROVAL
   (a) For the purpose of ensuring just and reasonable rates for all ratepayer
classes and mitigating the risk of financial exposure to electric distribution
companies and their existing ratepayers, a data center shall be served by an
electric company pursuant to a large load service equity contract approved by
the Public Utility Commission.
   (b) The large load service equity contract shall:
      (1) include a method for allocating costs that is equal or proportional to
the costs of providing electric service to the data center, including providing
for equitable contributions to the embedded costs and the efficiency, reliability,
and resiliency of the electricity network;
      (2) mitigate the risk of other ratepayer classes paying unwarranted
costs, including any electric generation, distribution, and transmission
infrastructure costs incurred to meet the load requirements of a data center or
the energy capacity, transmission, or resource adequacy costs incurred as a
result of the data center’s load;
      (3) specify the duration of the contract and the date or the estimated
date that the electric company will begin to provide electric service to the data
center;
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      (4) obligate the data center to pay a minimum amount or percentage
based on the data center’s projected electricity usage for the duration of the
contract to ensure compliance with subdivision (1) of this subsection;
      (5)   include a reasonable charge for demand in excess of the data
center’s projected electricity demand at the time the contract is entered into;
      (6) include a collateral requirement sufficient to mitigate the risk of
stranded costs;
      (7)       include provisions requiring implementation of demand-side
management operational measures for the purpose of maintaining grid
stability and efficiency, including demand response and flexible load
management practices, such as load shifting, peak shaving, and the use of
distributed energy resources;
      (8) include provisions for the collection of gross receipts taxes, energy
efficiency charges, and any other fees or charges that may be applicable to
electricity revenues; and
      (9) meet any other terms or conditions required by the Commission that
are consistent with the purpose of this section and in the public interest.
   (c) The Commission shall not approve a large load service equity contract
unless the Commission first finds that the same will promote the general good
of the State.
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   (d) Before the Commission approves a large load service equity contract as
required under this section, the Commission shall find that the terms of the
contract:
        (1) will not adversely affect the efficiency, reliability, and resilience of
the electric power system;
        (2) will result in an economic benefit to the State and its residents;
        (3) are consistent with the principles for resource selection expressed in
the applicable electric distribution company’s approved least-cost integrated
plan;
        (4) are consistent with the Electrical Energy Plan approved by the
Department under section 202 of this title, or that there exists good cause to
permit a variance;
        (5) will ensure that the data center will be served economically by
existing or planned transmission facilities without undue adverse effect on
Vermont utilities or other retail ratepayer classes; and
        (6)   are consistent with environmental justice and equity policy as
established pursuant to 3 V.S.A. chapter 72.
   (e) A data center shall not be eligible to participate in an energy savings
account or a customer credit program pursuant to subdivision 209(d)(3)(C) of
this title, or a self-managed energy efficiency program pursuant to subsection
209(j) of this title.
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§ 285. ENERGY EFFICIENCY DESIGN
   Early in the design development phase of a data center, the owner or
operator of a data center shall consult with the efficiency utility appointed by
the Public Utility Commission under subdivision 209(d)(2)(A) of this title to
ensure compliance with State energy efficiency requirements and best
practices.
§ 286. QUARTERLY AND ANNUAL REPORTS
   (a)   Data center.    Within three months after a data center becomes
operational, and in a form and manner determined by the Commission, the
data center shall begin submitting quarterly reports to the Commission and the
Department of Public Service. Each quarterly report shall include the data
center’s water and energy usage, including its peak usage per day, and an
itemization of the data center’s payments toward shared infrastructure
constructed to support the data center.
   (b) Department. Annually, beginning on or before January 15, 2028, and
provided at least one data center has entered into a large load service equity
contract pursuant to this subchapter, the Commissioner of Public Service shall
include in the Department’s annual report published pursuant to subsection
202b(e) of this title findings and recommendations related to the energy,
environmental, and economic impacts of data center construction and
operation in Vermont, as well as any impactful developments within the region,
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including any benefits to all ratepayers from electric infrastructure projects
undertaken to provide power to one or more data centers.
§ 287. RULES
   In addition to the rules required by this subchapter, the Commission may
adopt any other rules it deems necessary to implement and enforce the
provisions of this subchapter consistent with its purpose and in the public
interest.
Sec. 2. APPLICATION
   30 V.S.A. chapter 5, subchapter 3 (established in Sec. 1 of this act) shall
apply to any data center not operational on the effective date of this act and to
any smaller, traditional data center operational on the effective date of this act
to the extent such data center seeks to expand its capacity and meet the
threshold requirements of Sec. 1, 30 V.S.A. § 283(1).
Sec. 3. 10 V.S.A. § 6001 is to amended read:
§ 6001. Definitions
   As used in this chapter:
                                      ***
      (3)(A) “Development” means each of the following:
                                      ***
            (xiv) The construction of improvements on a tract or tracts of land
for a data center as defined in 30 V.S.A. § 283(1).
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Sec. 4. 10 V.S.A. § 6086a is added to read:
§ 6086a. WATER USE; COOLING; PERMITTING; QUALITY
   (a) As used in this section:
      (1) “Closed-loop cooling system” means a sealed cooling process in
which the same water or coolant circulates continuously within a data center’s
cooling system without withdrawal of water from municipal public water
supplies, groundwater, or surface water and without discharge of wastewater
to municipal wastewater systems, groundwater, or surface waters, except for de
minimis discharges authorized under a discharge permit issued by the Agency
of Natural Resources.
      (2) “Data center” has the same meaning as in 30 V.S.A. § 283(1).
      (3)     “Per- and polyfluoroalkyl substances” or “PFAS” means any
chemical substance or mixture containing a chemical substance that
structurally contains at least one of the following three substructures:
            (A) R-(CF2)-CF(R′)R″, where both the CF2 and CF moieties are
saturated carbons;
            (B) R-CF2OCF2-R′, where R and R′ can either be F, O, or saturated
carbons; or
            (C) CF3C(CF3)R′R″, where R′ and R″ can either be F or saturated
carbons.
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   (b)(1) A data center shall identify to the District Commission reviewing the
data center’s application for a permit under 10 V.S.A. chapter 151 how the
data center will cool the facility.
      (2) If water is used to cool a data center, the data center shall use a
closed-loop cooling system to minimize impacts to the quality and quantity of
surface water and groundwater unless a District Commission, during review of
a permit application under 10 V.S.A. chapter 151, determines that the use of a
closed-loop cooling system is not feasible at the proposed data center.
      (3) If water is used to cool a data center through a closed-loop cooling
system or through another type of cooling system, a data center shall identify
where the data center will obtain water to cool the facility and where the
cooling water will be discharged.
   (c) If a data center proposes to use groundwater to cool the data center, the
data center shall obtain a groundwater withdrawal permit under 10 V.S.A.
§ 1418 for any withdrawal of groundwater by the data center notwithstanding
the permitting threshold of withdrawal of more than 57,600 gallons of
groundwater a day. A closed-loop cooling system is not exempt from the
groundwater withdrawal permit under 10 V.S.A. § 1418(b)(6).
   (d) If a data center proposes to use surface water to cool the facility, the
data center shall obtain a surface water withdrawal permit pursuant to 10
V.S.A. § 1043. The rules adopted by the Secretary to implement 10 V.S.A.
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§ 1043 shall require a data center to cease withdrawals under drought
conditions.
  (e)(1) A data center shall obtain all applicable water quality and water
resource protection permits from the Agency of Natural Resources, including
stormwater, shoreland, stream alteration, direct discharge, surface water
withdrawal, groundwater withdrawal, wetland, and river corridor development
permits.
     (2) A data center shall obtain from the Agency of Natural Resources a
water quality certificate that meets the same criteria that the Agency requires
to be met to obtain a federal Clean Water Act Section 401 water quality
certification as those criteria existed under the Act, 33 U.S.C. §§ 1251–1388,
and any regulations adopted thereunder on January 1, 2026.
  (f) A data center that discharges wastewater into a surface water of the
State shall identify PFAS that may be used in the operation and submit a plan
to the Agency of Natural Resources establishing a program that monitors the
wastewater discharge from the data center, including monitoring for the
presence of PFAS. The monitoring plan shall be approved by the Agency upon
a determination that it meets the Vermont water quality standards.
  (g) The addition of PFAS to water discharged from a data center shall be
prohibited in Vermont.
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Sec. 5. REPORT ON REGIONAL RENEWABLE ENERGY MARKET
        CONDITIONS; PUBLIC UTILITY COMMISSION
  (a) On or before January 15, 2027, the Public Utility Commission shall
prepare a written report on projected regional renewable electric generation
market conditions. In developing the report, the Commission shall examine the
cost and availability of new regional renewable electric generation resources
during the years 2027 through 2035.
  (b) In preparing the report, the Commission shall provide an opportunity
for written input from interested stakeholders, including retail electricity
providers, renewable energy developers, regional transmission organizations,
consumer advocates, and any other members of the public. In addition, the
Commission may consult with the Department of Public Service and other
relevant state, regional, or federal entities, as the Commission deems
appropriate. Preparation of the report is not subject to the contested case
procedures established under 3 V.S.A. chapter 25.
  (c) The Commission shall submit the report to the House Committee on
Energy and Digital Infrastructure and the Senate Committees on Finance and
on Natural Resources and Energy.
Sec. 6. RECOMMENDATION ON DATA CENTER DECOMMISSIONING
  (a) The Commissioner of Public Service, in consultation with the Secretary
of Natural Resources, the Chair of the Land Use Review Board, and any other
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interested stakeholders deemed appropriate by the Commissioner, shall
recommend a regulatory model for data center decommissioning. As used in
this section, “data center” has the same meaning as in Sec. 1, 30 V.S.A.
§ 283(1), of this act.
   (b) The recommended regulatory model developed pursuant to this section
shall ensure responsible data center decommissioning in a manner that
protects and preserves the environment and the public health and welfare. The
model shall include standards and procedures that address:
      (1) approval of a decommissioning plan by the appropriate regulatory
entity;
      (2)   regulatory oversight of the decommissioning process, including
through site visits and inspections;
      (3) a bond requirement or other financial assurance to ensure a data
center is solely responsible for the costs associated with implementation of an
approved decommissioning plan;
      (4) guidelines for data sanitization, the physical destruction of highly
sensitive storage devices, and a documented chain of custody for information
technology assets;
      (5)    guidelines for environmental compliance, hazardous material
handling, environmental remediation, and site restoration;
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        (6) a timeline for commencing and completing the decommissioning
process after the abandonment, closure, destruction, or permanent cessation of
operations of a data center; and
        (7) any other matters deemed appropriate by the Commissioner.
  (c)     On or before December 15, 2026, the Commissioner shall submit
recommendations for a data center decommissioning regulatory model in the
form of draft legislation to the House Committees on Energy and Digital
Infrastructure and on Environment and the Senate Committees on Finance and
on Natural Resources and Energy.
Sec. 7. EFFECTIVE DATE
  This act shall take effect on passage.
Sec. 1. 30 V.S.A. chapter 5, subchapter 3 is added to read:
                          Subchapter 3. Data Centers
§ 281. SHORT TITLE
  This subchapter shall be known and may be cited as the “Vermont
Sustainable Data Centers Act.”
§ 282. PURPOSE
  The purpose of this subchapter is to establish a regulatory framework that
ensures responsible growth of an emerging industry in a manner that
financially benefits existing electric ratepayers and protects them from
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additional costs and promotes sustainable climate, environmental, community,
and equity outcomes consistent with State policies.
§ 283. DEFINITIONS
   As used in this subchapter:
      (1)     “Data center” means a facility that uses or is able to use 20
megawatts or more of power and is engaged in providing data processing,
hosting, and related services as described under code 518210 of the 2022
North American Industry Classification System.
      (2) “Electric company” means the retail electric company that provides
or will provide electric service to a data center pursuant to a large load service
equity contract under section 284 of this subchapter.
      (3) “Facility” means all buildings, equipment, structures, and other
stationary items that are owned or operated by the same person or by any
person that controls, is controlled by, or is under common control with such
person and that are located on:
            (A) a single site or contiguous or adjacent sites; or
            (B) multiple nonadjacent sites that function as a single integrated
operation by virtue of shared infrastructure or unified operational protocols,
under a central management system.
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§ 284. LARGE LOAD SERVICE EQUITY CONTRACT; APPROVAL
   (a) For the purpose of ensuring just and reasonable rates for all ratepayer
classes and precluding the risk of financial exposure to electric companies and
their existing ratepayers, a data center shall be served by an electric company
pursuant to a large load service equity contract approved by the Public Utility
Commission.
   (b) The large load service equity contract shall:
      (1) include a method for allocating costs that is equal or proportional to
the costs of providing electric service to the data center, including providing
for equitable contributions to the embedded costs and the stability, efficiency,
reliability, and resiliency of the electricity network;
      (2) ensure that other ratepayer classes are insulated from all costs
associated with data center deployment, including expenses for new
generation, transmission, and distribution infrastructure, as well as energy
capacity and resource adequacy costs;
      (3) specify the duration of the contract, which shall be for a minimum of
10 years, and the date or the estimated date that the electric company will
begin to provide electric service to the data center;
      (4) obligate the data center to pay a minimum amount or percentage
based on the data center’s projected electricity usage for the duration of the
contract to ensure compliance with subdivision (1) of this subsection;
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      (5)     include a reasonable charge for demand in excess of the data
center’s projected electricity demand at the time the contract is entered into;
      (6) include a collateral requirement sufficient to prevent the risk of
stranded costs;
      (7)      include provisions requiring implementation of demand-side
management operational measures for the purpose of maintaining grid
stability, efficiency, reliability, and resiliency, including demand response and
flexible load management practices that, at a minimum, satisfy the
requirements of section 285 of this subchapter;
      (8)     address load curtailment procedures and priorities during grid
emergencies;
      (9) include provisions for the collection of gross receipts taxes, energy
efficiency charges, and any other fees or charges that may be applicable to
electricity revenues; and
      (10) meet any other terms or conditions required by the Commission
that are consistent with the purpose of this section and in the public interest.
   (c)(1)     The Commission shall not approve a large load service equity
contract unless the Commission first finds that it will promote the general good
of the State and that its terms:
            (A) will not adversely affect the stability, efficiency, reliability, and
resiliency of the electric power system;
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         (B) will result in an economic benefit to the State and its residents;
         (C) are consistent with the principles for resource selection expressed
in the electric company’s approved least-cost integrated plan;
         (D) are consistent with the Electrical Energy Plan approved by the
Department under section 202 of this title, or that there exists good cause to
permit a variance;
         (E) will ensure that the data center will be served economically by
existing or planned transmission facilities without any undue adverse effect on
Vermont utilities or other retail ratepayer classes; and
         (F) are consistent with environmental justice and equity policy as
established pursuant to 3 V.S.A. chapter 72.
      (2) The Commission’s findings pursuant to this subsection shall be in
writing and shall include a stated rationale for each.
   (d)(1) The Commission shall conduct a periodic review of a large load
service equity contract approved under this section. The purpose of the review
shall be to verify the data center’s ongoing compliance with all established
contract terms, conditions, and regulatory obligations.
      (2) Reviews shall be performed at intervals not to exceed two years.
However, the Commission may initiate a review at any time upon a finding of
good cause or when deemed necessary to protect the public interest.
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   (e) A data center shall not be eligible to participate in an energy savings
account or a customer credit program pursuant to subdivision 209(d)(3)(C) of
this title or a self-managed energy efficiency program pursuant to subsection
209(j) of this title.
§ 285. DEMAND-SIDE MANAGEMENT
   (a) Purpose. The purpose of this section is to minimize any adverse impact
of data center operations on Vermont’s electric system, other ratepayers, and
the environment.        It aims to minimize peak demand increases, reduce
associated costs, and enhance the grid’s stability, efficiency, reliability, and
resiliency while minimizing climate pollution emissions and maximizing
benefits to Vermonters.
   (b) Site suitability analysis and project design.
      (1) Site suitability analysis. Prior to submitting a permit application
under 10 V.S.A. chapter 151, the owner or operator of a proposed data center
shall conduct a site suitability analysis. This analysis shall be developed in
consultation with the electric company and the efficiency utility appointed by
the Public Utility Commission under subdivision 209(d)(2)(A) of this title. The
analysis shall provide a preliminary assessment of the facility’s capacity to:
          (A) comply with the required commercial building energy standards
adopted under section 53 of this title;
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         (B) maximize the deployment of on-site renewable energy generation,
battery storage, and demand response assets; and
         (C) implement a waste heat recovery system capable of providing
thermal energy to adjacent municipal or residential buildings.
      (2) Project design. In the design and construction of the data center, the
owner or operator shall ensure compliance with State energy efficiency
requirements and best practices and maximize the potential of the site and any
structures on the site to host renewable energy.
   (c) Combustion-based backup generation.
      (1) A data center shall use combustion-based backup generation only
during emergency situations involving power failures and interruptions.
Otherwise, the data center shall prioritize to the greatest extent practicable the
use of battery storage and on-site renewable energy generation.
      (2) As used in this subsection, “combustion-based backup generation”
includes any electrical generation system that emits air contaminants as
defined in 10 V.S.A. § 552 during combustion.
   (d) Distributed renewable generation. Taking into consideration the site
suitability analysis and project design requirements under subsection (b) of
this section and any other relevant factors, a data center shall maximize the
construction and operation of on-site renewable energy generation to the
greatest extent technically feasible. A renewable energy plant that directly
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emits air contaminants as defined in 10 V.S.A. § 552(2) from fuel combustion
does not qualify under this subsection, unless it is a thermal energy plant. A
data center shall transfer any renewable energy certificates or environmental
attributes generated from the operation of plants constructed pursuant to this
subsection to the electric company.
   (e) Energy transformation payment.
      (1) Because of the unique and significant demands a data center has on
Vermont’s electric system, it shall contribute proportionally to State initiatives
that reduce fossil fuel consumption and greenhouse gas emissions.
Accordingly, a data center shall make an annual payment directly into a fund
managed by the electric company. The payments shall be used to finance
energy transformation projects as defined in subdivision 8002(28) of this title
and, to the extent practicable, such projects shall be deployed in the
community hosting the data center and the surrounding communities.
      (2) The amount of the payment shall be equal to 60 percent of the data
center’s electricity usage for the prior calendar year multiplied by the
alternative   compliance     payment      rate   established    in     subdivision
8005(a)(6)(A)(ii) of this title. Payments shall be made in advance at the start
of each calendar year based on projected electricity usage. Any difference
between projected and actual usage shall be reconciled in the following year’s
payment.
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      (3) In the event funds generated by this subsection are used to support
projects that are also supported by the electric company under subdivision
8005(a)(3) of this title, or by any other regulated entity, the Commission shall
prorate the reduction in fossil fuel consumption and greenhouse gas emissions
credited to the regulated entity.
   (f) Virtual power plant.
      (1) A data center shall participate in a virtual power plant managed by
the electric company, if available and technically feasible, otherwise it shall
design and implement a self-managed virtual power plant in coordination with
the electric company to optimize energy generation and consumption. Data
center funds used to develop or implement a virtual power plant under this
subsection shall be in addition to any support or incentives provided under
subsection (e) of this section or through any ratepayer-funded or State-funded
program supporting the deployment or operation of assets participating in
such virtual power plant.
      (2) As used in this subsection, “virtual power plant” means a network of
distributed energy resources, such as batteries, demand response assets,
renewable energy generation, and controllable loads, that are coordinated
through software to function like a traditional power plant.
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§ 286. QUARTERLY AND ANNUAL REPORTS
   (a) Data center quarterly reports. Within three months after a data center
becomes operational, and in a form and manner determined by the
Commission, the data center shall begin submitting quarterly reports to the
Commission and the Department of Public Service. Each quarterly report
shall include the data center’s water and energy usage, including its peak
usage per day, and an itemization of the data center’s payments toward shared
infrastructure constructed to support the data center. The reports are subject
to public inspection and copying under the Public Records Act.
   (b) Department annual report. Annually, beginning on or before January
15, 2028, and provided at least one data center has entered into a large load
service equity contract pursuant to this subchapter, the Commissioner of
Public Service shall include in the Department’s annual report published
pursuant to subsection 202b(e) of this title findings and recommendations
related to the energy, environmental, and economic impacts of data center
construction and operation in Vermont, as well as any significant
developments within the region, such as significant laws or regulations with
respect to data centers enacted or adopted in other states in the region, known
data center construction in the region, and any known impact on ratepayers
from such construction in that state or region.
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§ 287. RULES
   The Commission may adopt rules it deems necessary to implement and
enforce the provisions of this subchapter consistent with its purpose and in the
public interest.
Sec. 2. 10 V.S.A. § 6001 is amended to read:
§ 6001. DEFINITIONS
   As used in this chapter:
                                       ***
         (3)(A) “Development” means each of the following:
                                       ***
              (xiv) The construction of improvements on a tract or tracts of land
for a data center as defined in 30 V.S.A. § 283(1), including on land within a
Tier 1A area, notwithstanding anything to the contrary in section 6034 of this
title.
                                       ***
Sec. 3. 10 V.S.A. § 6086c is added to read:
§ 6086c. WATER USE; COOLING; PERMITTING; QUALITY
   (a) As used in this section:
         (1) “Closed-loop cooling system” means a sealed cooling process in
which the same water or coolant circulates continuously within a data center’s
cooling system without withdrawal of water from municipal public water
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supplies, groundwater, or surface water and without discharge of wastewater
to municipal wastewater systems, groundwater, or surface waters, except for de
minimis discharges authorized under a discharge permit issued by the Agency
of Natural Resources.
      (2) “Data center” has the same meaning as in 30 V.S.A. § 283(1).
      (3)     “Per- and polyfluoroalkyl substances” or “PFAS” means any
chemical substance or mixture containing a chemical substance that
structurally contains at least one of the following three substructures:
            (A) R-(CF2)-CF(R′)R″, where both the CF2 and CF moieties are
saturated carbons;
            (B) R-CF2OCF2-R′, where R and R′ can either be F, O, or saturated
carbons; or
            (C) CF3C(CF3)R′R″, where R′ and R″ can either be F or saturated
carbons.
   (b)(1) A data center shall identify to the District Commission reviewing the
data center’s application for a permit under this chapter how the data center
will cool the facility.
      (2) If water is used to cool a data center, the data center shall use a
closed-loop cooling system or an alternative cooling system that is approved
by a District Commission and that shall not use more water than a comparable
closed-loop cooling system for the data center.  Before approving an
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alternative cooling system, a District Commission shall find that the
alternative cooling system will minimize groundwater use or surface water use
and will not unreasonably burden a public water supply, surface water, or
groundwater resource.
         (3) If water is used to cool a data center through a closed-loop cooling
system or through an alternative cooling system approved by a District
Commission, a data center shall identify where the data center will obtain
water to cool the facility and where the cooling water will be discharged.
   (c) If a data center proposes to use groundwater to cool the data center, the
data center shall obtain a groundwater withdrawal permit under section 1418
of this title for any withdrawal of groundwater by the data center
notwithstanding the permitting threshold of withdrawal of more than 57,600
gallons of groundwater a day. A closed-loop cooling system is not exempt
from the groundwater withdrawal permit under subdivision 1418(b)(6) of this
title.
   (d) If a data center proposes to use surface water to cool the facility, the
data center shall obtain a surface water withdrawal permit pursuant to section
1043 of this title. The rules adopted by the Secretary to implement section
1043 of this title shall require a data center to cease withdrawals under
drought conditions.
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   (e)(1) A data center shall obtain all applicable water quality and water
resource protection permits from the Agency of Natural Resources, including
stormwater, stream alteration, direct discharge, surface water withdrawal,
groundwater withdrawal, wetland, and river corridor development permits.
      (2)(A) If a data center proposes to use more than 150,000 gallons a day
of surface water for cooling or other purposes, the Agency in reviewing the
application for a surface water withdrawal permit required under section 1043
of this title shall assess the impacts on water quality, aquatic biota, State
endangered and threatened species, instream flow habitat, impingement,
streambank erosion, littoral habitat, and wetlands.
          (B) The issuance of a surface water withdrawal permit by the Agency
after completion of the assessments required under subdivision (A) of this
subdivision (e)(2) shall create a rebuttable presumption that the data center
will not result in undue water pollution under the requirements of subdivision
6086(a)(1) of this title.
          (C) The Agency may by rule reduce the amount of surface water
proposed for withdrawal by a data center for which the Agency would be
required to complete the assessment under subdivision (A) of this subdivision
(e)(2).
   (f) A data center that discharges waste into a surface water of the State
shall monitor the discharge for the maximum number of PFAS that are
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detectable under U.S. Environmental Protection Agency standard methods
approved as of January 1, 2026. A data center shall not discharge waste that
exceeds the criteria established under the Vermont Water Quality Standards. If
no criteria have been established under the Vermont Water Quality Standards
for PFAS and the data center is withdrawing surface water or groundwater for
purposes of operating the data center’s cooling system, the data center shall
monitor the withdrawn water for PFAS at the point of withdrawal. When the
data center discharges waste from the cooling system to surface water, PFAS in
the discharged waste shall not exceed the level of PFAS detected in the surface
water or groundwater withdrawn for purposes of operating the cooling system
at the data center.
Sec. 3a. AGENCY OF NATURAL RESOURCES REPORT ON
         DISCHARGES OF PFAS FROM DATA CENTERS TO SURFACE
         WATERS OF THE STATE
   On or before January 1, 2027, the Secretary of Natural Resources shall
submit to the House Committee on Environment and the Senate Committee on
Natural Resources and Energy a recommended standard for authorizing per-
and polyfluoroalkyl substances in the discharge of waste from the cooling
systems of data centers to surface waters of the State.
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Sec. 4. REPORT ON REGIONAL RENEWABLE ENERGY MARKET
        CONDITIONS; PUBLIC UTILITY COMMISSION
  (a) On or before January 15, 2027, the Public Utility Commission shall
prepare a written report on projected regional renewable electric generation
market conditions. In developing the report, the Commission shall examine the
cost and availability of new regional renewable electric generation resources
during the years 2027–2035.
  (b) In preparing the report, the Commission shall provide an opportunity
for written input from interested stakeholders, including retail electricity
providers, renewable energy developers, regional transmission organizations,
consumer advocates, and any other members of the public. In addition, the
Commission may consult with the Department of Public Service and other
relevant state, regional, or federal entities, as the Commission deems
appropriate. Preparation of the report is not subject to the contested case
procedures established under 3 V.S.A. chapter 25.
  (c) The Commission shall submit the report to the House Committees on
Environment and on Energy and Digital Infrastructure and the Senate
Committees on Finance and on Natural Resources and Energy.
Sec. 5. RECOMMENDATION ON DATA CENTER DECOMMISSIONING
  (a) The Commissioner of Public Service, in consultation with the Secretary
of Natural Resources, the Chair of the Land Use Review Board, and any other
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interested stakeholders deemed appropriate by the Commissioner, shall
recommend a regulatory model for data center decommissioning. As used in
this section, “data center” has the same meaning as in Sec. 1, 30 V.S.A.
§ 283(1), of this act.
   (b) The recommended regulatory model developed pursuant to this section
shall ensure responsible data center decommissioning in a manner that
protects and preserves the environment and the public health and welfare. The
model shall include standards and procedures that address:
      (1) approval of a decommissioning plan by the appropriate regulatory
entity, with a clear delineation of authority if more than one entity is involved
in the approval process;
      (2)   regulatory oversight of the decommissioning process, including
through site visits and inspections;
      (3) a bond requirement or other financial assurance to ensure a data
center is solely responsible for the costs associated with implementation of an
approved decommissioning plan;
      (4) guidelines for data sanitization, the physical destruction of highly
sensitive storage devices, and a documented chain of custody for information
technology assets, including compliance with the Storage Device Sanitization
and Destruction Manual, Policy Manual 9-12, prepared by the National
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Security Agency and the Central Security Service of the U.S. Department of
Defense;
         (5)   guidelines for environmental compliance, hazardous material
handling, environmental remediation, and site restoration;
         (6) a timeline for commencing and completing the decommissioning
process after the abandonment, closure, destruction, or permanent cessation of
operations of a data center; and
         (7) any other matters deemed appropriate by the Commissioner.
   (c)     On or before December 15, 2026, the Commissioner shall submit
recommendations for a data center decommissioning regulatory model in the
form of draft legislation to the House Committees on Energy and Digital
Infrastructure and on Environment and the Senate Committees on Finance and
on Natural Resources and Energy.
Sec. 6. EFFECTIVE DATE; APPLICATION
   This act shall take effect on passage and shall apply to any data center not
operational on the effective date of this act as well as to any data center that
uses less than 20 MW of power that is operational on the effective date of this
act to the extent such data center seeks to expand its capacity and meet the
threshold requirements of Sec. 1, 30 V.S.A. § 283(1).