New Jersey Governor Mikie Sherrill has signed legislation requiring data centers to publicly disclose their energy and water consumption, while simultaneously releasing statewide guidance to help municipalities negotiate community benefits agreements with data center developers, actions she describes as completing all four pillars of a comprehensive data center framework announced just three months ago.

A Framework Delivered in Three Months

The moves mark what Sherrill's office calls a major milestone in addressing the rapid expansion of data centers across New Jersey.

In May, the governor announced what her office characterized as the most comprehensive data center plan in the nation.

By late August, she had delivered on every component of that plan, a pace her office noted is faster than most states, many of which are still in the early stages of considering how to regulate the sector.

The final actions, the signing of legislation S3379/A4096 and the release of community benefits agreement guidance, come on the heels of what the governor described as nation-leading legislation signed in July.

That earlier legislation required data centers to supply their own clean energy and established a separate rate class for data center developments, a measure designed to prevent other ratepayers from absorbing the costs associated with surging data center energy demand.

New Transparency Requirements for Energy and Water Use

The newly signed legislation, S3379/A4096, places direct reporting obligations on data center owners and operators. Under the law, they must submit semiannual reports to the New Jersey Board of Public Utilities detailing their consumption of both energy and water.

The required disclosures are extensive. Reports must include total energy consumption, energy used specifically for cooling systems and information technology equipment, peak daily water use, the sources of that water, and information about both on-site and backup power supplies.

The legislature's intent is to give regulators and the public greater visibility into what data centers are actually drawing from the state's energy and water infrastructure, resources that have historically been difficult to quantify at the facility level.

Guidance to Help Municipalities Negotiate With Developers

Alongside the new law, Governor Sherrill announced statewide guidance from the Department of Community Affairs aimed at equipping municipalities with the tools to negotiate effectively with data center developers before projects are approved or built.

The guidance was distributed to municipalities on August 25 through a Local Finance Notice.

It centers on community benefits agreements, which are contracts between local governments and developers that can be used to extract commitments on a range of community priorities in exchange for local cooperation or approval of a project.

According to the governor's office, the guidance outlines how municipalities can use these agreements to mitigate the impacts of data centers, share in the economic benefits of these large-scale developments, and secure concrete investments for their communities.

The document provides considerations for evaluating how proposed data centers might affect local infrastructure and resources, including emergency response capacity and infrastructure needs. Among the types of community investments, the guidance identifies as candidates for negotiation are public infrastructure improvements, blight remediation, support for local schools, and workforce development programs.

The guidance also outlines applicable state labor standards, including prevailing wage requirements and project labor agreement obligations, standards intended to ensure that construction work associated with data centers supports union labor.

State Agencies Offering Technical Assistance to Local Governments

Recognizing that many municipalities may lack the in-house expertise to navigate complex negotiations with large technology companies, the governor's office announced that several state agencies have established dedicated resources to assist communities.

The New Jersey Economic Development Authority has set up an online resources and technical assistance hub and assembled a team available to provide direct support to local governments.

The Board of Public Utilities and the Department of Environmental Protection have also created technical assistance teams. Information about all of these resources is accessible through the EDA's Municipal Resource Hub.

The involvement of the BPU and DEP alongside the EDA reflects the multi-agency nature of the data center challenge, which cuts across energy regulation, environmental oversight, and economic development policy.

Framing the Policy as an Affordability Issue

Governor Sherrill framed the entire data center initiative explicitly in terms of cost reduction and affordability, positioning the regulatory framework as a way to prevent data center growth from driving up costs for ordinary residents and businesses.

"I am laser-focused on driving down costs and making sure our state is more affordable," Sherrill said in a statement released by her office.

"When it comes to data centers, we're doing that by putting power back in the hands of communities and ensuring data centers play by our rules, paying their fair share for energy and contributing to the grid, being transparent about their energy and water usage, making meaningful investments in communities, and bringing good union jobs when they are building."

The four pillars of the plan as executed include: requiring data centers to bring their own clean energy, establishing a separate rate class to protect other ratepayers, mandating transparency on energy and water use, and providing communities with guidance and support for negotiating community benefits agreements.

New Jersey Acting Amid National Policy Uncertainty

The governor's office noted that while New Jersey has moved swiftly to enact a complete regulatory framework, states across the country are still working through how to respond to the rapid growth of data centers and the increasing demands they place on power grids, water systems, and local infrastructure.

The AI boom has significantly accelerated data center construction nationally, intensifying pressure on state and local governments to establish clear rules governing how these facilities are built, operated, and held accountable.