New Alabama Law Going Into Effect October 1st Sets Rules for Hyperscale Data Centers

Alabama is experiencing a surge in hyperscale data‑center proposals, with at least three possible in Tuscaloosa County, near Brookwood.

With controversy rising about the development of the massive, energy-consuming centers, the Alabama Legislature passed, and Gov. Kay Ivey signed, Senate Bill 270 into law earlier this year.

SB 270 forces large data centers to pay for their own buildout — including all incremental electric‑system costs — and requires the Public Service Commission to verify that the deal doesn’t raise bills for regular customers. It applies to any facility needing 150 megawatts or more at a single site.

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The law states that data centers must pay all incremental costs, including generation, transmission, distribution, fuel, taxes, and any other expenses the utility would not incur without the data center. Additionally, all contracts must provide “positive benefits” to other customers, with the PSC determining if the deal lowers costs for other ratepayers, increases grid efficiency, or contributes to local economic growth.

The legislation doesn't officially become state law until October 1st, but Alabama Power is asking the PSC to follow a narrow implementation of that law. This would make enforcement more about the cost of recovery rather than deeper scrutiny of benefits, risk, or grid impacts.

In their official statement, Alabama Power is proposing a more limited enforcement of the law. The utility wants the PSC to narrowly focus on cost recovery and downplay the law’s broader “positive benefits” requirements. This would make the utility regulator's review of data center projects quick and limited, with no definitive analysis of grid impacts or requirement to prove broad public benefits. That would mean projects like those proposed in Brookwood would have an easier and quicker path to approval.

Meanwhile, State Attorney General Steve Marshall is asking the commission to change how it sets electric rates. He argues the current system gives Alabama Power too much automatic control and too little public oversight over rate hike requests. He also believes there is not enough transparency, which limits opportunities to challenge rate hikes. Marshall is also critical of how the PSC depends too much on Alabama Power. All of these factors can play into data center development.

The next PSC meeting is next Tuesday, while the next rate-related hearing is September 22nd.

Critics point out that a narrow implementation like Alabama Power wants treats SB 270 like a simple accounting rule, while a broad implementation as watchdog groups want treats SB 270 like a public-interest safeguard.

The future of the proposed Brookwood projects and every other data center project in Alabama depends entirely on which path the PSC chooses.