Midterm voters yesterday, Nov. 3, sent a clear message to lawmakers and investors, calling for restrained data center development from the top to the bottom of their ballots. Democratic gubernatorial candidates who supported temporary moratoriums or tighter regulation won in states that had favored development, including Texas, Ohio and Georgia, while at least 42 jurisdictions approved measures to ban or restrict data center development.
Together the two sets of results point to slower project approvals, fewer eligible sites and higher interconnection and development costs in some of the country’s busiest buildout markets, as Octus outlined in its February analysis.
Gubernatorial Races
Democrats flipped five governorships in the Nov. 3 midterm elections, and many winners advocated for statewide pauses on data center development or stricter rules for new projects.
Democrats now hold 28 governorships, with Kansas and Alaska races still uncalled by the Associated Press at the time of publication. Nevada now has a Democratic trifecta, but elsewhere, most moratorium pledges will run into divided governments.
In Texas, Democrat Gina Hinojosa defeated incumbent Greg Abbott, ending three decades of Republican gubernatorial control. Hinojosa campaigned on an immediate statewide moratorium that would last until the Legislature passes stronger protections, including safeguards for utility ratepayers and measures to strengthen local approvals, as well as ending data center subsidies. Although a prolonged blanket moratorium would likely face a legal challenge under the Texas Constitution, Hinojosa will be able to exert significant influence over permitting and grid interconnection processes.
These policy shifts build upon the restrictions Abbott already put in place earlier this year. In September, Abbott ordered the Public Utility Commission of Texas and the Electric Reliability Council of Texas, or ERCOT, to audit all data centers in the interconnection queue before approving more and directed the Texas Commission on Environmental Quality to halt all data center permits until that audit is done.
Democrats also appear to have flipped the Texas House, although the Texas Senate remains Republican-controlled.
The equity markets responded negatively to the news as independent power producers Vistra and NRG Energy stocks fell roughly 15% and 12%, respectively, at the time of publication. About half of Vistra and NRG’s respective generation capacity is located in ERCOT. In comparison, other IPP peers Talen Energy and Constellation Energy stock prices fell by smaller margins, about 7% and 6%, respectively. Bond price movements were relatively more muted, according to S&P IHS. Stock prices were sourced from Yahoo Finance.
In Georgia, Democrat Keisha Lance Bottoms won the governor’s race, and Democrats took control of the Public Service Commission, or PSC, for the first time in more than 20 years.
Bottoms supports a temporary moratorium on new data center projects while state authorities develop a comprehensive framework to assess their strain on the grid, effects on the environment and public health and connection to rising consumer utility bills. In light of the Republican-controlled General Assembly, however, a statewide pause by executive order would test the limits of gubernatorial authority.
Bottoms’ Republican opponent, Rick Jackson, opposed a moratorium and favored more local autonomy with regards to project approvals.
The election of Peter Hubbard and Sheila Edwards, which gives the Democrats a majority on the five-member PSC, may be more consequential. The PSC regulates Georgia Power and must approve any investment needed to serve large loads. Hubbard and Edwards have both pledged to prevent data center infrastructure costs from impacting consumers and small businesses.
Democrat Amy Acton defeated Republican Vivek Ramaswamy in Ohio, marking the party’s first gubernatorial win in the state since 2006. The state halted new data center sales-and-use tax exemption requests in May. As discussed below, Ohio voters also approved a number of local measures restricting data center construction.
Acton’s plan is a conditional moratorium, not a flat ban. New projects would be blocked unless they cover all gas, water, electricity and infrastructure improvement costs, exclusively rely on union labor, sign community benefit agreements and provide full operational transparency with no nondisclosure agreements, among other requirements. Ramaswamy proposed a moratorium as well, conditioned on data center developers paying full property taxes and shouldering the electric bills of surrounding communities.
Acton also supports clawback provisions on state tax breaks for data centers, which have totaled roughly $1.6 billion. The Ohio General Assembly, however, remains Republican-controlled.
With Democratic Gov. Josh Shapiro’s victory, Pennsylvania is one of the most predictable large markets in this group. Shapiro’s Aug. 18 executive order directs the Department of Environmental Protection to review permit applications only if developers make legal commitments on energy affordability, transparency, workforce development and environmental standards. Those rules now carry through a second term.
The counterfactual was more restrictive. Shapiro’s Republican opponent Stacy Garrity had called for a temporary pause on new approvals, repeal of the state’s targeted data center tax exemption and greater local control.
Democrat Aaron Ford unseated Nevada Gov. Joe Lombardo, running on a platform that included a promise to stop awarding data center tax breaks until developers prove they are keeping their commitments and paying for their own clean energy, grid infrastructure and water. With a new Democratic trifecta, those pledges have a legislative path forward.
The Kansas gubernatorial race between Democrat Cindy Holscher and Republican Ty Masterson remains close as of noon Wednesday. In the legislature, both candidates supported Senate Bill 98, which provided tax incentives to data center developers. During her campaign, however, Holscher called for a temporary statewide moratorium and more guardrails.
In New Mexico, Democrat Deb Haaland won and has pledged a day-one executive order imposing a statewide moratorium on new large-scale data centers until the Legislature passes guardrails. This would likely place greater pressure on Oracle’s 2.45 GW Project Jupiter, which has already been repeatedly denied permits for an essential gas pipeline. Those denials prompted Oracle’s recent force majeure notice to Blue Owl Capital’s development unit, as Octus reported in our Sept. 25 Technology Insights. The $18 billion loan backing the project is unrated and trading at stressed levels. Whether Haaland’s order reaches approved projects still awaiting state permits, such as Jupiter’s gas microgrid, is unknown but will be critical to the state’s future data center buildout.
Ballot Measures
Voters in 13 states rejected data center initiatives on the ballot, according to results across 55 measures tracked by Octus as of noon Wednesday.
Ohio ballots had the lion’s share of data center-related measures on the ballot and led the nationwide rejection, passing at least 13 measures prohibiting data center development, including large scale projects above 25 megawatts. Ohio voters also rejected six ballot measures that proposed rezoning of land parcels from rural residential to light industrial, or allowing data center development within village limits.
Elsewhere in the midwest, voters in Bloomington, Ill. decided to impose a moratorium on large-scale data centers while five other measures in the state that advise officials to permit new data centers have failed. In Janesville, Wis., voters passed a ballot referendum requiring voter approval for the development of the General Motors/Janesville Auto Transport Co. manufacturing site if costs exceed $450 million. In Kansas, voters have passed at least three ballot measures prohibiting high impact data centers in their localities.
Voters in Boulder City, Nev. also said ‘no’ to data centers within the Eldorado Valley Transfer Area.
In Maine, voters have passed measures banning data centers of 25,000 sq.ft or more and supported a six-month moratorium on data center growth and permitting. In California, Alhambra’s Measure DB has not been called, but more than 80% of voters have said ‘yes’ to barring data centers in the city. In June Monterey Park residents voted to prohibit data centers via amending the city land use element. Edgewater, Fla. voters have opted to preclude the approval, construction, expansion and operation of new data centers in the city.
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