Indiana is on the front line of a question facing the nation as it races toward an AI future: Who should pay for the electricity needed to fuel the technology?
Gov. Mike Braun is expected to sign a bill that would require large energy users like Big Tech’s AI data centers to cover 80% of the costs of new power needed to run them if they seek a faster regulatory approval process, making it the first state to do so.
A second law Braun recently signed allows utilities to pass the cost to consumers of exploring a source of power that isn’t operating at scale in the US yet. Big Tech companies have bet that a new generation of “small modular nuclear reactors,” or SMRs, could soon provide around-the-clock power to data centers.
Consumer advocates said the two bills will ultimately hike energy bills for everyday Hoosiers and put them on the hook for nuclear projects that may never get up and running.
The debate in Indiana reflects one playing out across the country over the cost and environmental implications of the spike in energy demand from AI data centers.
Kerwin Olson, executive director of Citizens Action Coalition, a consumer advocacy group, called the bills “a disaster for Hoosier ratepayers” and said it will “exacerbate the utility affordability crisis.”
Republican Rep. Ed Soliday, who co-sponsored the bills, other GOP lawmakers, and a trade group representing utilities in Indiana argued the bills contain sufficient safeguards for consumers and that SMRs are the future of clean and affordable energy as demand from data centers and new manufacturing plants grows.
Indiana’s $15 billion data center pipeline
While Indiana doesn’t top the list of major US data center hubs, the Rust Belt state is attracting more development due to tax incentives and a reliable power supply.
Big Tech companies, including Amazon Web Services, Google, Microsoft, and Meta, plan to invest about $15 billion combined in Indiana. In January, President Donald Trump announced that a billionaire in Dubai planned to invest $20 billion in data centers across the US, including in Indiana.
Data centers require around-the-clock electricity to power and cool the racks of servers fundamental to cloud computing and storage. These projects could demand thousands of megawatts of electricity by 2035 — more power than the nearly 7 million residents in Indiana combined, according to utility forecasts analyzed by the Citizens Action Coalition.
A bet on small nuclear
So far, most of the demand is expected to be met by fossil fuels. But many tech companies and utilities have promised to shift to cleaner energy and are therefore exploring SMRs, which don’t produce carbon emissions.
SMRs are about one-third the size of traditional nuclear power plants, which could make them less expensive and quicker to build. To date, none are operating in the US, and only a few exist in Russia and China. It’s unclear when the first plant might come online, with forecasts range from five to 15 years.
Cost estimates for SMR projects vary widely, from $2.4 billion to $4 billion, depending on the start-up.
A law Braun signed in April allows utilities to recoup the costs of exploring SMR projects from customers, even if they never supply power to the grid.
The utility Indiana Michigan Power is evaluating the potential of SMRs at a coal-fired plant in Rockport, and the aerospace manufacturer Rolls-Royce is considering SMRs for a plant in Indianapolis.
Soliday told Business Insider that allowing utilities to recover dollars from customers in real time for their early-stage activities will save Indiana residents money in the long run. Otherwise, utilities would have to fund the projects by raising capital, leading to extra costs that residents would ultimately pay for, he said. Soliday added that state regulators must approve the costs and determine they aren’t overly expensive for customers.
Democratic Rep. Matt Pierce, who opposed the law, said it isn’t fair to let utilities burn money investigating a technology that may never produce power, and then charge customers for it. Pierce noted that a federally funded SMR project by NuScale Power in Utah was canceled in 2023 due in part to escalating costs.
Braun appeared to agree in February, when he told News 10 that he supported nuclear power but that utilities should shoulder the costs. “They are out there as investor-owned, and some of that is going to have to be the risk that they take,” Braun said.
When asked why he signed a law allowing the opposite, Braun’s spokesperson, Griffin Reid, said it would address Indiana’s high energy demand.
“Indiana is committed to pursuing diverse generation options, from fossil fuels to renewable energy to nuclear power, wherever they prove practical,” Reid said.
Critics call out loopholes
Consumer advocates said the other bill passed by Indiana legislators isn’t broad enough to shield residents from higher energy bills to cover the cost of new infrastructure for AI data centers.
While the bill requires tech companies to pay for 80% of the new power generation needed to serve them, this requirement is not guaranteed to apply to every project.
Danielle McGrath, president of the Indiana Energy Association, said in an email that the 80% requirement only applies if utilities pursue the new voluntary, fast-tracked approval process for big power projects.
“The legislation addressed concerns expressed by some large customers that speed was critical to their decision making and that longer timelines could serve as a deterrent to locating their projects,” McGrath said.
Pierce and Olson said utilities can pursue other pathways outside the new fast-track process to recover the costs of new power plants and other infrastructure, which could ultimately raise customer rates. That includes special contracts hidden from public view that may not require large energy users like data centers to pay 80% of the bill.
Soliday told BI that the 80% cost-share applies no matter what pathway utilities seek to get projects approved by state regulators.
“You are not going to get any utility to build in the state of Indiana for a large load customer without that customer paying 80%,” Soliday said. “Whether they take plan A or B to get there, they’re paying it.”
New infrastructure needed to serve Indiana Michigan Power’s pipeline of data centers could cost up to $1 billion, according to a cost-share agreement the utility reached with the Citizens Action Coalition, Amazon Data Services, Google, Microsoft, and others.
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