New York lawmakers are considering a three-year halt on the construction of new AI-focused data centers, positioning the state among a growing list of jurisdictions seeking to slow the rapid expansion of energy-intensive computing facilities.
The proposal follows New York’s recent passage of the Responsible AI Safety and Education (RAISE) Act, which created state oversight of AI models, and a separate measure requiring transparency when artificial intelligence is used in advertising. The latest bill, introduced by Sen. Liz Krueger, would temporarily block permits for new data centers while regulators study their impact on power grids and utility customers.
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If enacted, the legislation would require the state Public Service Commission to issue orders aimed at reducing the effect of future data centers on electricity and gas rates for residential, commercial and industrial users.
The move places New York alongside Maryland, Georgia, Oklahoma, Virginia and Vermont, where similar proposals have emerged in recent weeks. A Republican lawmaker in Michigan has signaled plans to introduce a statewide measure after dozens of local governments enacted their own bans, while a Democratic gubernatorial candidate in Wisconsin has also endorsed a pause.
AI data centers have drawn increasing scrutiny as consumers confront higher electricity bills linked to surging demand for power. The U.S. Energy Information Administration reported that nationwide electricity rates jumped 13% in 2025 — the steepest annual increase in more than a decade.
“Massive data centers are gunning for New York, and right now we are completely unprepared,” Krueger said in a statement. “It’s time to hit the pause button, give ourselves some breathing room to adopt strong policies on data centers, and avoid getting caught in a bubble that will burst and leave New York utility customers footing a huge bill.”
Environmental organizations have rallied behind the proposal, arguing that unchecked data center growth threatens climate and water resources. Food and Water Watch joined more than 230 groups in December urging Congress to impose a nationwide moratorium.
“The rapid, largely unregulated rise of data centers to fuel the AI and crypto frenzy is disrupting communities across the country and threatening Americans’ economic, environmental, climate and water security,” the coalition wrote in its letter.
Assemblymember Anna Kelles, sponsor of the companion bill in the lower chamber, echoed those concerns. “This is the time to take a pause and set up strong regulations that ensure protections for New Yorkers from carrying the economic burden of the high energy demands of data centers and minimize environmental harms of water, noise, light, and air pollution,” she told Politico.
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The backlash has upended traditional political alignments. In Pennsylvania, Democratic Gov. Josh Shapiro shifted from aggressively recruiting AI investment to proposing new limits to shield residents from escalating utility prices. Arizona Gov. Katie Hobbs similarly reversed course, replacing tax incentives with new water-use fees for the industry.
New York Gov. Kathy Hochul has attempted to strike a middle ground. Last month she unveiled the Energize NY Development initiative, designed to modernize how large energy users connect to the grid while ensuring they “pay their fair share.”
Supporters of the moratorium argue that a temporary freeze would allow the state to craft comprehensive rules before additional facilities lock in decades of energy demand. Industry advocates counter that delays could drive investment elsewhere and slow technological innovation.
The bill faces an uncertain path in Albany, where lawmakers must balance economic development ambitions with mounting concerns over affordability and environmental impact.
Data centers powering artificial intelligence models require enormous amounts of electricity for computing and cooling. Analysts estimate that a single large facility can consume as much power as a mid-sized city, placing strain on aging grids. Utilities in several states have warned that meeting projected demand may require new gas plants, conflicting with climate goals.
Local governments have increasingly used moratoriums as a tool to buy time for zoning and infrastructure planning. Critics say communities often bear the costs — higher rates, water use and noise — while economic benefits are limited due to the relatively small number of permanent jobs created.
New York’s proposal would not affect existing centers but could reshape negotiations with major tech firms scouting sites across the Northeast. Observers expect intense lobbying from both environmental coalitions and the technology sector as the measure moves through committee hearings this spring.
Originally reported by CPI in A Pymnts Company.
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