Battle over data centers in Illinois pits consumer costs vs. state
competitiveness
[February 21, 2026]
By Gabriel Castilho
SPRINGFIELD — The debate over how to regulate data centers in Illinois
is intensifying as lawmakers struggle to balance costs to consumers and
the state’s need to be competitive economically.
Data centers house computer systems that store, process and distribute
data but require large amounts of energy to power that workload. A
growing number of these facilities are used to power AI.
A state report published in December projects energy shortfalls would
begin in northern Illinois by 2029 and the rest of the state by 2031,
driven in large part by data centers’ increased power usage. That’s led
Gov. JB Pritzker to backtrack on a proposal he signed in his first year
as governor to incentivize data center development in the state.
“With the shifting energy landscape, it is imperative that our growth
does not undermine affordability and stability for our families,” he
said, proposing a two-year moratorium on the incentives in his budget
address Wednesday.
Illinois consumers blame data centers — which often receive generous tax
incentives in Illinois — for straining the grid and driving up prices,
and they want relief. But companies that operate the centers are seeking
ways to build more quickly and pushing for looser regulation, arguing
the centers are key to the state’s economic future.
And the state, from the governor’s office to the legislature, is
struggling with ways to balance the economic interests tied to data
center development with environmental and consumer cost concerns.
“We don’t want them to overwhelm our electrical capabilities and our
water resources,” Sen. Steve Stadelman, D-Caledonia, said. “If we’re
going to allow them and track them, how can we make sure it benefits
Illinois residents and rate payers in the state?”
Data center negotiations continue
These are the same issues and tensions legislators hoped to address in
their fall veto session. But no broad consensus was reached, and
instead, Gov. JB Pritzker signed the Clean and Reliable Grid
Affordability Act, adding new air regulations for backup generators used
by data centers.
Lawmakers in Springfield have already begun negotiating a new round of
data center regulations.
Sen. Ram Villivalam, D-Chicago, recently announced the introduction of
Senate Bill 4016, known as the POWER Act, to place prohibitions on cost
shifting, introduce “bring your own new clean capacity and energy,”
guarantee transparent public engagement and implement water efficiency
standards on data centers.
“By establishing policies that ensure data centers, not consumers, bear
the increasing energy costs, and critical protections for our
environment and sustainable water use, we can work toward a future built
for technology to support our daily lives,” Villivalam said, “not
deplete our resources and price us out of our homes.”
Environmentalists want new data centers to build their own renewable
energy sources on site to prevent new projects from further stressing
energy infrastructure and creating more pollution.
Pritzker said something similar earlier this month: “If they are, in any
way, going to increase the price of electricity for consumers, they
should pay for that increase, not the consumers.”.
The data center companies oppose such mandates, preferring a voluntary
“bring your own energy” policy, according to Brad Tietz, director of
state policy for the Data Center Coalition industry group.
“I think, ultimately, when you try to mandate something, you get less of
it,” he said.
States are competing to attract investments from companies that want to
build more data centers as they seek an edge in the artificial
intelligence race. Illinois has the fourth-largest number of data
centers — 222 — in the country, but Tietz said the state is in danger of
slipping because other states have friendlier policies.
Illinois has provided tax incentives for data centers since Pritzker
signed bipartisan legislation in 2019. According to the state’s 2024
report, at least 27 data centers had received incentives totaling $983
million in estimated lifetime tax breaks and benefits. That would stop
for at least two years under Pritzker’s plan.
Sen. Terri Bryant, R-Murphysboro, said she would like to see “a change
in our policy here in Illinois” so the state does not fall behind,
though she hopes those centers bring their own energy.
“We want to be able to do that because if we don’t, China will. If we
don’t, Wisconsin will, Indiana will,” she said.
‘Little type of war’
As negotiations progress, the Data Center Coalition has signified
another point of contention: A 2008 law known as the Biometric
Information Privacy Act that prohibits private companies from collecting
personal data without informed consent. The law allows people to sue
over the misuse of their biometric profile, such as fingerprint mapping,
facial recognition and retina scans.
Stadelman said the privacy protections in the act, which Illinois put in
place before any other state, are at the center of a “little type of
war.”
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State Sen. Terri Bryant, R-Murphysboro, with State Sen. Chapin Rose,
R-Mahomet, speaks on her support for data centers supplying their
own energy generators. (Medill Illinois News Bureau photo by Gabriel
Matias Castilho)
“You have privacy rights advocates saying, ‘We’re a leader in the
country as far as protecting people’s privacy rights and protecting
their data,’” Stadelman said. “But the data (centers) say, ‘We’re not
going to have more projects in Illinois unless you change the BIPA
legislation.’”
Tietz said these regulations have factored into operators’ decisions to
bypass Illinois, although lawmakers in 2024 drastically curtailed the
way damages accrue and the liability private entities are likely to face
if found in violation.
But the data center industry wasn’t satisfied, and its leaders say the
legal liabilities are one reason they are building in other states.
Abe Scarr, state director of the Illinois Public Interest Research
Group, said biometric information is uniquely sensitive.
“We should know who is collecting and commercializing information
created from the stuff our lives are made of,” Scarr said. “And we
should have to opt into — and be able to easily opt out of — pervasive,
intrusive surveillance.”
Consumer backlash
The legislative debate comes as data centers have become increasingly
controversial. In January, the Aurora City Council approved a moratorium
pausing new data centers. The city had five data centers in development
and had been receiving requests to build more even as residents and
environmental groups complained about noise, water usage and rising
utility costs.
Alison Lindburg, director of sustainability for Aurora, said the city
passed the moratorium because it needed time to put requirements for
data centers in place.
“We have tried to explain that to communities, that it’s not just about
data centers in Aurora, it’s about the entire grid, but that doesn’t
matter to them,” Lindburg said in an interview. “I think they’re just
very frustrated overall with the rising electricity prices.”
Hannah Flath, Illinois Environmental Council’s climate communications
director, said other communities are also opposing data centers.
“In that case (Aurora), the local government acted in accordance with
what their local constituents were saying,” Flath said.
Tietz said he has been in conversations with officials from Aurora about
the 180-day moratorium and is hoping he can help find a solution.
Lucy Contreras, GreenLatinos Illinois state program director, said
communities should have a voice in whether, where and how these projects
are built. She said developers must ensure host communities receive
tangible benefits rather than bearing only the burdens of hosting these
facilities.
“They contribute to air pollution and consume excessive amounts of water
daily, which restrains local water systems that might already be
struggling,” Contreras said. “Without strong and forceful regulations,
data center expansion will deepen existing inequalities, harm public
health and undermine our Illinois clean energy goals.”
Spreading the costs
Utilities are building billions of dollars of new power lines and plants
to keep up with energy demand increases brought on by data centers —
whether they’re built or in the process of being built. They, in turn,
spread associated costs to ratepayers.
“Speculation about data center development has actually increased
prices,” Sen. Bill Cunningham, D-Chicago, said. “It’s not just the
immediate demand, it’s anticipated future demand, so it’s really
important to sift out the wheat from the chaff on what’s a real proposal
and what isn’t.”
Cunningham said he expects fellow Democratic lawmakers to work on
safeguards for consumers when pending data center projects go
uncompleted.
Recently, northern Illinois utility Commonwealth Edison announced it
will require a 10-year guarantee of revenues upfront from big energy
consumers. ComEd said this will help protect ratepayers from bearing the
costs of high-load projects and ensure, even if they don’t come to
fruition.
Maddie Wazowicz, Midwest Energy Efficiency Alliance policy director,
said utilities function best when they can plan into the future.
“Whether or not data centers emerge — and how much, how many of them
come, where and how long they last — does complicate utility long-term
planning,” she said.
Gabriel Castilho is a graduate student in journalism
with Northwestern University’s Medill School of Journalism, Media
and Integrated Marketing Communications, and is a fellow in its
Medill Illinois News Bureau working in partnership with Capitol News
Illinois.
Capitol News Illinois is
a nonprofit, nonpartisan news service that distributes state
government coverage to hundreds of news outlets statewide. It is
funded primarily by the Illinois Press Foundation and the Robert R.
McCormick Foundation. |
