New reporting rules are part of a broader state plan intended to protect ratepayers, give municipalities more leverage and capture more local benefits from data center development.
New Jersey data centers must report their energy and water use to the BPU twice a year.
New state guidance will help municipalities negotiate infrastructure improvements and other community benefits from developers.
The broader plan aims to protect utility customers, strengthen labor standards and ensure data centers cover more of the costs created by their development.
New Jersey data centers will be required to report their energy and water use to state regulators twice a year under a new law. Gov. Mikie Sherrill signed S3379/A4096 on August 27, completing the final pieces of a four-part data center policy announced in May. Along with the reporting law, the state released guidance to help municipalities negotiate community benefits agreements with data center developers and established technical assistance teams through the New Jersey Economic Development Authority (NJEDA), Department of Environmental Protection (DEP) and Board of Public Utilities (BPU).
The policy does not seek to stop data center construction. Instead, it creates new rules intended to make the industry’s resource use more visible, prevent residential and commercial utility customers from subsidizing its power needs and give host communities a larger role in deciding what developments should provide in return.
What data centers must disclose
Under the new law, owners and operators must submit semiannual reports to the BPU detailing how much energy and water their facilities consume. Existing data centers that have operated for at least one year must file their first report within three months; other facilities have six months.
The reports must include total energy consumption, electricity used by information technology equipment, energy and fuel used for cooling, the electric utility serving the facility and information about on-site and backup power systems. Operators must also disclose total and peak daily water use, the source of that water and whether it is potable or reclaimed.
Facilities receiving state financial incentives face additional reporting requirements. They must provide performance measurements such as power usage effectiveness, water usage effectiveness, renewable energy use and the amount of waste heat reused. These measurements can help regulators distinguish between the power used to operate servers and the additional electricity and water required to keep those servers cool.
The BPU must publish certain reported information on its website within 30 days. Performance and sustainability information protected under the law will remain confidential, although anonymized and aggregated information from at least five facilities may be included in public reporting.
The reporting requirement initially runs for three years from a facility’s first filing. At the end of that period, the BPU can decide through the regulatory process whether to make it permanent. Data center operators must also give the BPU at least 60 days’ notice before making a substantial operational or technological change that would require their reported information to be updated.
Why energy and water use matter
Data centers are the physical backbone of our modern, digital lives, from iphones to cloud computing, streaming, online services and artificial intelligence. They house large concentrations of servers that operate continuously; the equipment requires significant electricity, along with cooling systems that may consume additional power and water.
That concentration of demand can create costs far beyond a data center site. A large facility may require new substations, transmission improvements, water and sewer upgrades, road work and added fire protection. Without clear rules assigning those costs, utilities, municipalities and other ratepayers can be left carrying part of the burden.
The reporting law is designed to establish a clearer picture of those demands. Reporting does not by itself reduce consumption or expand infrastructure. Its value will depend on how the BPU and DEP organize the information, how much facility-level data becomes publicly accessible and whether state and local officials use the findings when reviewing future projects.
Towns receive a framework for negotiations
The New Jersey Department of Community Affairs (DCA) separately issued guidance on community benefits agreements, which are legally binding contracts between developers and host municipalities. The agreements can require a developer to address local impacts or fund investments connected to the project.
The state is advising municipalities to evaluate water and wastewater capacity, electric infrastructure, roads, stormwater systems, fire protection and emergency response before reaching an agreement. Depending on a project’s effects, a municipality could seek funding for road reconstruction, water and sewer main improvements, firefighting equipment, emergency training, blight remediation, schools, workforce development or other local priorities.
The guidance also encourages towns to examine noise, light pollution, stormwater, water-efficient cooling, heat recovery and the eventual decommissioning of a facility. State officials recommend public engagement and long-term compliance measures so an agreement remains enforceable after construction is complete.
This is guidance rather than a single mandatory statewide agreement. Each municipality will still have to assess its own infrastructure, negotiate terms and retain legal and technical expertise. The NJEDA’s new municipal resource hub is intended to help local officials evaluate developer information and connect with specialists in energy, water and economic impacts.
A wider effort to shift costs and create jobs
The new requirements build on a law Sherrill signed July 7 that creates a separate utility rate class for large data centers. The BPU must develop standards and cost-allocation rules intended to prevent other customers from subsidizing the electricity and grid infrastructure required by those facilities. The law also encourages data centers to add clean power and reduce their demand when the grid is strained.
New Jersey has also established labor standards for data center construction. Projects designed to use at least five megawatts are subject to prevailing wage requirements, contractor registration, certified payroll reporting and safety and training standards. State guidance encourages project labor agreements for facilities designed to use 25 megawatts or more.
Data centers can bring major private investment, construction work and tax revenue, but their benefits and burdens are not distributed automatically. New Jersey’s framework attempts to link approval and operation more closely to the cost of the power, water and public infrastructure these facilities require.
The next stage will happen at the BPU and in individual municipalities. Regulators must turn the laws into workable reporting and rate rules; local officials must use the new information and negotiating tools to decide whether proposed projects provide enough lasting value to justify their demands on community resources.
Sources:
New Jersey Department of Community Affairs, Division of Local Government Services. (2026, August 25). Local Finance Notice 2026-13: Data centers. https://www.nj.gov/dca/dlgs/lfns/2026/2026-13.pdf
New Jersey Legislature. (2026). S. 3379: Requires data center owners and operators to submit semi-annual water and energy usage reports to BPU. https://www.njleg.state.nj.us/bill-search/2026/S3379
New Jersey Office of the Governor. (2026, August 27). Governor Sherrill delivers all four pillars of data center plan, puts power back in the hands of communities. https://www.nj.gov/governor/news/2026/20260827a.shtml
NJBIZ. (2026, August 27). NJ data center energy and water reporting law. https://njbiz.com/nj-data-center-energy-water-reporting-law/
