A new Alabama law taking effect October 1st establishes regulatory rules and permitting frameworks for hyperscale data centers.

Alabama is experiencing a surge in hyperscale data-center proposals, with at least three potential facilities planned for Tuscaloosa County near Brookwood. Amid growing controversy over the development of these massive, energy-intensive complexes, the Alabama Legislature passed Senate Bill 270 earlier this year, which Gov. Kay Ivey signed into law.

SB 270 mandates that large data centers cover their own construction costs, including all incremental electric-system expenses. It also requires the Public Service Commission (PSC) to verify that such agreements do not increase utility bills for residential and commercial customers. The law applies to any facility requiring 150 megawatts or more at a single site.

Under the legislation, data centers must pay for all incremental costs, encompassing generation, transmission, distribution, fuel, taxes, and any additional expenses the utility would not otherwise incur. Furthermore, all contracts must deliver “positive benefits” to other customers. The PSC will evaluate whether each deal lowers costs for ratepayers, improves grid efficiency, or stimulates local economic growth.

Although SB 270 does not officially take effect until October 1st, Alabama Power has petitioned the PSC to adopt a narrow interpretation of the statute. In its official statement, the utility requests that regulators focus strictly on cost recovery while downplaying the law’s broader “positive benefits” requirements. This approach would streamline the PSC’s review process, limiting it to financial calculations without conducting definitive analyses of grid impacts or mandating proof of widespread public advantages. Consequently, proposed developments like those in Brookwood would face a faster, less rigorous approval pathway.

Concurrently, State Attorney General Steve Marshall is urging the commission to overhaul Alabama’s electricity rate-setting framework. Marshall contends that the current system grants Alabama Power excessive automatic authority while providing insufficient public oversight regarding rate-increase requests. He also highlights a lack of transparency that restricts opportunities to contest rate hikes, and criticizes the PSC’s heavy reliance on Alabama Power. These regulatory dynamics directly influence the trajectory of data center development across the state.

The PSC is scheduled to meet next Tuesday, with the next rate-related hearing set for September 22nd.

Critics argue that Alabama Power’s preferred narrow implementation reduces SB 270 to a straightforward accounting mechanism, whereas watchdog groups advocate for a comprehensive approach that treats the law as a public-interest safeguard. Ultimately, the fate of the proposed Brookwood facilities—and every future data center project in Alabama—hinges entirely on which regulatory path the PSC selects.