A coalition of Colorado progressive and environmental groups are backing new legislation to more strictly regulate large data centers, countering an industry-endorsed bill that would pair a handful of safeguards with tax breaks to incentivize development.

The centerpiece of Senate Bill 26-102, introduced this week by Democrats Senator Cathy Kipp of Fort Collins and Representative Kyle Brown of Louisville, is an “hourly matching requirement” mandating that data center operators generate or purchase renewable electricity to meet their annual power consumption, starting in 2031. The bill proposes the requirement be set at 100 percent, though it gives leeway to the state’s Public Utilities Commission to determine the “highest percentage … that is technically and economically feasible.”

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“Colorado is already home to large data centers, and many more developers want to build here,” Kipp said in a press release Wednesday. “Without some basic protections in place, these projects place too much risk on the shoulders of Colorado families and small businesses. Our bill ensures that won’t happen.”

Amid a nationwide boom in data center construction, largely driven by investment in AI, polling shows a growing number of Americans concerned about the energy-intensive facilities’ impact on the environment, and what the surging demand for energy could do to utility rates paid by consumers.

Electricity demand in Colorado, like most states, remained relatively flat between 2000 and 2020, with population and economic growth offset by gains in efficiency. But Xcel Energy, the state’s largest electric utility, told the PUC last year that it expects demand to increase by nearly 20 percent between 2024 and 2031, with two-thirds of the new demand coming from data centers.

In a letter to Governor Jared Polis and state lawmakers this month, 54 Colorado environmental and social justice groups, including Conservation Colorado, GreenLatinos and the Bell Policy Center, urged policymakers to “act now to ensure that Big Tech pays its fair share and avoids harming Coloradans.”

Those groups have been critical of a separate proposal pending in the Legislature, House Bill 26-1030, which has the support of groups representing the tech industry. It would offer a 100 percent sales and use tax exemption for data center operators for up to 30 years, aligning Colorado with at least 37 other states that have passed similar incentives. An industry representative told lawmakers last month that operators of so-called “hyperscale” data centers, which serve the largest AI and cloud-computing companies, “only go to places with the state-level sales and use tax exemption.”

In order for a data center to qualify for the tax incentive, HB-1030 would require the electric utility that will provide power to the facility to “verify that the data center will not cause unreasonable cost impacts to other utility ratepayers.” It would also require a utility making a “targeted resource acquisition” to meet the energy needs of new data center to source at least 75 percent of the new capacity from clean energy sources, with the requirement rising to 100 percent after 2040.

Critics of HB-1030 call it a “handout” for an industry that serves some of the richest companies in the world. SB-106 doesn’t include any tax exemptions, and it would prohibit electric utilities from offering discounted “economic development rates” to large data centers, defined as facilities that consume a peak load of more than 30 megawatts. The bill would also require the Colorado Department of Local Affairs to publish model codes that local governments could adopt to regulate data center construction and operation.

“Colorado shouldn’t be the Wild West for data center developers,” Stacy Tellinghuisen, deputy director of policy development at Boulder-based environmental group Western Resource Advocates, said in a statement. “This bill makes them pay their fair share, protects families from higher utility bills, and establishes strong standards for clean energy, efficient water use and community protections. It’s about setting common-sense, responsible guardrails around data center development that puts the needs of Coloradans first.”