Pennsylvania and Kentucky Diverge on AI Data Center Regulations

State legislatures in Pennsylvania and Kentucky have taken opposing approaches to the rapid expansion of hyperscale data centers. In Pennsylvania, the Pennsylvania House of Representatives approved two bills aimed at managing the growth of cloud-computing and AI campuses. One measure establishes a model ordinance for municipalities to regulate building size and height, while the second mandates annual reporting on water and electricity usage, with non-compliance penalties reaching $10,000 per day. These efforts follow a previous bill designed to protect utility customers from price spikes driven by data center energy demand.

In contrast, Kentucky failed to implement similar protections during its 2026 legislative session. Lawmakers stripped key provisions from Senate Bill 197, effectively killing House Bill 593, which sought to prevent ratepayers from subsidizing infrastructure costs. The proposed Kentucky legislation would have required a $75,000 application fee and mandatory contracts for transmission costs. While some sponsors claimed industry support, the state's largest electric utility, Louisville Gas & Electric and Kentucky Utilities, opposed the measure as a one-size-fits-all approach.

Supporters of the Pennsylvania laws, including Representative Kyle Mullins, describe the current environment as a reckless gold rush. Conversely, opponents like Republican House leader Jesse Topper and the Data Center Coalition argue that state-level mandates could discourage investment and job creation. In Kentucky, Senate President Robert Stivers advocated for utility-led tariffs over legislative mandates, leaving Democratic Representative Adam Moore to describe the outcome as incredibly frustrating.