Microsoft on Tuesday promised to cover the costs of powering its massive expansion of data centers so local residents don’t have to foot the bill.
The pledge is part of Microsoft’s new “community-first” plan for building the infrastructure to support its artificial intelligence ambitions, which also includes replenishing data centers’ water use and adding to the local tax base.
The plan is aimed at quelling community opposition to data centers, which has emerged as a major risk to the AI race. Microsoft and other hyperscalers are struggling to gain the local support necessary to get their projects sited because residents are concerned about rising utility bills, the strain on water supplies, and tax breaks for trillion-dollar companies — especially at a time when schools and local infrastructure are often underfunded.
Last year, Microsoft scrapped plans for a data center in rural Wisconsin after community pushback, WPR reported. Google and Amazon also withdrew plans for data centers in Indiana and Virginia, respectively. The total number of projects canceled in 2025 vary widely; a tracker by Data Center Watch counted at least six, while an analysis by Heatmap found at least 25.
The rising cost of living, including utility bills, has become a political flashpoint across party lines, and President Donald Trump has taken note. On Monday, he said his administration is pushing tech companies to ensure their AI data centers don’t drive up electricity prices and teased Microsoft’s announcement.
“We will have much to announce in the coming weeks,” Trump said on his Truth Social site. “We are the ‘HOTTEST’ Country in the World, and Number One in AI. Data Centers are key to that boom… but the big Technology Companies who build them must ‘pay their own way.’”
The debate over utility bills
Microsoft’s vice chair and President Brad Smith attributed a recent rise in electricity rates to inflation, supply chain contractions, and overdue grid upgrades. He also nodded to the growing impact of AI data centers’ energy use, which can rival that of midsize cities.
“Especially when tech companies are so profitable, we believe that it’s both unfair and politically unrealistic for our industry to ask the public to shoulder added electricity costs for AI,” Smith said in a blog post. “Instead, we believe the long-term success of AI infrastructure requires that tech companies pay their own way for the electricity costs they create.”
Smith treaded carefully around the impact of AI data centers on electricity prices. The strength of the correlation between the two is still under debate. Between 2019 and 2024, the biggest driver of rising rates was actually utilities’ distribution and transmission upgrades, researchers at Lawrence Berkeley National Lab and the Battle Group found in their October report. And in states like North Dakota and Virginia with growing data center footprints, prices actually fell despite the rise in power demand.
That analysis only includes the start of the data center boom, however. The researchers noted that the trend may change as data center load growth forecasts surge to unprecedented levels. In PJM, price spikes in recent capacity auctions — a portion of which are passed on to ratepayers — were driven by the booming data center industry and not enough new generation.
Smith said Microsoft will work with utilities and state PUCs to set tariff rates high enough to cover the electricity and grid infrastructure needed to serve AI data centers. The company has used this approach in communities in Wyoming and Wisconsin already, he added. Microsoft supports a new “very large customer” rate structure proposed by a local utility in Wisconsin, which is under review by state energy regulators.
The tech giant also will advocate for state and federal policies that advance “affordable, reliable, and sustainable power,” Smith said. Those efforts will focus on speeding up the process to permit and interconnect new sources of generation, in part by collaborating with utilities earlier so they can better plan for future power demand.
Sustainability takes a back seat to AI
Microsoft’s AI ambitions are already undercutting its sustainability goals, in part because there isn’t enough clean energy on the grid to meet data centers’ voracious power demand. The company’s greenhouse gas emissions increased by nearly 30% between 2020 and 2024, largely due to the rapid growth in data centers.
In summer 2024, Microsoft’s former VP of energy predicted a “real risk” that hyperscalers’ climate commitments would take a back seat to AI. “There’s a huge economic pie sitting in front of all these tech companies, which is AI,” said Brian Janous, who is now CEO of Cloverleaf Infrastructure, at a Latitude Media event. ”And whoever can get there first and get the biggest piece of that pie is going to reap rewards for decades to come.”
While tech giants are investing — or encouraging utilities to invest — in new solar and nuclear power, battery storage, and other technologies to try to power this new demand cleanly, those projects have hurdles of their own.
For one, clean energy developers face their own opposition from local residents and power infrastructure often gets tied up in lengthy federal and state permitting processes or litigation. Meanwhile, Trump has cancelled offshore wind projects and other federal renewable energy programs, which critics argue will increase costs for ratepayers over the long run.
With utility bills on the rise, in part due to a spike in gas prices in 2025, Trump is under pressure to bring costs down, which was a key campaign promise and figured prominently in November’s off-year elections. And now that hyperscalers’ biggest obstacles to building data centers are securing enough power and rising local opposition, Microsoft sees a win-win in trying to help Trump deliver. The company’s commitment will pressure other hyperscalers to follow its lead, Jeffries analysts said in a note to investors.
A version of this story was published in the AI-Energy Nexus newsletter on January 14, 2026. Subscribe to get pieces like this — plus expert analysis, original reporting, and curated resources — in your inbox every Wednesday.
