Illinois POWER Act Fails as AI Data Center Tax Incentives Survive and Grid Strain Mounts

When the Illinois General Assembly gaveled out its spring session on May 31, the most ambitious state-level attempt yet to make the AI data center boom pay its own way died quietly in committee. The POWER Act — the Protecting Our Water and Energy Resources Act — would have forced hyperscale data centers to report their energy and water use, meet new efficiency standards, and shoulder the cost of the electricity they consume. It never reached the floor. Days later, the state's lucrative data center tax incentive program rolled toward its July 1 anniversary intact, and Gov. JB Pritzker was left to do alone what lawmakers would not.

A bill that stalled, an industry that did not

The POWER Act, carried by state Sen. Ram Villivalam in the Senate and state Rep. Robyn Gabel in the House, was pitched in February as a national model. It would have required "hyperscale" data centers to disclose their resource consumption, meet water-efficiency benchmarks, pay for their own energy generation, and lean on renewable sources such as wind, solar and battery storage.

"Now is the time for us to come together and take action to address challenges our communities are facing that are posed by data centers and instill common sense guardrails to minimize their impact on our neighbors," Villivalam, whose 8th District covers parts of Chicago and the northern suburbs, said at the bill's rollout.

The political will, however, did not translate into votes. The bill remained stuck in committee through the spring and missed the session deadline entirely. Meanwhile, the industry it sought to regulate kept growing. Illinois already hosts at least 222 data centers — among the densest concentrations in the country — and at least three more were approved in the months after the bill was introduced. The state's footprint expanded even as the legislature debated whether to slow it down.

The numbers driving the alarm

The stakes are not abstract. An analysis by the Union of Concerned Scientists, which backed the POWER Act, projected that unchecked data center growth could add between \$24 billion and \$37 billion to Illinois electricity system costs by 2050 — costs that, absent reform, would be spread across ordinary ratepayers. Power demand in the Chicago area alone is projected to rise by as much as 900% as AI campuses multiply, straining a grid that was never built for this kind of load.

The existing tax incentive program shows how much public money is already in play. From 2020 through 2024, 27 data centers claimed more than \$983 million in benefits under the state's Data Center Investment Program, according to a state report. That program's terms were set to continue unchanged past July 1.

Pritzker acts where lawmakers wouldn't

With the legislature unwilling to pause the incentives itself, Pritzker moved unilaterally. On June 5, he directed the Illinois Department of Commerce and Economic Opportunity to stop processing new agreements under the Data Center Investment Program beginning July 1 — effectively a two-year suspension of new tax breaks. Existing agreements signed before that date would be honored.

"I am directing my administration to pause the processing of data center agreements while we continue working with the General Assembly and stakeholders on a comprehensive framework that protects affordability, safeguards our natural resources, and ensures responsible growth across Illinois," Pritzker said in a statement. "I look forward to continuing these conversations and getting this done the right way for Illinois working families and communities."

The move put Illinois alongside Ohio, where Gov. Mike DeWine ordered a similar pause, as states began improvising guardrails the AI buildout has outrun.

Union vs. environmental interests

If the POWER Act exposed a fault line, Pritzker's executive pause split it wide open. Some of the loudest opposition came not from tech companies but from organized labor. Climate Jobs Illinois and the Illinois AFL-CIO — coalitions that normally align with the governor's clean-energy agenda — called the pause "shortsighted" and urged him to "pause his pause."

In a joint statement, the labor leaders accused the administration of acting "to generate headlines, rather than practical results," arguing the order "does nothing to lower utility bills, protect the grid, or advance clean energy." Worse, they warned, it "will send billions of dollars in investment and thousands of union jobs to Indiana, Kentucky, and Ohio — states that sit on the same electrical grid, where those data centers will be built anyway, just without Illinois workers protected by nationally leading labor standards and without the clean energy requirements we've collaboratively fought to establish here."

That argument captures the central bind. Data centers are construction-heavy projects that generate apprenticeships and prevailing-wage work, making the building trades natural champions of the boom. Environmental advocates and consumer groups see the same projects as water-hungry, grid-straining machines whose costs land on residential ratepayers. The POWER Act tried to satisfy both — labor standards plus environmental accountability — and ended up commanding neither a coalition large enough to pass it nor an industry willing to accept it.

Why this matters

The Illinois fight is a preview of a national one over who pays for AI infrastructure. As hyperscalers race to site campuses near cheap power and water, states are discovering that the tax incentives they wrote a decade ago to lure server farms now subsidize an industry capable of moving regional electricity prices on its own. The question of cost allocation — whether data centers or households absorb the price of new transmission and generation — has migrated from statehouses to federal regulators.

What to watch

On June 18, the Federal Energy Regulatory Commission issued orders that begin to reshape how the costs of large new loads like data centers are allocated across the grid nationally — a federal intervention that could either reinforce or undercut state efforts like Illinois's. If FERC pushes more of the cost onto the hyperscalers themselves, it may hand reform-minded states the leverage the POWER Act lacked. If it does not, the burden defaults back to ratepayers, and the next version of the POWER Act — Villivalam and Gabel have signaled they will return in the fall veto session — will face the same uphill climb. Either way, with 222 data centers and counting, Illinois has run out of time to wait.