The Data Center Backlash Has a Practical Fix

That era is over.

The explosive growth of artificial intelligence has transformed data centers from invisible infrastructure into one of the most combustible issues in politics. Today's facilities are massive industrial operations that can consume as much electricity as a small city. And they are clustering most aggressively across the South and Sun Belt — Virginia, Texas, Georgia — where land is plentiful, regulation is lighter, and demand for power is surging.

My firm's new report, Accelerating South — the first political-risk analysis of the nine-state American South — maps the buildout at ground level. Voters are alarmed, and often with good reason. Rising electric bills, new transmission lines cutting across communities, mounting concerns about water usage, and a deepening distrust of AI are all top of mind.

This issue's refusal to break cleanly along partisan lines is what makes this issue so potent. And yet, neither party has figured out how to talk about data centers in a way that matches the growing intensity of voter concern. The political high ground is still very much up for grabs.

The leaders who navigate this successfully will be the ones who stop adopting postures — "community input," and "fair deals" — and start naming mechanisms. Here are four rules that can separate the states who are writing durable rules from ending up with negative headlines and frustrated residents.

Put data centers in their own rate class. This is the fight that decides everything else, and it's why Virginia's legislature spent a session on two unglamorous bills about tariff design. A dedicated rate class — with minimum-bill and take-or-pay provisions — means the company that ordered the capacity pays for it whether or not it ends up using it. Without one, households amortize a hyperscaler's bet: a dedicated class ensures unusually large users pay the costs associated with the generation, transmission and capacity they require, rather than shifting those costs to residential customers. A politician who can't say "separate rate class" doesn't yet have a data center position; they have a press release.

Price the exit, not just the entry. Every incentive negotiation obsesses over the ribbon-cutting. The harder question is the one no one asks out loud: if AI demand disappoints after the generation is built, who owns the surplus? North Carolina learned this lesson the expensive way when VinFast's 7,500 promised jobs became roughly 1,400 — and the state discovered it held clawback rights it never expected to need. Write the data center version now: capacity commitments that survive cancellation, clawbacks that trigger automatically, and no exposure to stranded plants for the ratepayers who never voted for them.

Trade speed for standards, not subsidies. Here is the negotiating leverage most officials don't realize they hold: what hyperscalers maximize isn't tax abatement — it's time-to-power. A jurisdiction that can deliver a permitted, pre-zoned, grid-ready site on a certain timeline is selling the scarcest commodity in the AI economy, and it can charge for that certainty in standards — water recycling, noise buffers, local hiring, community benefits agreements priced like procurement rather than charity — instead of paying for the privilege with its tax base.

Sunset the secrecy. The power and water terms of these deals are routinely locked behind nondisclosure agreements until after the approval vote. Flip the sequence: disclosure before the vote, as a condition of the incentive. Communities learn about projects only after the key decisions are made — that's the practice fueling the backlash — and it's also now bad politics. A deal that can't survive daylight won't survive an election.

Data centers aren't going anywhere. They're the backbone of the next economy, and the South is perfectly positioned to play host to an outsized network of them. But the politicians who treat that inevitability as license to cut deals behind closed doors are about to learn what the Georgia Public Service Commission already discovered: voters will notice who paid for the power, and exact their price at the ballot box.

The third rail was never the data center. It was the leader who reached for the easy win and forgot whose backyard it landed in.

Howard Franklin is founder and CEO of Ohio River South, a government affairs and political-risk firm with clients across the South, and the author of Accelerating South: Risks, Rewards & The Road Ahead.