2026-07-26 01:47 UTCIn-site rewrite5 min readUpdated: 2026-07-26 02:48 UTC

The hidden cost of AI: Why your town is negotiating with Amazon and Microsoft

AI data centers are driving massive energy demand, leading towns to negotiate community benefit agreements with tech giants. The article highlights examples like Hobart, Indiana, where Amazon committed $200 million, and argues for a new 'community contract' requiring tech companies to pay for infrastructure and local investment.

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CommentaryData centers

The hidden cost of AI: Why your town is negotiating with Amazon and Microsoft

Melody Birmingham

July 23, 2026, 6:30 AM ET

Melody Birmingham is executive vice president of NiSource and group president of NiSource Utilities.

Protesters arrive at City Hall after marching through San Marcos in the March for Water and a Sustainable Future, Aug. 19, 2025. Sara Diggins/The Austin American-Statesman via Getty Images

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The future of data centers isn’t being decided in Silicon Valley boardrooms or Washington backrooms. It’s being shaped on Main Street, in town councils and utility commissions across America. What’s emerging is a new “community contract” that delivers for both sides – joining the data center boom with key local investments and benefits.

That contract is the foundation for the largest infrastructure buildout in a generation. As Fortune recently covered, PJM’s independent market monitor recently tied the expected demand from data centers to roughly $23 billion in higher electricity costs for customers across the mid-Atlantic and Midwest, running through at least 2028. It is the hardest question the industry has faced in decades: how to meet the massive energy demand of new data centers, while keeping the lights on and bills affordable.

So far, this AI-driven buildout has been painted as us vs. them, residents vs. data centers, utility customers vs. Big Tech. I’m convinced that isn’t the right story.

The more interesting, and important, conversations are happening far from those fights, in places like Hobart, Indiana.

Hobart is a town of about 30,000, the kind of place where the big civic fights are usually about zoning and the local high school. The town found itself across the table from Amazon. The tech giant wanted to build a data center. Hobart wanted something in return: investment in its future. Hobart, which entire annual tax levy is about $25 million, left the table with roughly $200 million in commitments. The city will use some of the funds to invest in public parks, youth programs, and public safety – without having to raise income taxes – in addition to securing a commitment from AWS to recruit from Hobart high schools.

A similar model is taking hold across the country. Down the road, LaPorte, Indiana, projects 30-year tax collections from its project with Microsoft at $1 billion, 15% of it dedicated to the local school system. In Jasper County, officials approved a community benefit plan worth $98 million upfront and $23 million a year for a decade, with $1 billion in expected tax revenue. Henrico County, Virginia is home to the first county housing trust funded entirely by data center revenue – $60 million for teachers, nurses, and factory workers who just miss traditional housing assistance.

However, when these deals are struck in the dark, communities revolt. In Festus, Missouri, voters removed half the city council this spring after officials backed a $6 billion data center; Rick Belleville, the first-time candidate who unseated an eight-year incumbent, said it was, “the way the deal was handled that led to this kind of uprising.” Festus is not an isolated case. By one tally from the research group Data Center Watch, at least 75 projects worth roughly $130 billion were delayed or blocked across the country in just the first three months of 2026.

With billions at stake, it’s not surprising that negotiations can be fraught. Utilities are emerging as a key broker – designing agreements that power data centers while protecting ratepayers. There is a clear, long-term need for such models. Joe Bowring, the independent monitor of the PJM market, has warned that capacity prices could stay high and argues that large loads like data centers should bring their own generation, rather than lean on infrastructure the rest of us pay for.

That is exactly what is starting to happen. AEP Ohio now makes large load customers pay for most of the capacity they reserve, whether they use it or not. And NIPSCO, the utility I help lead, created a separate company that lets the data center finance its own generation rather than drawing on the existing rate base. Already, we’ve signed agreements with Amazon and Alphabet. These data centers will not only pay for their own electric service, but also return an expected $1.4 billion to existing customers – a figure that will only grow as more projects come online.

Similar approaches may soon go nationwide. In June, the Federal Energy Regulatory Commission required all six regional grid operators to revise or justify the rules governing how large new energy users connect and who pays for needed upgrades. Months earlier, AI companies signed a White House-backed pledge to provide or pay for the power their projects require. The growing consensus: large loads should carry the costs their projects create, and communities should share in the promise of the AI-driven buildout.

This is the new contract in action. The towns and utilities that treat this as a chance to write the new rules, not just defend the status quo, will come out ahead.

Melody Birmingham is executive vice president of NiSource and group president of NiSource Utilities.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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