Microsoft's Brad Smith tells Congress Big Tech must pay AI data center costs

Brad Smith, Microsoft’s president and vice chair, met Tuesday with federal lawmakers to press for an industry-funded model for AI data center expansion, calling on technology companies to bear the full costs of the computing infrastructure powering AI services rather than shifting expenses to taxpayers or utility ratepayers.

“Local communities naturally want to see new jobs but not at the expense of higher electricity prices or the diversion of their water,” Smith said in an interview with The Associated Press. President Donald Trump aligned with the position Monday evening in a Truth Social post, stating he does not want Americans to “pick up the tab” for data centers or pay higher utility costs.

The push comes as data center projects face widening community opposition over rising electricity rates, heavy water consumption, and loss of open space — with some municipal boards rejecting construction permits and developers offering hundreds of millions of dollars in side payments to secure local approvals.

Rising bills and community resistance

Smith, who has spent decades leading Microsoft’s legal and political affairs, said the industry must confront residents’ concerns directly. “People are asking not just pointed questions but completely reasonable questions and it’s our job, I think, to acknowledge them and address them head on and show that we can do this and pursue this expansion in a way that fully meets their needs,” he said.

Electricity costs represent the central challenge. In the mid-Atlantic region grid — which encompasses all or parts of 13 states — ratepayers have been paying higher prices on their bills since at least June 2025 because of data centers, according to utilities and analysts. Bills are expected to keep rising as payments to power plant owners grow to attract new power sources needed to meet demand in hot spots including Virginia, Ohio, and Pennsylvania.

Water usage has also stirred conflict. Data centers consume water to cool electronic equipment, raising concerns among residents near proposed facilities that wells will run dry or water utility bills will spike.

Smith acknowledged electricity is the heavier lift. “We don’t use nearly as much water as we do electricity. Electricity is a heavier lift. It’s a larger investment,” he said.

A separate source of friction involves bulk power deals that large data center developers can negotiate directly with local utilities — deals that are often kept confidential. Consumer advocates said it may never be clear whether operators are actually paying for their electricity or passing the cost to other ratepayers on the same utility.

Dollars and deals

The scope of the opposition has driven some developers to substantially expand the financial incentives they offer communities in exchange for approval.

In Hobart, Indiana, the City Council last week approved a tax-abatement package for a multibillion-dollar Amazon data center. Under the deal, Amazon will make two payments of $5 million each upon issuance of building permits, plus additional payments totaling $175 million over three years at various project milestones. Opponents said the money unduly influences the decision-making of city officials.

Wisconsin flashpoint

Microsoft’s data center expansion in Wisconsin has drawn particular scrutiny. The company has described its facility near the shores of Lake Michigan as “the world’s most powerful AI datacenter,” and has promised the centers will employ hundreds of people when completed.

Environmental group Clean Wisconsin called for state officials to pause data center approvals until Wisconsin develops a comprehensive regulatory plan. Francesca Hong, one of several Democratic candidates for governor — incumbent Democratic Gov. Tony Evers is not seeking re-election in November — proposed a moratorium on data center construction she called “CONTROL ALT DELETE” until, in her words, “we know how to protect ourselves from their environmental and energy costs.”

Environmentalists and consumer groups warned that Microsoft’s Wisconsin centers will consume unprecedented amounts of electricity, driving up rates across the Midwestern power grid, and could use hundreds of thousands of gallons of Lake Michigan water daily. Company officials said the centers’ impact will be minimal and will contribute carbon-free energy to the power grid.

Evers has supported the projects, saying they will put Wisconsin “on the very cutting edge of AI power.”

Smith pushed back against calls for a pause, saying Microsoft supports development of a comprehensive state electricity plan but should not be required to wait for one. He said the company has proposed a rate tariff to Wisconsin’s public utility commission under which Microsoft would take on additional costs, and pointed to a planned investment in a 150-megawatt solar farm as part of its energy commitments in the state.

Carbon goals

Smith said Microsoft has not changed course on its 2020 commitment to become carbon-negative by 2030 — meaning the company will remove more carbon from the environment each year than it emits, beginning that year.

“Progress is lumpy, not linear,” he said. “A lot of what we’re doing in the middle of the decade is making the investments that will benefit us at the end of the decade.”

On some occasions, Smith acknowledged, power reaching Microsoft’s data centers is generated by natural gas. The company works with utilities to use cleaner natural gas and also invests in adding carbon-free sources — including nuclear, solar, and hydropower — to regional electricity grids, he said.