Trump Tees Up “Ratepayer Protection Pledge” in SOTU, Signaling Big Tech Must Pay Its Own Way

In his State of the Union address, President Trump introduced what he called a “Ratepayer Protection Pledge,” aimed at addressing growing public concern that the rapid expansion of AI data centers could drive up electricity costs for Americans. He argued that major technology companies should assume responsibility for their own power needs — even building dedicated power plants — rather than relying on an aging grid and shifting infrastructure costs onto residential ratepayers. Framing the proposal as a first-of-its-kind strategy, Trump positioned it both to secure energy supply for high-demand industries and potentially lower electricity prices for local communities.

The principle behind the pledge is straightforward: large infrastructure users should pay for the incremental costs they impose on shared systems. I describe the Pay Your Own Way strategy in Big Tech’s Electricity Bill Is a Problem: Why the Pay Your Way Principle Should Apply to Broadband and Data Centers.

What Is the Ratepayer Protection Pledge?

“Ratepayer protection” is a concept rooted in U.S. public utility regulation, emerging in the late 19th and early 20th centuries when electricity, gas, railroads, and telephony were treated as regulated monopolies. A “ratepayer” is a customer who pays government-approved rates set under rate-of-return regulation, and the term reflects the legal duty of regulators to ensure those rates are “just and reasonable.” Ratepayer protection therefore refers to preventing utilities from imposing unjustified costs on captive customers—by disallowing imprudent spending, blocking cross-subsidies, and limiting excessive returns.

In electricity markets, this concept is not new. Large industrial users — including hyperscale data centers — routinely:

• Enter long-term power purchase agreements (PPAs);
• Reserve dedicated generation capacity;
• Trigger and co-finance grid interconnection upgrades;
• Pay demand charges tied to peak load.

These arrangements reflect a basic infrastructure norm: heavy users pay for both usage and the upgrades their demand requires.

Yet in parts of the United States — particularly in regions with aging grids and outdated regulatory frameworks — infrastructure upgrade costs have sometimes been socialized, pushing incremental expenses onto residential consumers through higher retail electricity prices.

The Ratepayer Protection Pledge signals a political shift: shielding consumers from subsidizing the electricity demands of AI and hyperscale data infrastructure.

The approach mirrors elements of proposed legislation in states such as Oklahoma and Texas where policymakers are exploring mechanisms to prevent data center expansion from driving up household utility bills.

Georgia, Iowa, and Florida have each advanced policy aimed at protecting ratepayers from bearing the electricity costs associated with AI hyperscale data center growth, and broader state action is underway. In Georgia, the Georgia Public Service Commission (PSC) has approved rules requiring new large-load customers like hyperscale data centers to pay for the transmission and distribution costs incurred as their construction progresses, a measure designed to protect residential and small business customers from cost-shifting of grid expansion and power supply costs to other ratepayers. In Iowa, lawmakers have pushed legislation (House File 2447) that would increase transparency around data center energy use and direct the Iowa Utilities Commission to create a separate utility rate class for data centers, preventing cross-subsidization of their costs by residential ratepayers. In Florida, Governor Ron DeSantis has proposed legislation as part of an “Artificial Intelligence Bill of Rights” that would prohibit utilities from charging Florida residents more to support hyperscale data center development and empower regulators and local governments to ensure large energy users pay their full costs. Moreover, states nationwide are actively considering similar measures: in 2025 at least 22 states introduced more than 60 bills addressing data center grid impacts, including ratepayer protection elements like cost allocation and rate design to keep electricity cost burdens off ordinary consumers.

The “Pay Your Own Way” Infrastructure Model

In most major infrastructure sectors, large users internalize marginal capacity costs. Electricity is a prime example. Hyperscale data center operators:

• Contract directly for generation capacity;
• Co-finance grid upgrades triggered by their interconnection;
• Pay peak demand charges;
• Absorb incremental capacity costs rather than shifting them to residential ratepayers.

Large users do not rely on households to fund the infrastructure expansion necessitated by their operations.

Broadband, however, is increasingly anomalous.

Why Broadband Is Different

Today, major platforms send enormous volumes of data into broadband networks without paying for the strain that traffic puts on those systems.

The costs of expanding network capacity to accommodate exponential traffic growth are largely absorbed by downstream access networks, with the impacts often reflected in reduced investment — particularly in rural and high-cost areas. When incremental infrastructure costs are not internalized by the largest traffic generators, providers must recover those expenses elsewhere. Policymakers then attempt to close the resulting investment gap through mechanisms such as Universal Service Fund (USF) assessments and other end-user taxes or fees designed to finance broadband deployment subsidies. In effect, costs that originate upstream are shifted downstream to households and small businesses.

Broadband is the only major infrastructure sector in which the largest marginal users frequently do not pay for their usage or network upgrade. Big Tech enjoys the most egregious free ride in the USA, which I quantify for the top 8 internet brands as $200 billion annually in revenue earned from USF supported connections. Yet these 8 firms contribute little to nothing to the $8.5 billion USF. Read more here.

If Congress Does Not Modernize Universal Service

If Congress fails to modernize the Universal Service contribution base, market forces may move the system toward a de facto “pay your own way” regime.

Such a shift could include:

• Traffic-based interconnection pricing;
• Capacity reservation contracts for high-volume edge providers;
• Usage metering and attribution systems;
• Congestion-based pricing structures;
• Formalized paid peering or transport agreements.

This would represent a structural shift from today’s environment. Economically, such mechanisms would align broadband with standard infrastructure principles: incremental demand triggers incremental cost responsibility.

However, a purely market-driven adjustment carries uncertainty:

• It is unclear whether bilateral commercial negotiations would preserve statutory universal service obligations under Section 254.
• Fragmented negotiations could increase transaction costs.
• Interconnection disputes could lead to litigation or regulatory intervention.

While economically coherent, this path would be less predictable than statutory modernization.

A Broader Political Signal

A year ago, leading technology CEOs stood prominently at the presidential inauguration. At the State of the Union, Big Tech was not celebrated — it was implicitly cautioned.

The Ratepayer Protection Pledge marks a subtle but significant shift: recognition that hyperscale digital infrastructure generates real-world externalities — on energy grids, local infrastructure, and potentially broadband networks — and that those costs must be addressed.

Whether this principle remains confined to electricity markets or expands into telecommunications policy remains an open question. But the underlying message is clear: The days of some players getting a free ride on shared infrastructure may be coming to an end.