On August 27, 2026, New Jersey Governor Mikie Sherrill signed legislation (S3379/A4096) requiring data center owners and operators to report their energy and water use. The Governor also announced statewide guidance to help municipalities negotiate community benefits agreements (CBAs) with data center developers, along with technical assistance from several state agencies. Together with the Data Center Fair Share Act signed in July, these actions complete the four-pillar data center plan the Governor announced on May 27, 2026.

The plan is intended to ensure that data centers cover the costs they place on the electric grid, provide greater transparency around resource use, invest in their host communities, and support local jobs. This article breaks down the four components of the plan and what they mean for data center stakeholders in New Jersey, including owners, operators, developers, and host municipalities.

Background: The Four-Pillar Plan and the Data Center Fair Share Act

Governor Sherrill announced the statewide data center plan on May 27, 2026. As outlined in the New Jersey Department of Community Affairs’ (DCA) Local Finance Notice 2026-13, the plan includes four key principles:

• Fair-share energy rules: Data centers help cover the costs of grid infrastructure needed to support their growth and bring new clean energy online, without passing those costs along to other ratepayers.
• Transparency: Data centers report their energy and water use to give the public a better understanding of their resource demands.
• Community benefits: State guidance and resources help municipalities negotiate CBAs that address local concerns, such as noise, light, and pollution, while bringing additional benefits to their communities.
• Good-paying jobs: Promoting the use of local workers and fair, competitive wages for data center construction projects.

The first pillar was addressed on July 7, 2026, when Governor Sherrill signed S731/A796, the Data Center Fair Share Act (P.L. 2026, c.32). The law directs the New Jersey Board of Public Utilities (NJBPU) to establish a separate rate structure for large data centers to help prevent other utility customers from subsidizing the costs of serving them. NJBPU will determine the applicability threshold, which cannot exceed 50 megawatts (MW), and must also consider the combined demand of related facilities when determining applicability.

The law also:

• Incentivizes new clean generation and energy storage by prioritizing grid interconnection for data centers that commit to bringing new clean generation or storage resources online.
• Requires data centers to cover associated grid infrastructure upgrade costs through standards developed by NJBPU.
• Requires large data centers to reduce electricity demand during grid emergencies before residential customers are affected.
• Directs NJBPU to establish tariff treatment for large data centers served by co-located generation. Emergency generation is excluded from the definition of co-located generation for this purpose.

By July 7, 2027, NJBPU must set the new data center standards after receiving input from stakeholders. Each electric utility will then have 180 days to create and file a new rate class and tariff for data centers. The law also applies to existing large data centers. However, some facilities that had already received approval for electric service before the law took effect are exempt from certain requirements, including the long-term financial guarantee.

S3379/A4096: Energy and water use reporting

Signed into law on August 27, 2026, S3379/A4096 (P.L. 2026, c.75) implements the second pillar of the data center plan and creates new energy and water reporting requirements for data centers in New Jersey. Data center owners and operators must submit reports to NJBPU twice per year for three years, beginning with their first required report. The reports include information such as:

• Total energy use
• Energy used for cooling and information technology (IT) equipment
• Total and peak daily water use
• Water sources
• On-site and backup power supplies

The law applies to data centers of any size. The only exclusion is for facilities used primarily for the internal operations of licensed health care facilities or providers. Data centers that had already been operating for at least one year as of August 27, 2026, must submit their first report by November 27, 2026. All other data centers must submit their first report by February 27, 2027. Data centers that receive financial incentives from a New Jersey state agency must provide additional information on their performance and sustainability efforts, including energy efficiency, water use, and renewable energy.

The goal of the reporting requirements is to give the state a clearer picture of how data centers affect New Jersey’s energy and water resources. For owners and operators, the new requirements will mean reviewing current monitoring and recordkeeping systems to make sure they can accurately and reliably collect the required information to be reported and developing a procedure for recording and reporting the information.

Statewide Community Benefits Agreement Guidance

On August 25, 2026, DCA issued Local Finance Notice 2026-13 to guide municipalities in negotiating CBAs with data center developers (the third pillar). A CBA is a legally binding agreement between a developer and a host municipality that can help address a project’s local impacts while providing financial and non-financial benefits to the community.

While the new guidance does not require municipalities to enter into CBAs, DCA strongly encourages municipalities to explore them when a data center is proposed. Separate CBA requirements may also apply to projects participating in certain state incentive programs.

DCA recommends that municipalities consider several factors when negotiating a CBA, including:

• Planning consistency: Whether the project aligns with the municipality’s master plan and any redevelopment or rehabilitation plans.
• Emergency response and infrastructure review: Review of the developer’s emergency response plans and infrastructure impacts by municipal engineering, public works, and emergency services.
• Resource impacts: How the project may affect water supply, wastewater capacity, and fire protection.
• Community engagement: Input from residents, community leaders, local trades, and nonprofits, with public hearings encouraged even when not required.

The guidance also identifies provisions that municipalities may consider including in CBAs. These range from water-efficient cooling and clean energy procurement to noise mitigation, environmental monitoring, and local hiring commitments. Agreements may also provide funding for community priorities such as infrastructure improvements, schools, housing, and workforce development. DCA encourages municipalities to include long-term monitoring requirements and clearly define what happens if a developer does not meet its commitments.

In addition to the CBA guidance, New Jersey has established labor requirements for certain data center construction projects. Under P.L. 2025, c.335, signed January 20, 2026, qualifying data center construction projects beginning on or after March 1, 2026, and meeting the law’s 5 MW threshold must pay prevailing wages. Contractors must also meet applicable registration, payroll reporting, safety training, insurance, and bonding requirements. For projects designed to use 25 MW or more, the state encourages the use of project labor agreements.

Technical Assistance for Municipalities

The New Jersey Economic Development Authority (EDA), working with DCA, the New Jersey Department of Environmental Protection (DEP), and NJBPU, launched the Data Center Community Benefit Agreement Municipal Resource Hub to help municipalities evaluate proposed data center projects.

The hub provides access to state experts on energy, water, and economic impacts, along with resources such as model agreement language, case studies, and examples from other jurisdictions. Municipalities can also request direct assistance by contacting DataCenterTA@njeda.gov.

These resources are intended to help municipalities better understand the potential impacts of proposed data centers and negotiate agreements that address local priorities.

Looking Ahead

With all four pillars of New Jersey’s data center plan in place, attention now turns to implementation. NJBPU will be responsible for establishing the standards and tariffs under the Data Center Fair Share Act, including determining which facilities will be subject to the new rate structure.

For companies that own, operate, or plan to develop data centers in New Jersey, these actions introduce new reporting obligations and considerations for project planning. Owners and operators should evaluate their ability to track and report energy and water use, while developers should account for potential grid infrastructure costs, applicable prevailing wage requirements, and community benefits discussions early in the development process. Municipalities can also use the new state guidance and technical resources as they evaluate proposed projects and negotiate CBAs.

As New Jersey moves forward with implementation, data center owners and developers should continue to monitor NJBPU’s rulemaking and any additional guidance that may affect their facilities or projects.

ALL4 has extensive experience supporting data center projects across the U.S., including several in New Jersey. Our services span the development and operation of data centers, from project planning, acoustics, air dispersion modeling, and environmental permitting to ongoing compliance support. We also assist with storage tank permitting and plans, water permitting, sustainability initiatives, and environmental reporting.

ALL4 will continue to monitor implementation of New Jersey’s data center plan. If you have questions about how these developments may affect your project or need assistance tracking energy and water use to meet reporting requirements, contact Cambre Codington (ccodington@all4inc.com), Sharon Sadler (ssadler@all4inc.com), or your ALL4 Project Manager to discuss how we can help.