A contentious and ongoing debate around data centers in Colorado has led to rushed policy decisions at the local level while the legislature drags its feet, mostly serving only to further confuse the issue. To avoid a patchwork of local regulation, build healthy working relationships, and welcome economic development, the legislature, the data center industry, and communities should work in tandem to ensure transparent development.
This could help limit issues that have popped up in Colorado cities such as Walsenburg and Parker, without shutting the door on the future of Artificial Intelligence (AI).
Walsenburg: Learning the news from a reporter
In Walsenburg, the mayor and other town council officials only found out about a data center taking shape in their jurisdiction when the Denver Gazette reached out for comment on a story.
The company piloting the project, BluSky AI, released a press statement, “Walsenburg represents a convergence of power availability, infrastructure readiness, and community partnership — core pillars of our deployment mode.”
This incident brings into question how much community partnership there can be when Walsenburg Mayor Gary Vezzani told the Gazette it’s just a rumor.
Parker: Buried in a development map
In Parker, a new data center is under construction and is scheduled to be completed in January 2027. The company behind it, Flexential, specializes in custom IT solutions for businesses. Their headquarters lies in the heart of Denver while operating over 40 data centers across the US, with Parker being its fourth in Colorado. However, many residents only found out about it a few months ago.
According to the Town of Parker website, the project was disclosed on an online development map since 2021. Hardly a robust form of community engagement.
The divide between technical disclosure and meaningful public transparency is what open discourse could bridge.
Fear of rising rates
Across Parker, Walsenburg, and increasingly throughout the state, residents are worried about data centers driving up electricity rates.
However, the Institute for Energy Research, a Washington DC based non-profit that focuses on research and analysis of energy markets, study found no statistically significant relationship between data center concentration and faster rate increases between 2015–2025 and 2021–2025. While ratepayers could see future increases, those higher costs are more a function of policy–which is in the hands of lawmakers–than the end user.
Two bills, zero progress
There was no data center legislation passed in this year’s session. However, there were a few attempts.
Senate Bill 26-102 would have shielded residents from subsidizing energy costs for data centers to operate, instead putting that burden directly on the operators.
The bill included statewide carbon reduction goals and allowing companies to compete for two tax exemptions per year. These awards would be granted based on water usage, investments, job creation, and overall contributions to a community.
While the feasibility of things like carbon reduction goals and targeted tax exemptions are questionable, protecting ratepayers from being obligated to pick up the tab for data center energy costs seems a no-brainer, and solid starting point for another bite at the legislative apple.
In another attempt, House Bill 26-1030 sought to set up an authority to give certifications to large data centers for a 100% state tax exemption for 20-30 years in exchange for providing jobs, apprenticeships, and sustainability goals. If the data center does not abide by these standards, the authority would have the ability to revoke the tax benefits.
The bill did add that the utilities can plan and finance infrastructure for these larger data centers through an application process under the Public Utilities Commission (PUC), however this would have created a lengthy bureaucratic procedure, as the PUC tends to move at the speed of sloths.
A better compromise
Another failed bill would have protected ratepayers from worrying about data centers joining the grid.
House Bill 26-1246: Consumer-Regulated Electric Utilities draws on the idea of placing data centers on an islanded grid–essentially an electricity generating system serving one large customer– with only the data center and the utility bearing the cost. The electricity could be natural gas, nuclear, or renewables.
This bill allowed data centers to implement this process without having to jump through the regulatory hoops of the PUC, which could take years to approve.
Although this bill did not pass during this legislative session, it shows a possible compromise to the bills that failed before it.
New Hampshire passed a similar bill in 2025, signaling a change in how to solve an issue ratepayers could face in the future.
Bans aren’t the fix
With state government so far passing the buck, local governments have turned to moratoriums, temporarily prohibiting the construction of data centers. Although moratoriums buy time for communities to hash out the issue, it also sends the wrong message to the industry.
As The Colorado Sun reported, Dan Diorio, Vice President of State Policy at the Data Center Coalition stated, “Enacting local moratoriums on data center development would send a signal that the area is closed for business, both for data centers and for other significant economic development projects.”
Thus far, Larimer, Jefferson and Boulder counties have all enacted temporary moratoriums, as has the City of Denver, with others under consideration, including in Broomfield.
Building Colorado’s future
Regionally, Colorado is losing projects to Wyoming as the Cowboy State continue to develop this industry without political friction. In the meantime, fear of the inevitable future continues to push local Colorado governments in different regulatory directions.
The legislature needs to step in and bridge that gap.
Kiera Sheehan is a recent graduate of the future Leaders program at Independence Institute, a free market think tank in Denver.
