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On Tuesday Microsoft announced a new initiative called “Community-First AI Infrastructure” that commits the company to paying full electricity costs for its data centers and refusing to seek local property tax reductions.

As demand for generative AI services has increased over the past year, Big Tech companies have been racing to spin up massive new data centers for serving chatbots and image generators that can have profound economic effects on the surrounding areas in which they are located. Among other concerns, communities across the country have grown concerned that data centers are driving up residential electricity rates through heavy power consumption and by straining water supplies due to server cooling needs.

The International Energy Agency (IEA) projects that global data center electricity demand will more than double by 2030, reaching around 945 TWh, with the United States responsible for nearly half of total electricity demand growth over that period. This growth is happening while much of the country’s electricity transmission infrastructure is more than 40 years old and under strain.

It’s a big enough issue that in December, US Senators launched a probe demanding tech companies explain how they plan to prevent data center projects from increasing electricity bills.

Microsoft Vice Chair and President Brad Smith wrote in the company’s blog post about the announcement that the company will “set a high bar” for responsible data center development, making promises that seem targeted to quell the growing criticism surrounding AI data center construction.

The company’s plan to address the issues includes five commitments: covering full electricity costs to prevent rate increases for residents, minimizing water use while replenishing more than the company withdraws, creating local jobs, paying full property taxes, and investing in AI training programs for data center communities.

Taking responsibility for power usage

In the Microsoft blog post, Smith acknowledged that residential electricity rates have recently risen in dozens of states, driven partly by inflation, supply chain constraints, and grid upgrades. He wrote that communities “value new jobs and property tax revenue, but not if they come with higher power bills or tighter water supplies.”

Microsoft says it will ask utilities and public commissions to set rates high enough to cover the full electricity costs for its data centers, including infrastructure additions. In Wisconsin, the company is supporting a new rate structure that would charge “Very Large Customers,” including data centers, the cost of the electricity required to serve them.

Smith wrote that while some have suggested the public should help pay for the added electricity needed for AI, Microsoft disagrees. He stated, “Especially when tech companies are so profitable, we believe that it’s both unfair and politically unrealistic for our industry to ask the public to shoulder added electricity costs for AI.”

On water usage for cooling, Microsoft plans a 40 percent improvement in data center water-use intensity by 2030. A recent environmental audit from AI model-maker Mistral found that training and running its Large 2 model over 18 months produced 20.4 kilotons of CO₂ emissions and evaporated enough water to fill 112 Olympic-size swimming pools, illustrating the aggregate environmental impact of AI operations at scale.

To solve some of these issues, Microsoft says it has launched a new AI data center design using a closed-loop system that constantly recirculates cooling liquid, dramatically cutting water usage. In this design, already deployed in Wisconsin and Georgia, potable water is no longer needed for cooling.

On property taxes, Smith stated in the blog post that the company will not ask local municipalities to reduce their rates. The company says it will pay its full share of local property taxes. Smith wrote that Microsoft’s goal is to bring these commitments to life in the first half of 2026. Of course, these are PR-aligned company goals and not realities yet, so we’ll have to check back in later to see if Microsoft has been following through with its promises.