Annexation, Jurisdiction and Utility Service Areas for Data Center Sites

The jurisdiction controls zoning, site plan review, building permits, local taxes and many incentives. The utility service area controls who can deliver power, water and sewer, under what rules and on what schedule. A parcel on the edge of a city, near a county line or at the boundary of two electric providers can have very different outcomes depending on which side of a line it falls on.

These boundaries are also hard to change. Zoning can be amended through a public process. Service territories and municipal boundaries change only under state law, often with consent from several parties. When we screen a site, we confirm both before spending time on anything else that depends on them.

Land inside a city or town is governed by that municipality’s zoning and permitting. Land outside any municipality is usually governed by the county, though some rural counties have little or no zoning. In some states, cities also exercise extraterritorial jurisdiction over land just beyond their limits, which can include subdivision, platting or even zoning authority. Townships carry land use authority in some states as well.

• City land: city zoning and building codes; city services often available; city property tax in addition to county.
• Unincorporated county land: county zoning, if any; services may come from districts or rural providers; often fewer tax layers.
• Extraterritorial areas: a city may control some approvals even though the land is not in the city.
• Boundary parcels: a tract split between jurisdictions may need approvals from both, under different rules.

Annexation brings unincorporated land into a city. State law sets the method, and it varies widely. Common requirements include contiguity with existing city limits, a petition or consent from the landowner, a service plan and a vote by the city council. Some states allow cities to annex without owner consent under certain conditions; others require consent or an election.

For data centers, annexation usually comes up because a city will extend water or sewer only to land that annexes, or that signs a pre-annexation agreement committing to annex later. The trade-offs are real:

• The site moves from county to city zoning, which may be more or less favorable to a data center.
• City property and other local taxes may apply, which changes the incentive math.
• City services, such as water, sewer, fire protection and sometimes electric service, become available.
• An annexation agreement can set zoning, fees and service terms, much like a development agreement for a data center.

Annexation adds a public process and time. It also changes who the community conversation involves, since city residents and officials now weigh in.

In many states, the utility commission or state law assigns each area an exclusive retail electric provider, sometimes through a certificate of public convenience and necessity or territorial agreements between utilities. Inside a certificated territory, only the assigned utility may serve new retail customers. A data center cannot simply choose a neighboring utility with more capacity or better rates, even if that utility’s line runs along the property.

There are variations. Some states allow large new loads to choose among providers in limited circumstances. In states with retail competition, the local wires utility is fixed, but the customer may buy energy from a competitive supplier. Territorial boundaries can sometimes be adjusted by agreement between utilities with regulatory approval, and in some states municipal annexation can affect which utility serves an area. None of these are quick or certain, and the rules vary by state.

Once the provider is known, the large-load interconnection process runs through that utility, along with any wholesale supplier or transmission owner it depends on.

Retail electric providers in the U.S. fall into three broad groups. Each can serve a data center, but they handle large loads differently.

With cooperatives and many municipal utilities, the retail provider may not control the generation or transmission needed for a large campus. The wholesale supplier and the transmission owner become part of the conversation, and contracts may run through several parties. Our guide to large-load tariffs and electric service agreements covers how those terms are structured.

Water and sewer service areas are separate from electric territories and from city limits. A site may sit in a city water area, a rural water district, a special utility district or no service area at all. Some states issue certificates or franchises for water and sewer service much as they do for electric service. Sewer is often the tighter constraint, since treatment plants and lift stations have fixed capacity. Gas service usually comes from a local distribution company holding a franchise for the area, with transmission pipelines operated separately. For cooling demand and discharge, see data center water requirements.

1. 01Confirm municipal limits and any extraterritorial area from the city and county, not a parcel viewer alone.
2. 02Identify the zoning authority and whether county zoning exists in that area.
3. 03Ask whether water or sewer service requires annexation or a pre-annexation agreement.
4. 04Confirm the retail electric provider of record with the utility or the state commission’s territory maps.
5. 05Identify that provider’s wholesale supplier and the transmission owner near the site.
6. 06Check the water, sewer and gas providers for the parcel and their stated capacity.
7. 07Note any boundary that splits the site, and what each side would require.