Why 9? Baseload is back?!
This month, E9 dove into the evolving landscape of large load tariff design and regulatory investigations, as states position themselves for the data center boom
As utilities across the country position themselves for load growth as data centers and hyperscalers come online, patterns are emerging - but so are the cracks. The data center boom has an economic upshot questioned by few in the industry, but priorities and development pathways vary widely across the states as hyperscalers, utilities, the distributed energy community and advocates shape outcomes.
Will the boom usher in more flexible data centers operations - or lock in gigawatts of new baseload generation?
Will it result in enduring utility-hyperscaler “special” contracts - or will states amend existing policies to enable more competitive sourcing of power?
How will regulators respond to urgent utility requests for new assets and generous tariffs - while insulating customers from the cost of development?
This month, we dug into state efforts to design new large load rate and tariff structures, approve major procurement strategies, and navigate the cost recovery battles that will undoubtedly follow. A few common themes emerged:
Special Rate Classes: Many utilities are developing dedicated rate structures or riders for data center customers. These often involve higher minimum demand thresholds, multi-year contract terms, and separate cost allocations to isolate risks from existing ratepayers.
High Load Factor Incentives: Rate designs frequently target customers with high load factors (e.g., 75%+), offering discounted energy rates or flexible procurement structures. Some tariffs include economic development discounts.
Minimum Billing Demand Requirements: Utilities are establishing monthly minimum billing demands (often 80% - 90% of contracted capacity) tied to demand charges and alignment with peak periods.
Exit Fees and Long-Term Contracts: To mitigate risk, tariffs often include termination penalties, collateral requirements, and 10–20 year service agreements.
Risk Management: Tariffs may include provisions acknowledging portable or speculative load and considerations of line extensions.
Rapid data center deployment is unfolding amid supply chain constraints and shifting federal priorities. One clear message is being driven home in utility resource and distribution plans: the easy button is more supply. But is this the best answer?
Duke recently released the first national-scale analysis of how the existing U.S. power system can accommodate large new loads without massive generation and transmission buildouts. That study introduces a concept called curtailment-enabled headroom, describing how much additional load the grid can absorb using existing capacity with only modest short-duration reductions in usage.
What these emerging approaches mean for utility customers – and what the best approach in allocating system costs – remains to be seen. The industry has faced these challenges before. Will these system increases deliver system wide value or cater to the loudest customer?
1. Nevada approves NV Energy Clean Transition Tariff
The PUCN approved a stipulation for NV Energy’s clean transition tariff (CTT), allowing eligible non-residential customers with at least 5 MW average annual hourly load to source energy from new clean resources while remaining retail customers. The tariff supports corporate energy goals with a dual pricing model: a fixed price for resource production hours and a variable rate for non-production hours. NV Energy will update the CTT in its next IRP.
2. Indiana approves I&M Industrial Tariff settlement
The IURC approved updates to Indiana Michigan Power Company's (I&M) Industrial Power Tariff – Tariff I.P., for customers exceeding 70 MW at an individual site or 150 MW aggregated across sites. The approved “Large Load Terms,” include: 12 year contracts, termination fees, 80% monthly minimum billing demand, collateral increases and limited capacity reductions. The order delayed addressing cost-allocation issues related to necessary grid investments, as well as concerns raised by intervenors about the deployment of grid-enhancing technologies and grid reliability investments.
3. Minnesota rejects Amazon diesel backup
The Minnesota PUC rejected Amazo’s petition to develop 600 MW of diesel backup generation at a new data center, citing the need for a CPCN. Amazon's December 2024 petition argued that the generators were necessary to ensure resilience at the load center and would only run during Xcel outages or interruptions. A legislative bill offering Amazon an exemption is advancing.
4. Georgia approves new large load customer rules
The Georgia PSC approved new rules for Georgia Power customers exceeding 100 MW, including longer contract lengths and minimum billing requirements. The order approves staff's recommended modifications to Georgia Power's proposed rules and regulations in a manner that the commission asserts will protect ratepayers from cost shifting.
5. Ohio utility seeks approval for colocated fuel cells
AEP Ohio petitioned the commission to approve an agreement to procure, own, install, maintain and operate a solid state oxide fuel cell for Amazon Data Services. If approved, AEP will collect the costs, including infrastructure and development costs, solely from the customer. AEP will contract with Bloom Energy for the construction and installation of the fuel cell system, which will use natural gas. As proposed, should Amazon lose power at the site, or should the fuel cell fail, the company would either curtail load or dispatch on-site generation resources.
6. Arizona opens inquiry into data center rate classes
The Arizona Corporation Commission opened an investigation into existing rate classifications for data centers. The commission notes the importance of balancing the economic opportunities presented by data centers with the need to financially protect other ratepayers to ensure they are not bearing the rising energy generation and transmission costs. The docket will review the existing rate classifications and the possible creation of more transparent rates for data center customers and the public. Other topics could include a review of utility mechanisms being implemented with data center customers, as well as behind-the-meter and in-front-of-the-meter solutions.
7. Kentucky Utilities request CPCN for gas and storage
Kentucky Utilities and Louisville Gas and Electric (LG&E) filed a CPCN for the construction of two 645 MW natural gas combined cycle combustion turbine (NGCC) facilities, including on-site gas and electric transmission. Included in the petition is a a CPCN to construct a 400 MW, 4-hour (1600 MWh) lithium-ion battery energy storage system. The utilities note 6 GW of data center pipeline capacity and a further 2 GW in possible data center customers. The new gas generation is expected to cost $2.8 billion, and the BESS project is expected to cost $775 million.
8. Pennsylvania opens review of grid impacts from data centers
The Pennsylvania PUC approved a motion to convene a public hearing on data center grid impacts. The hearing will bring together stakeholders to examine the challenges and opportunities presented by data center integration and ensure ratepayer protection. Ahead of the hearing, the PUC requested stakeholder comments on issues, including: definition of large load customers; requirements for deposits; cost sharing contributions; minimum contract terms; phased-in usage; tariff structures and best practices from other states.
9. Nine months in!
This month marks the ninth month of my fiancée’s pregnancy. It’s our first. And while we’re totally overwhelmed and have no idea what we’re doing, we’re so excited to embark on this next phase of our life journey together. I’ve been so humbled by the incredible outreach and support from my personal network, and I wanted to share the good news with you all. Hopefully, by the time our baby comes of age, we’ll have this whole data center thing figured out. 😉
So this month, we celebrate the continued growth of the E9 family, and while I may be a bit less available this summer, I look forward to reconnecting and finding ways to continue to collaborate when I’m back online. And to all the moms out there, Happy Mothers Day!
Mazel!
- Sam
