Image by Michal Jarmoluk from Pixabay
The Oregon Public Utilities Commission recently approved several elements of Portland General Electric’s proposals for charging customers based on their contribution to growth – which is meant to ensure that data centers will pay for new infrastructure that supports their growth.
“The decision reflects an important step toward balancing growth, reliability and affordability for Oregon customers,” said John McFarland, Chief Customer Officer. “As energy demand grows, it is critical that the costs of new infrastructure are allocated fairly and transparently. Our focus remains on maintaining reliable service, supporting economic development and protecting residential and small business customers from unnecessary cost impacts.”
The Commission’s order establishes a new regulatory framework for serving large load customers and adopts several core components proposed by PGE, including:
- A new customer classification, Schedule 96: The order adopts PGE’s proposal to establish a dedicated customer class for large load data centers, recognizing the “unique scale, infrastructure needs, and growth impacts” associated with these customers.
- Growth based cost allocation: The Commission approved PGE’s proposed peak growth modifier, with some modifications. The PGM is meant to allocate costs to customer groups that are growing the most.
- Customer protections against stranded assets: The Commission adopted PGE’s proposals for exit fees and minimum charges with some modification. Exit fees and minimum charges are meant to ensure that data centers commit to a certain level of payment.
- Special contracts to support clean energy development:The Commission also adopted PGE’s proposal preserving the opportunity for case-by-case special contracts that could enable large customers to directly support new clean energy resources and infrastructure investments while facilitating “more efficient” interconnection timelines.
The idea of requiring data centers to help pay for grid upgrades is picking up some steam. Last summer, the Public Utilities Commission of Ohio (PUCO) approved a proposal from American Electric Power (AEP) to create a dedicated tariff for data centers. The tariff, originally submitted in May 2024, is intended to ensure these high-demand users contribute more directly to the costs of building and maintaining the infrastructure required to meet their substantial electricity needs.
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AEP Ohio’s proposal approved by the PUCO requires large new data center customers to pay for a minimum of 85% of the energy they are subscribed to use – even if they actually use less. AEP has argued that the plan’s sliding scale allows small and mid-sized data centers more flexibility. It also requires data center owners to provide proof they are financially viable and able to meet those requirements. The terms also include an exit fee if a project is canceled or unable to meet the obligations over the term of the electric service agreement contract.
AEP’s proposal drew pushback from big tech companies like Google, Amazon, Microsoft and Meta. In direct testimony to Ohio’s Public Utilities Commission in August 2024, several individuals, including consultants and tech employees, opposed AEP’s original request, arguing that the new rates would be “discriminatory” and “unreasonable.”
AEP is not the only other utility updating its interconnection rules as data center loads surge. To protect against financial risk and ensure fairness for its ratepayers, Arizona Public Service (APS) has introduced “load commitment agreements.” These contracts require data centers to guarantee energy use levels, meet minimum demand and energy thresholds, demonstrate creditworthiness and commit to long-term usage timelines.
Ref: https://www.renewableenergyworld.com/power-grid/should-data-centers-pay-for-grid-upgrades-oregon-regulators-think-so/
