The data center boom in Central Ohio is driving massive new demand for power and will require billions of dollars in new investments in the electric grid.
The big technology companies that own the data centers – not small businesses or ordinary ratepayers – should absorb those costs, the Public Utilities Commission of Ohio ruled on Wednesday.
The commissioners – five appointees of the governor – agreed that the data centers pose “a real, pending transmission constraint concern,” requiring expensive grid upgrades. The data centers, the PUCO ruled, should pay for these upgrades, even if they don’t end up needing all the electricity they previously forecasted.
The commissioners said the ruling will incentivize more accurate estimates of demand, “which will result in efficient, right-sizing of the transmission system and any upgrades that must be made.”
The data centers can still ask for a PUCO rehearing. From there, they can appeal the ruling to the Ohio Supreme Court. Regardless, the ruling marks a win for American Electric Power, the utility company that services most of the data centers in Central Ohio. It asked for regulatory permission to treat data centers as a unique set of customers.
And the office of the Ohio Consumers’ Counsel, a state agency that represents residential ratepayers’ legal interests, said the case is a victory for ordinary Ohioans, who will be spared from yet another cost on their electricity bills.
Google, Sidecat (a Meta affiliate), Microsoft, IGS Gas and others fought AEP’s requests, pressing for a lower minimum payment and shorter, more flexible terms. They’re joined by the Ohio Blockchain Council – cryptocurrency being another energy-intensive operation.
The data centers are “disappointed” by the ruling, according to a trade association spokesman.
“We continue to maintain that no one customer type or industry should be singled out for disparate rate treatment by the utility,” said Lucas Fykes, director of energy policy for the Data Center Coalition
Billions behind the data center boom
There are 185 data centers in Ohio, including 117 in Central Ohio, according to Data Center Map, an industry consultancy.
They’re stadium-sized warehouses, consisting of stacks of computer equipment, wiring, cooling fans and other machinery that fuels the software behind artificial intelligence and cryptocurrency. Some companies have started to build their own, private “behind the meter” natural gas plants or solar farms on site to power the operations.
Amazon Web Services, which opposed AEP’s proposal in the regulatory case, said it has invested $10.3 billion in Ohio, with plans for billions more. Google, another opposing party, says it has invested more than $6.7 billion.
Ohio incentivizes the data center owners with hundreds of millions in state and local tax breaks – one of which lawmakers tried to kill in the budget before a veto from Gov. Mike DeWine preserved it.
AEP says data centers should take on the risks
AEP asked the regulators for permission to charge unique rates to data centers given their unique power demands and novelty.
At the time it initiated the case, AEP had agreed to deliver enough electricity to different data centers to double the region’s power demand by 2030.
Plus, another 50 prospective customers at 90 sites have submitted such requests for another 30,000 megawatts – a staggering sum in Ohio, where the current peak demand is about 4,000 megawatts. The utility has issued a moratorium on hooking up new data centers as the case has progressed. The company said in a statement it was “looking forward” to ending the moratorium but didn’t say when.
“We are glad the PUCO agrees that it is critical to align data centers’ demand for energy with the infrastructure costs needed to support their growth in Ohio,” said Marc Reitter, AEP Ohio’s president and chief operating officer.
AEP was supported in the case by unusual pairings like the ratepayer advocates of the Ohio Consumers’ Counsel and WalMart, a major ratepayer. Maureen Willis, executive director of the Ohio Consumers’ Counsel, said the ruling enacts important consumer protections.
“We are grateful that the PUCO acted today to protect residential consumers from bearing excessive costs caused by data centers,” she said. “It’s a step in the right direction for Ohio consumers.”
AEP says data centers should take on the risks
The PUCO said that at least three other states – Idaho, Arkansas and Wyoming – have enacted data-center-specific rules and rates given their new and unique role.
Under the PUCO’s ruling:
- Data centers must pay for 85% of the power they said they’d use, even if they end up needing less. The rules establish costs for any energy needed in excess of the contract and a ceiling for power use.
- The facilities must sign 12-year contracts, though they can pay an exit fee after five years plus a negotiated “load ramp” run-up period with more lenient pricing rules.
