In Ohio, the rapid expansion of data centers by hyperscalers Google, Microsoft, Amazon and Meta, as well as the increasing trend of colocation and smaller data processors, have put electric providers on edge.
So that in May 2024, American Electric Power of Ohio (AEP) tried to continue the process by applying to the Public Utilities Commission of Ohio (PUCO) to create a new rate model for data center customers and crypto mining. Mobile workstation / data center. According to Marc Reitter, president and COO of AEP Ohio, the issue is not with customers right now, but rather with a clear plan and commitment from large data center customers to ensure that the right building is built in the right time.
Meanwhile, electricity demand in central Ohio, a hotbed of data growth, is expected to more than double over the next five years, and building new power plants and transmission facilities could take 7 to 10 years. New rate structure proposed for infrastructure
AEP’s proposal to the PUCO requires data companies to pay for 90 percent of the electricity they plan to use, even if their shared needs do not meet their original plans.
The proposed rate structure will apply to new data centers with a planned capacity of more than 25MW and cryptocurrency mining operations/mobile data centers with a capacity of more than 1MW. The deal is expected to be reached before construction begins.
The proposal, to say the least, has not been well-received by the industry, with testimony before the PUCO describing it as discriminatory, unreasonable and a major departure from standard practices. In response, a proposal from a group of major data center players offered to pay at least 75 percent of expected energy consumption, a proposal that AEP Ohio said does not include other provisions necessary to protect those who -business and some general input problems.
These changes are expected to be a surprise to the company, because many company leaders have expressed concern that if the data center does not begin to address the issues that require power, the power company electricity will do it for them. This proposal from AEP Ohio may be just the tip of the iceberg.
On October 10, the Data Center Coalition (DCC), a group of data center leaders and practitioners dedicated to public policy advocacy, announced that it had signed a memorandum of understanding and further support. PUCO in Case No. 24-0508-EL. – ATA. The DCC said that the agreement was the result of a process of joint negotiations involving all parties and that many stakeholders had signed it. Signatory members represent a broad coalition of Ohio businesses and other stakeholders. As DCC points out, most of the signatories are not data center organizations. In addition to the DCC, signatories include:
Amazon Data Services, Inc. Constellation Energy Generation, LLC and Constellation New Energy, Inc.
Enchanted Rock Company, LLC
Google LLC
Interstate gas supply
Microsoft Corporation
Ohio Blockchain Council
Ohio Energy Board of Directors
Producers of Ohio Energy Group
A product of Energy Enterprises, Inc. Commercial lighting companies
Sidecat LLC, a subsidiary of Meta Platforms, Inc.
Although the agreement was approved by many parties involved in the case, the DCC said that the PUCO will need to review it in depth to decide whether to approve it in whole or in part.
On October 23, 2024, AEP Ohio filed a settlement agreement to address these energy claims
Staff from the Public Utilities Commission of Ohio, the Ohio Consumer Council (OCC), Ohio Energy Group (OEG), Ohio Partners for Affordable Energy, and Walmart participated in the PUCO filing. The agreement begins with a requirement that new data centers larger than 25 MW pay for 85% of their planned energy use. Along with requirements to prove your project is financially viable and the requirement to pay an exit fee if the project is canceled or cannot meet other contractual terms.
These requirements would be in effect for 12 years with a 4-year ramp-up period, but would also include an outline for a process to end the current moratorium on new deals at Central Ohio data centers. Small and medium-sized data centers could utilize a sliding scale that provides more flexibility.
Other proposed provisions include incentives for energy efficiency development, adaptable usage provisions based on actual usage, and a cost-sharing model among stakeholders, including AEP Ohio and the data centers. The proposal is still up in the air; however, the hearing scheduled for November 4, 2024 has been rescheduled to December 3, 2024 to give interested parties, both pro and con, additional time to provide evidence to support their arguments.
Ultimately, the deal will be a delicate balancing act. It must protect Central Ohio’s growth as a hub for data centers and technology investments while also serving the interests of its residents. The success of the deal will depend on the ability to sustain a sustainable balance, encouraging the technology industry and its investments to continue to expand.
We will be following this story closely. The evolution of this debate should be of interest to the data center industry, as this framework could serve as a model for other markets where cost-sharing for transmission expansion is at stake.
