Data center electricity cost debate centers on financial risk of electric-grid build up

The data centers that are flocking to central Ohio use massive amounts of electricity.

It’s so much electricity, that the state’s utility regulators are considering an AEP Ohio plan to charge the businesses more up front than other commercial users.

Attorneys for companies like Google, Amazon Web Services and Meta have been turning out in droves at hearings this month at the Public Utilities Commission of Ohio to resist the move.

One of the questions at stake is who should take on the risk of data centers not showing up, after those investments are made.

Matt McKenzie, vice president of AEP Ohio’s Regulatory and Finance division has been testifying all week. He said one of the reasons the company wants more money from data centers is to alleviate the risk of companies backing out of Ohio or reducing loads after AEP builds out transmission lines and increases their available mega watts.

“If the data centers didn’t show up and use the load they said they were going to use, there could be costs allocated to other customer classes,” McKenzie said.

But preventing cost shifting doesn’t mean that data centers will have to pay 100% of the infrastructure upgrades, McKenzie said to Data Center Coalition attorney Nikhil Vijaykar.

“I think you are assuming that 100% of those costs allocated to the company are going to get allocated to whatever class of customer the data center is in, and that’s unlikely to happen,” McKenzie said.

Companies like Meta and Amazon argue they should pay for 70% of costs, while AEP Ohio wants them to pay 85%, a figure consumer groups and staff regulators agree with.

PUCO commissioners will make the final call, likely sometime this year after the evidentiary hearings wrap up.

Vijaykar asked if AEP Ohio’s objective “is to secure sufficient revenues from data center customers to offset the costs of the investments that the company would make this year.”

McKenzie responded, “That’s mostly correct. I would put it more that we’re trying to minimize the risk of cost shifting, but we’ve been very clear up front that we’re not trying for one-for-one cost recovery here. These are going to be 70-year transmission investments,” McKenzie said.

Vijaykar asked, “When you say minimize the risk of cost shifting, you’re referring to minimizing the risk of shifting costs from data center customers to data center customers?”

“Primarily, yes,” McKenzie said. “But there’s also the possibility in my scenario a minute ago where you had 10 data center customers and three of them go away and the costs would get shifted to the other data center customers as well.”

Vijaykar asked if there’s a risk of cost shifting in the other direction, with the data center industry paying for the needs of other electric users.

“Well, I’m not seeing other customers with a 30,000 megawatt queue or having signed 5,000 MWs of ESAs (energy service agreements). That doesn’t exist, anything close to that. So I guess no, I’m not even sure how that would happen,” McKenzie said.

Central Ohio’s peak load is about 4,000 MW, existing contracts with data centers are expected to double the peak load, and other inquiries of interested data centers could mean even more demand.

On Jan. 3, the public had the chance to weigh in.

Regulators held the required public input meeting the Friday after New Year’s at the PUCO’s offices in downtown Columbus, with no options to watch or participate virtually.

Only two people spoke, one on behalf of a construction company that builds data centers, and the other person spoke on behalf of a company that mines crypto currency.

WOSU asked why the hearing wasn’t available to the public online.

“We typically don’t livestream public hearings…(the hearings are) often not in places that are conducive to having the technology. So it’s just a process that is not typically done,” said PUCO spokesperson Matt Schilling.

The meeting was held in the PUCO offices where their regular meetings are offered live online.

People can view the case here, and add comments to the case electronically here with case No. 24-0508-EL-ATA.