Dive Brief:
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Facing about 30 GW in potential data center load, AEP Ohio on Monday asked state utility regulators to approve a proposal that would set increased financial requirements for new data centers and cryptocurrency operations.
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The proposed rates for data centers larger than 25 MW and crypto and mobile data centers bigger than 1 MW would help ensure that they pay for new transmission needed to serve them, which could cost billions, according to filings at the Public Utilities Commission of Ohio.
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“AEP Ohio’s proposed data center tariffs will require data centers to make long-term financial commitments — to have more skin in the game — to mitigate the risk that transmission infrastructure will be built for data centers but not needed,” Matthew McKenzie, vice president of regulatory and finance for AEP Ohio, said in testimony at the PUC.
Dive Insight:
There is about 600 MW of data center load in AEP Ohio’s service territory in Central Ohio, according to filings with the PUC. The utility has agreements to connect an additional 4.4 GW of data center load by 2030, which can be accommodated by the region’s transmission system.
However, AEP Ohio has received inquiries from companies considering building data centers that could add an additional 30 GW of load, which would require new transmission — possibly 765-kV lines — on the PJM Interconnection’s system, according to the utility.
PJM recently approved about $5 billion in transmission projects in the Dominion Energy and First Energy territories to help serve more than 7.5 GW of data center load in the northern Virginia area, Kamran Ali, vice president of transmission planning and analysis for American Electric Power Service Corp., told the PUC.
In response to the inquiries, AEP Ohio in March 2023 paused accepting new service requests from data center customers so it could evaluate how they would affect the utility’s power delivery system, Ali said.
The proposed tariffs will help AEP begin potential siting activities and identify transmission routes into the Central Ohio area as well as PJM’s development of potential regional solutions through a competitive solicitation process, he said.
“Without requiring data centers to make long-term financial commitments to support transmission investment, data center load growth could leave AEP Ohio with insufficient transmission capacity to support the kind of ordinary, non-data-center economic growth that creates jobs and powers Ohio’s economy,” McKenzie said.
Also, if the transmission facilities are built, but the data center load doesn’t materialize as expected, retail customers in PJM would have to pay for unneeded transmission capacity, he said.
Under AEP Ohio’s proposal, data centers would be required to commit to ten-year electric service contracts, with an option to pay an “exit fee” after five years, according to McKenzie. Also, data centers would be required to pay minimum demand charges based on 90% of their contract capacity, up from 60% under the utility’s current general service tariff, he said. Mobile data centers, such as cryptocurrency mining operations, would be required to pay minimum demand charges based on 95% of their contract capacity.
The proposal would apply to service agreements made after AEP Ohio’s moratorium on them is lifted.
In the past, AEP Ohio’s largest customers have been industrial facilities with peak demand in the range of a few hundred megawatts, according to McKenzie. Now, AEP Ohio has had multiple customers say they are considering building data centers that could have loads of 1 GW or more, he said.
AEP Ohio has a general obligation to serve all customers in its service territory, but that obligation doesn’t require the utility to extend service to customers in a way that would be unreasonable or unjust for the utility and its other customers, McKenzie said.
Data centers have less of an effect on the local economy than typical commercial and industrial customers, Lisa Kelso, AEP Ohio vice president of customer experience, told the PUC.
On average, non-data center C&I customers support about 25 direct full-time equivalent jobs per megawatt while data center customers support less than one direct FTE job per megawatt, she said.
Owners of hyperscale data centers are attracted to Central Ohio because of reliable electric service from AEP Ohio, available fiber connectivity, water resources and retail choice for power supply, according to Kelso.
Some mobile cryptocurrency operations have appeared in AEP Ohio’s service territory and then left, she noted.
