(TNS) — Michigan could see tech giants like Microsoft, Google and Amazon build new facilities consuming more power than entire cities to fuel burgeoning artificial intelligence and cloud computing systems.
But watchdogs and regulators worry utilities' rush to serve these new “hyperscale” data centers could end up burdening average residents' power bills if proper safeguards aren’t put in place.
The nightmare scenario goes like this.
A utility spends millions building out a new power plant to serve a data center packed with racks of servers that need as much electricity as tens of thousands of homes. But the demand proves to be a mirage. The facility ends up using less than expected, or its owner picks up and leaves for a state with more attractive power rates. Michiganders are left holding the check.
“You don’t want somebody coming in saying, ‘We need a ton of new generation for 30 years,’ but then leaves after three. That’s going to leave other customers on the hook,” said Shannon Fisk, a director of state electric sector advocacy with Earthjustice, a nonprofit environmental law organization.
State regulators share the worries. In an interview with Crain’s Grand Rapids Business in December, Michigan Public Service Commission Chair Dan Scripps said he’ll be examining how utilities charge data centers so Michigan isn’t left “holding the bag.”
He’s got an opportunity already this year.
On Feb. 7, Consumers Energy, one of the state’s largest utilities, asked regulators for permission to tweak an electric rate it proposes to use for new data centers, in part to address those concerns.
Microsoft has purchased 316 acres in a Grand Rapids suburb for a potential data center. In a filing, Consumers said it had inquiries from more than 30 prospective data center developers, representing a total of over 15 gigawatts in demand.
Those aren’t done deals. But to put the number in perspective, Consumers' J.H. Campbell coal-fired power plant in Ottawa County, closing this year, is rated at 1.45 gigawatts, capable of serving a million people.
The key is to make sure the potential electric load growth for the utility is real and that Consumers' other customers are sheltered from the possibility of stranded costs from investments to meet it, Fisk said.
He and other watchdogs say they’re still reviewing the new rate proposal to ensure that’s accomplished.
It includes provisions like a minimum 15-year power contract for data centers needing 100 megawatts or more, an “exit fee” if a facility stops using its budgeted electricity and the requirement that operators pay at least 80% of their contracted capacity, whether it’s used or not.
The plan has not yet been approved by the Public Service Commission, and a spokesperson for the regulatory body declined to comment on the active case.
The proposal has “some good provisions” for Consumers customers, Amy Bandyk, executive director of the Citizens Utility Board of Michigan, a group advocating for residential ratepayers, said in a statement.
But there are also some specific numbers about how much Consumers plans to charge data centers that need further analysis to ensure other customers don’t have to subsidize tech companies, she said.
Fisk argues data center operators should bear “all of the costs.” That means not just paying for the electricity itself, but also the price of building out new power plants, as well as needed upgrades to transmission networks and local power lines.
“They should bear the risks if they leave early or go out of business,” he said.
Katie Carey, a Consumers Energy spokesperson, said in a statement the rate proposal is “designed to protect customers from potential stranded costs associated with data center loads,” and it is intended to “mitigate risks.”
They’re important because data centers don’t have large numbers of local employees or supply chains, making it easier for them to “pick up shop” or reduce power usage, the utility argued in a regulatory filing.
The industry pushes back on the claim, and is seeking to get involved in the legal proceedings before state regulators.
In a Feb. 20 filing, the Data Center Coalition, a trade group representing 35 operators, claimed its members stand to experience “direct financial harm” from the Consumers proposal, calling its terms “discriminatory and onerous.”
Consumers currently serves one data center, the Switch facility near Grand Rapids, but it projects its long-term growth pipeline will reach upwards of nine gigawatts, with 65% to 70% of that from data centers and the rest from manufacturing, according to Carey.
In the coming three years, data centers are expected to as much as triple their power use in the U.S., according to a recent Department of Energy-backed report. They could account for as much as 12% of the nation’s electricity consumption by 2028 under the forecast.
Power companies have reason to await that growth. Their main profit comes from a return on capital investments, like the cost of new power plants and infrastructure, Fisk said.
Like Consumers, power giant DTE Energy has also touted interest from data center customers in Michigan in recent calls with investors.
But there’s also reason for skepticism. In the late ‘90s and early 2000s, power demand was projected to go “through the roof” because of personal computing, but it actually remained steady for about 20 years, Fisk said.
Changes in technology can affect the trajectory. When Chinese start-up DeepSeek released an AI system that appeared radically more efficient than American competitors in January, it raised questions about whether projected power demand could slow, Fisk said. That still remains to be seen, he added.
As a state, Michigan is still hoping to lure tech companies and their data centers.
In December and January, Gov. Gretchen Whitmer signed bills granting the biggest of those facilities tax breaks — over objections from economic incentive skeptics and environmentalists.
Some worried massive increases in power demand could prompt utilities to back off promises to close dirty coal plants or seek to build new natural gas-fired plants that emit planet-warming pollution, derailing Michigan’s clean energy goals.
But proponents pointed to tax break measures pushing qualifying data center companies to procure clean energy, through on-site wind or solar, contracts with utilities or participation in voluntary green power plans.
Still, the ongoing debate around Consumers' electric pricing strategy presents an opportunity to force data centers to become more efficient with their power usage and hold big tech companies to their own stated climate goals, Fisk said.
Consumers has already made “aggressive commitments” to develop clean energy, adding renewables, setting emissions reductions targets and investing in efficiency, Carey said. It plans to show how it will continue meeting clean energy targets with its electric load when it files an updated plan with regulators in 2026.
The utility has requested regulators give expedited consideration to its rate changes, as it wants the tweaks in place as it enters into contracts with new data centers.
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