"This industry is moving at a speed the likes of which we have never seen," Pennsylvania Public Utility Commissioner Kim Barrow said at a meeting this month.
It reminded her of when rideshare companies first came to Pennsylvania.
"They were going to break things, and they were not waiting for the Legislature or this commission to move," Ms. Barrow said during the Nov. 6 meeting at which the PUC approved guidelines for utilities dealing with new data center entrants.
Big data centers are a big deal with little consensus in the utility space.
PJM, the regional transmission grid that coordinates electricity for 13 states including Pennsylvania, is asking some of the same questions: how to incorporate data centers into the grid while keeping the lights on for everyone and keeping the cost of service from spiking.
At its Nov. 6 meeting, the PUC voted narrowly to approve a model tariff for data centers that will guide how the state's electric utilities treat them.
But PJM members, which include utilities, power producers and transmission owners, couldn't agree on the best way of integrating data centers into the regional power grid. Proposals from stakeholders, including Gov. Josh Shapiro, failed to garner enough votes for the committee to make a recommendation.
A customer class of their own
Data centers are not the typical large utility customer. They can't be lumped in with other large energy users, such as skyscrapers, warehouses or airports. Their acres of hard-working computers need constant power for processing and cooling.
The average data center that FirstEnergy's is expecting across its territory requires a power supply of 100 megawatts, the Akron-based company told Pennsylvania utility regulators. That's more than four times the energy load of the University of Pittsburgh.
In Pennsylvania Electric Company (PECO) territory in the eastern part of the state, the smallest data center the utility was evaluating last spring was close to 150MW, or the equivalent of shoving eight Pittsburgh International Airports into one utility meter.
Projects that make the headlines — Homer City Redevelopment, for example, with its proposed 4,400MW of data centers — are many times bigger.
Earlier this month, PPL said it signed agreements to connect 20,000MW of new data center customers.
"These individual loads are massive in scale, comparable to small cities and orders of magnitude larger than most other 'large' users," wrote the Industrial Energy Consumers of Pennsylvania, a trade group representing energy intensive facilities in the state.
The organization, which offered comments after the PUC began examining how utilities should treat data centers, wanted to draw a bright line between the factories, steel mills, and other long-embedded and familiar large grid users and the "unprecedented, system-altering" new would-be entrants.
When the PUC put forth a model tariff for data centers earlier this month, euphemistically calling them "large load customers," it settled on a technical definition of 50MW or more. Though hotly debated over the past six months, setting a threshold for what constitutes a large load was the easy part.
A more complicated question is, what do these data centers owe struggling residential rate payers whose costs have already risen and are expected to jump further as new demand tugs on a system that's not growing at the same pace?
And how should utilities ensure that the rest of their customers are protected when a data center comes online or, worse yet, says it will and then doesn't?
While some data center developers and economic development interest didn't want these massive computer-filled buildings to be treated differently from other large utility customers, the so-called AI Race has fueled a sense of urgency at the PUC.
"I fear for the reliability of the grid, and I fear for the economic impact [of] adding this much load in a very quick amount of time," Ms. Barrow said.
She also worries about how costs will be allocated among a utility's entire rate base. That includes the costs of system upgrades, which are sometimes socialized among all customers and sometimes paid by the customer that needs it. It also includes the costs to low-income households whose electricity bills have already increased by double digit percentages over the past year.
Undue burden
"It is uncontroverted that large load additions are roiling energy market pricing," Ms. Barrow said on Nov. 6.
The model tariff proposes that data centers make annual contributions to the utility's hardship fund, which gives grants for utility payments to low-income customers.
The smallest data centers (those whose peak demand is below 75MW) would be required to pay $250,000 while the biggest (500MW or more) would owe $1 million.
Commissioner Kathryn Zerfuss called it a "step in the right direction" but wondered whether it's sufficient for the scale of the challenge.
Perhaps the more sustainable option is to have these large load customers pay into a utility's universal service program, which is a broader set of assistance options for low-income customers, including reduced monthly bills, past balance forgiveness and energy conservation help. The cost of these programs is recovered through a charge in all residential customer bills.
The PUC has tried to nudge utilities to spread the cost among all customers, not just households. In a 2019 policy, the PUC argued that the increasing costs of utility customer assistance programs fell entirely on residential rate payers that are not considered low-income but are nonetheless facing steep increases in their energy burdens.
Residential customers are not the reason utility costs are rising, consumer advocates argue. Data centers are.
"There is a clear line between the increased demand caused by hyperscale users and increased energy costs paid for by all consumers, including low income consumers," according to The Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania and the Tenant Union Representative Network.
Those non-profits argued in comments to the PUC that instead of focusing on how not to shift "undue" burden onto households, they should reframe the problem. There is no such thing as "due burden for residential consumers to bear," they wrote. "Any cost-shifting from hyperscale users to Pennsylvania families would be patently unjust and unreasonable."
Unsettled questions
Should data centers be required to bring their own generation to offset impacts on the grid? No consensus emerged.
Duquesne Light, the Pittsburgh utility that serves parts of Allegheny and Beaver counties and does not have the kind of significant interest from large data centers as some other utilities in the state, was in favor.
Constellation Energy cautioned against it, despite the fact that its most high-profile project, the $1.6 billion restart of Three Mile Island's Unit 1, fits that mold. The nuclear plant is getting new life under a long-term power purchase agreement with Microsoft. Electrons will still be fed into the grid, but they will be essentially offsetting the impact of Microsoft plugging new data centers into the grid.
The PUC said utilities should consider lowering charges for data centers that offset their electricity pull form the grid by having generation onsite.
The model tariff also includes guidance on collateral that utilities can request from data center clients to insure against the risk and cost of planning for their arrival on the grid.
It suggests utilities charge data centers a minimum fee equal to 80% of their contracted demand, even if the data center uses less than it originally said it would.
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