Several big tech names like Google, Amazon, Microsoft, and Meta are opposing American Electric Power (AEP) Ohio’s requested tariff increase for data center customers and cryptocurrency mining/mobile data center operations.
In direct testimony to Ohio’s Public Utilities Commission last month, several individuals, including consultants and tech employees, opposed AEP’s request, arguing that the new rates would be “discriminatory” and “unreasonable”
AEP Ohio made the request in May to the Ohio PUC, requesting a new rate structure that would require new data centers with loads greater than 25 MW and cryptomining/mobile data center operations with loads greater than 1 MW to agree to meet certain requirements before infrastructure is constructed to serve them. Under the proposal, data centers would be required to make a 10-year commitment to pay for a minimum of 90% of the energy they say they need each month – even if they use less.
Overall, AEP is facing 15 GW of projected load growth from data centers by 2030, the utility said on its second-quarter earnings call in July.
In testimony on behalf of Google, consultant Brendon Baatz argued that AEP’s proposed rates would deviate from standard regulatory practices, because “it introduces terms and conditions based on the end-use of electricity.”
“While AEP Ohio has demonstrated that the growth of data centers is 29 driving an increase in electric demand, and that new investments will be necessary to 30 accommodate this growth, they have not provided any evidence that these challenges result from anything other than the large per-customer load size of these requests,” Baatz said in his testimony. “With its discriminatory focus on data centers, AEP Ohio is asking the commission to pick winners and losers in the local economy by imposing unfavorable terms for basic electric service on a single industry.”
In Amazon’s corner was Michael Fradette, principal of energy strategy at Amazon Web Services, who said it is “unreasonable” to expect data centers to accurately forecast demand within 10% over a period of a decade or more years. Additionally, Fradette argued that peak load is a factor of actual cooling needs – weather and seasonal – and the data centers’ customer utilization, both of which are “outside of AWS control.”
“A more reasonable demand charge would be one that is proportional to ensure the reasonable recovery of the allocated incremental cost of service for the individual customer,” Fradette said. “To the extent AEP Ohio can calculate such an amount, either at the level of a customer or all incremental load, that is a reasonable demand charge. By contrast, AEP Ohio’s proposal of 90% does not appear to have any basis and is not supported by the current record.”
In June, Meta submitted a motion to intervene in the proceeding in support of Sidecat, LLC, an affiliate of Meta Platforms that operates a data center in New Albany, Ohio.
“The applicable electricity rates and corresponding electric service tariffs for AEP Ohio will be a significant consideration for Meta when evaluating possible sites for new facilities, expansions at existing facilities, and otherwise operating its data center assets,” wrote Sidecat’s attorneys.
According to a study published by EPRI in May, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used. Demand for computing power from data centers, fueled by artificial intelligence and other new technologies, requires enormous amounts of power. Ohio is seeing unprecedented demand from data center customers, especially in the central part of the state.
According to AEP testimony to state regulators, data center load is expected to reach a total of 5,000 MW in Central Ohio by 2030, based on signed agreements with the company. As of April 2024, actual data center load was approximately 600 MW in Central Ohio.
The Buckeye State is not alone. In the U.S., data center demand is expected to reach 35 GW by 2030, up from 17 GW in 2022, McKinsey & Company projects. Grid operators and utilities are projecting significant load growth driven by electrification, new manufacturing, and data center development.
Utilities across the U.S. are grappling with how to equitably address growing data center demand through tariff structures.
In late August, the Federal Energy Regulatory Commission (FERC) rejected a proposal from Basin Electric Power Cooperative that requested to create new wholesale power sales rate schedules for cryptocurrency centers and other large loads.
Basin made the proposal in March, which requested three crypto blockchain rate schedules and a new large load schedule for other non-crypto loads greater than 75 MW, according to law firm Troutman Pepper. In the proposal, Basin said it had already had 200 MW of crypto load in its territory last year, and expected at least another 1,000 MW over the next several years.
Some utilities are attempting to collaborate with technology providers, however. Amazon, Google, and Microsoft supported an effort by Duke to develop new tariffs designed to support the long-term sustainability goals of data center owners.
The proposed Accelerating Clean Energy (ACE) tariffs would enable large customers to directly support carbon-free energy generation investments through financing structures and contributions that address project risk to lower costs of emerging technologies. ACE tariffs would facilitate onsite generation at customer facilities, participation in load flexibility programs, and investments in clean energy assets.
The ACE framework also would include a Clean Transition Tariff (CTT) – a feature enabling Duke Energy to provide individualized portfolios of new carbon-free energy to commercial and industrial customers. The CTT would match clean-energy generation and customer load. This would be a voluntary program for larger customers seeking to advance their clean energy goals, and it would include protections for non-participating customers, Duke Energy said.
The ACE tariffs would represent new, voluntary pricing structures for Duke Energy’s large commercial and industrial customers. Duke Energy’s five-year capital plan will continue as planned and these tariffs would be subject to regulatory approvals in North Carolina and South Carolina.
