By Mark Jaffe, EUCI energy writer
Electric utilities across the country are adopting “large load tariffs” aimed at data centers in a move to protect against the hefty costs that come with the facilities and speculative projects.
At least 36 utilities – from Dominion Energy in Virginia to Wisconsin Electric Power to Arizona Public Service – have adopted a variety of large load tariffs.
While they vary from utility to utility, some of the common elements are upfront fees, long-term contracts, minimum bills, security deposits and early-exit fees.
“They do get rid of stranded costs and help with ratepayer burden,” said Sarp Ozkan, a vice president at the energy analytics firm Enverus. “They also do get rid of a lot more of the speculative projects, which we know has been a big driver of the expected volumes.”
“So, I think, these tariffs are heading in the right direction,” Ozkan said.
The first problem utilities are facing is that in the rush to build data centers, developers are filing the same project with multiple power providers – “site shopping” – to see where they can get on the grid quickest.
The consulting group Wood Mackenzie is tracking 134 gigawatts (GW) of proposed data centers across the U.S., up from 50 GW a year ago.
Grid operators, however, have received interconnection requests far exceeding this, Wood Mackenzie said, “as some developers have bagged spots in multiple queues, hoping one of them will pay off, while others have yet to disclose project details.”
There is a risk that if a utility acquires generating capacity for a data center that doesn’t materialize, the utility and its customers will be left with the bill.
Columbus, Ohio-based American Electric Power (AEP) subsidiaries – in Indiana, West Virginia and Kentucky – acquired 750 megawatts of generating capacity for data centers that didn’t materialize. The utilities are now seeking to sell that capacity to the PJM Interconnection market.
AEP’s Ohio subsidiary, in contrast, has implemented a large load tariff that requires a load study fee of up to $100,000 for a 100-megawatt (MW) facility, demand changes equal to 85% of the average monthly bill for the past 11 months, and minimum contract term of eight years and fees to exit early.
The tariff can add nearly $10 million in first-year costs for a 100-MW facility, but has successfully reduced connection requests by half, according to Enverus.
“What AEP Ohio has done is clearing the queue,” said Ozkan. “We’ve seen that it is effective in in weeding out some of the speculative positions.”
Analysis done by the Tri-State Generation and Transmission Association as part of its submission for a large load tariff to the Federal Energy Regulatory Commission looked at 11 large load tariffs around the country.
The average requirement for security was to pay 7 years of minimum bills – in cash or with a letter of credit.
The average exit fee, for leaving the contract early, was five years of minimum bills. The average minimum bill was 80% of the contracted demand for power, and the average contract length was 14 years. The average “ramp time” – the period to get to full service – was four years.
The definition of what would trigger the large load tariff ranged from a 5 MW of new load to 500 MW with the average at 114 MW.
This survey group included AEP Ohio, Arizona Public Service, Florida Power & Light, and Santee Cooper, South Carolina’s largest power and water utility.
Tri-State, which supplies wholesale electricity to 41 rural cooperatives in Nebraska, Wyoming, Colorado, and New Mexico, has at least 10 proposals for large data centers across its service area, with an estimated 7 GW of demand.
“Tri-State’s existing resource and member planning processes are insufficient to handle the magnitude of applications,” the association told FERC.
The commission rejected Tri-State proposal because it also included some standards for retail sales by its cooperatives, which are outside the agency’s scope.
Lisa Tiffin, Tri-State’s chief commercial officer, said the association would remove the retail provisions and address some other issues raised and resubmit the tariff to FERC in February.
“We actually took the ruling as a good sign,” Tiffin said.
Tri-State’s proposed tariff would apply to loads of 45 MW or more and require an evaluation fee based on the size of the project. For a 45-MW project, the fee would be $80,000, for a 100-MW project it would be $150,000 and for 200-MW $250,000.
The data center would have to commit to minimum energy and minimum demand charges, a security deposit of $2.7 million for each project MW and a 15-year contract.
“I think that every single utility over the next several years will have adopted some sort of large load tariff,” Enverus’ Ozkan said.
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