Ohio utility regulators have given AEP Ohio the greenlight to create a new set of rules and rates for data centers.
On Wednesday, the Public Utilities Commission of Ohio (PUCO) ordered the utility to create the data center tariffs under its guidance, and told AEP Ohio to lift its moratorium on bringing new data centers onboard in central Ohio after it creates the new tariff.
Utilities have different types of rates for their customers. Residential customers are charged differently than commercial businesses or manufacturers.
The settlement is meant to protect non-data center customers in AEP Ohio's territory from shouldering the upfront costs of the increase in power the data centers need.
"AEP had a lot of requests to serve very large data center load and they didn't feel as if the infrastructure was in place such that they could serve the data load while at the same time providing safe, reliable service to the rest of Ohioans," said Bill Michael, senior counsel for the Ohio Consumers' Counsel.
"There can be uncertainty as to when the data center is going to come online and take 100% of the electricity that they contracted for," Michael said. "You know, there's construction issues, there's timing issues, there are technology issues."
The decision requires data center companies to enter long contracts and to pay for at least 85% of the energy they predict they'll use, even if the company doesn't use it, Michael said.
Michael also said that means that if a data center came to Ohio and said they'll need 1,000 megawatts, they'll be charged for at least 850 megawatts, even if they don't use it, to ensure they're paying for the transmission buildup.
"So that obviously increases the skin in the game that the data centers would have. And it would make them more likely to perform," Michael said.
The agreement the PUCO approved of adopts most of a proposal from the OCC and AEP Ohio. Regulators also considered a proposal more favorable to the data center companies that would have held them responsible for 70% of their promised power use.
PUCO chairperson Jennifer French said in a statement that the deal protects ratepayers while making sure Ohio still provides a "dependable and reasonable environment" for data center companies.
Marc Reitter, AEP Ohio's president and chief operating officer, said the company is happy with the decision.
“We are glad the PUCO agrees that it is critical to align data centers’ demand for energy with the infrastructure costs needed to support their growth in Ohio,” Reitter said. “This infrastructure will support Ohio’s growing tech sector and help secure America’s data storage and processing facilities here in the U.S.”
Reitter said the company is working on the process to end the moratorium on new central Ohio data center agreements, which AEP Ohio had instituted to protect the grid and the company’s other customers while the PUCO considered these new rules.
The plan also creates a sliding scale that allows small and mid-sized data centers more flexibility, AEP Ohio states.
"It also requires data center owners to provide proof they are financially viable and able to meet those requirements. The terms also include an exit fee if a project is canceled or unable to meet the obligations over the term of the electric service agreement contract," the company states.
The requirements will be in place for 12 years.
“I am grateful for the collaboration of all the parties involved in this filing, which ultimately brings clarity and certainty for infrastructure planning,” Reitter said. “We are looking forward to ending the moratorium and continuing to support development of more data centers in our service territory.”
“We are grateful that the PUCO acted today to protect residential consumers from bearing excessive costs caused by data centers. It’s a step in the right direction for Ohio consumers,” Reitter said.
The settlement was negotiated by OCC, AEP Ohio, the PUCO staff, Ohio Partners for Affordable Energy, the Ohio Energy Group and Walmart.
“We are grateful that the PUCO acted today to protect residential consumers from bearing excessive costs caused by data centers. It’s a step in the right direction for Ohio consumers," said Maureen Willis, agency director of the OCC.
The PUCO read filings and heard testimony from a collection of data centers at hearings in January before making a decision.
Attorneys for companies including Google, Amazon Web Services and Meta tried to argue for less restrictive rules.
