Some of the largest companies in the world are fighting with an electric utility over how to allocate financial risk from the growth of data centers.
The case before Ohio regulators helps to make real the scope—and the stakes—of forecasts that data centers will be the leading driver of a surge in U.S. electricity demand.
Here are the players and what they are saying:
The utility, American Electric Power, has asked the state to adopt rules that would require the owners of new data centers to make long-term commitments to buy electricity that will power the facilities, and pay substantial penalties for canceling those commitments. Without such rules, other AEP consumers would be left to pick up a potentially huge tab, the company has said.
In many cases before the Public Utilities Commission of Ohio, AEP has tremendous clout as one of the 10 or so largest companies in the state by revenue and market capitalization. But this time, it’s one of the little guys, facing off against a coalition that includes affiliates of Amazon, Google, Microsoft and Meta—four of the most valuable companies in the world.
AEP said in its initial proposal in May that companies building Ohio data centers will need 5,000 megawatts of electricity generating capacity to meet their needs by 2030. For perspective, the Columbus metro area has an annual peak demand of about 4,000 megawatts.
AEP will need to make investments to increase the supply of electricity, but the company wants to protect itself if some data centers close or use less power than they had planned. To account for this risk, the utility wants to charge the facilities for using a minimum of 90 percent of their contracted capacity, even if their actual use is less. AEP also wants to require an exit fee for data centers that close before operating for at least 10 years; the fee would vary based on the size of the project, and could be hundreds of millions of dollars on the high end.
The companies that operate data centers were not pleased.
Testimony in the case shows how data centers have exploded in their share of electricity demand. In AEP’s Ohio territory, the facilities had demand of about 100 megawatts in 2020, which grew to about 600 megawatts this year, and will grow to 5,000 megawatts by 2030.
That’s just the beginning. AEP said it has received inquiries about additional data center projects that would have combined demand of about 30,000 megawatts.