AEP Ohio Asks to Establish Data Center Rate Structure

American Electric Power Co.’s Ohio utility is asking regulators to let it set up a new billing category for data centers and cryptocurrency mining operations, a move officials say will let them better plan their spending and help ensure that their power-hungry customers are paying their fair share.

The topic of data centers and their vast energy needs was omnipresent during the recent earnings conference calls of many publicly traded utilities. Executives celebrated the plans of Meta, Google and other technology giants to add capacity in various parts of the country—much of it to feed the artificial-intelligence investment boom that’s underway and expected to mushroom—but several also said they were mindful that utilities’ spending to meet that demand shouldn’t result in rate hikes for other customers.

“Across the AEP system, I see the need to increase capital spend in the future, including incremental investment related to commercial load growth from data centers and resiliency spend,” AEP Interim President and CEO Ben Fowke said on his team’s earnings call April 30. “The key to capturing this commercial and industrial growth is to work with parties to make sure that commitments are real and secure, the tariffs and contracts are fair to all customers and growth is self-funded.”

Hence AEP Ohio’s new filing with the Public Utilities Commission of Ohio: It would require new data centers with loads of more than 25 megawatts (as well as crypto mining operations and mobile data centers with loads greater than 1 megawatt) to commit—before construction on their centers can start—to pay at least 90% of their projected energy needs every month for 10 years. The companies would be held to that 90% payment commitment even if they use less energy than projected in a month.

“While we see no concerns serving current or new residential and existing commercial or industrial customers, we need to ensure that the right long-term investments are made to the electric grid," Marc Reitter, AEP Ohio’s president and COO, said in a May 13 statement. "We need accurate plans and solid commitments from large data center customers so the right facilities are built at the right time.”

Funding commitments like the ones AEP Ohio is proposing are likely to become common. Duke Austin, CEO of infrastructure builder Quanta Services Inc., said on that company’s recent earnings call that he’s been surprised by the pace at which data center plans have been proposed in recent months. And with them come asks for tens of gigawatts at a time.

“It’s not easy from a rate base [standpoint],” Austin said. “It's not easy to deal with those kinds of things showing up at your doorstep when you’re trying to plan for 30 years and you build out a huge power plant and it’s gone in one day. The planning piece of the business is difficult.”

An added degree of difficulty with high-impact economic development projects such as data centers (as well as large manufacturing plants) is that they are eligible for discounted power rates. That led to the phrase “rate design” making repeat appearances during publicly traded utilities’ recent conversations.

Dominion Energy Inc. Chairman, President and CEO Bob Blue and his team have been at the forefront of the data center boom since the Northern Virginia part of Dominion’s service area is dotted with more than 300 such facilities. The company hasn’t yet filed a proposal along the lines of AEP Ohio’s but Blue recently told analysts that “we certainly continue conversations with these customers that we’ve worked with so well for so long.”

Also thinking about rate design are the leaders of Evergy Inc., which does business in Kansas and Missouri. President and CEO David Campbell said May 9 his team has extended its weather-normalized rate growth forecast of 2% to 3% through 2028 thanks to recent economic development wins that include a Google data center. The flip side of those improved forecasts is that some rate structure likely will need adjusting, he said.