The Data-Center Fight Moves From Wires to Power Plants

RALEIGH, N.C., Oct. 27 — NorthNorth Carolina’s governor, Josh Stein, and its attorney general, Jeff Jackson, called on the state’s utility regulators on Tuesday to make data centers pay more of the cost of new power plants, not only of the wires that connect them. The settlement before the regulators, which Duke Energy reached this month with the state’s Public Staff, Amazon, Google, Microsoft and a Meta affiliate, among others, would have new data centers pay in advance for grid facilities that serve only them and post letters of credit for transmission upgrades. How to allocate generation costs is left to be studied in Duke’s next rate case.

In Illinois the argument is still over the wires: ComEd’s records put the cost of connecting 30 data centers to its grid at $3.1 billion, against $721 million their developers have paid in deposits, Capitol News Illinois reported on Monday.

By this paper’s reading, the question regulators are being asked is moving from who pays to connect data centers to who pays for the plants that supply them. The answer sets the hyperscalers’ cost of power where a regulated utility builds the plants, and how much lands on everyone else’s bills.

The Wires

ComEd’s figures, as Capitol News Illinois reported them from its filing with the Illinois Commerce Commission, split almost evenly: $1.6 billion for transmission and $1.5 billion for distribution, for projects already connected or due by 2031. The Citizens Utility Board and the Environmental Law & Policy Center say the deposits, just under a quarter of the total, could leave a $2 billion shortfall to be spread across other customers’ bills.

ComEd says the groups overlook $1.1 billion of the transmission cost backed by transmission security agreements, lines of credit that guarantee 10 years of transmission payments even if a project does not materialize. Max Leichtman of ComEd said, according to Capitol News Illinois, that only distribution costs should be set against the deposits, which “may continue to increase,” and that any remaining distribution costs would fall on the large-user rate class, not on all customers.The AgreementsNineteen of the 30 projects predate ComEd’s requirement for the agreements, which regulators approved in 2025. The agreements have also caused “substantial attrition” in ComEd’s queue of data-center requests, Mr. Leichtman said, the outlet reported.

Even on that pairing, by this paper’s arithmetic from the rounded estimates, about $500 million of transmission cost has no agreement behind it and about $780 million of distribution cost is not yet matched by deposits. ComEd opposes making developers pay up front, which it says would make it hard for them to do business in Illinois; it proposes instead to assign rates to individual data centers based on their costs, Capitol News Illinois reported. “We don’t want to pay for grid bridges to nowhere,” Eric DeBellis, the Citizens Utility Board’s general counsel, told the outlet.

The Plants

Load growth over the next 15 years is projected at “at least five times” the rate of the previous 20, Mr. Stein said, and data centers make up about 80 percent of it, NC Newsline reported. Mr. Stein’s office says a report by Energy Futures Group, prepared with his Energy Policy Task Force, found that large loads, most of them data centers, will cost $50 billion over the next 25 years. The report cautions that its cost assessment “should not be mistaken for a rate impact analysis.”

He wants data centers to pay the full cost of their impact, including generation, and to “build or bring their own clean energy,” which he says would save ratepayers $20 billion if half the new large customers did so and ran flexibly, the outlet reported. “There is no reason why the largest, wealthiest companies in the history of the world cannot be required to pay for the energy generation and transmission costs that they put onto the system,” he said, as quoted by NC Newsline. Mr. Jackson said regulators should consider an entirely new rate class for large data centers.

There is no reason why the largest, wealthiest companies in the history of the world cannot be required to pay for the energy generation and transmission costs that they put onto the system.

Both still back the settlement as a start: Mr. Stein called it “a step in the right direction,” NC Newsline reported. “It’s not final yet, and we’re going to keep pushing for more,” Mr. Jackson said in the governor’s statement.

“It’s simple – data centers will pay upfront for all costs to connect to the grid,” Kendal Bowman, Duke’s North Carolina president, said on Oct. 7. A spokesman, Bill Norton, did not address Tuesday’s demands directly, NC Newsline reported; he wrote that powering the state “at the lowest possible cost” requires “balanced, diverse energy sources” and is at the heart of Duke’s resource plan and the settlement.

The settlement does put generation on the agenda: under it, Duke is to analyze, in its next rate case, how generation costs should be allocated to large loads, with and without a separate class for them.The TariffIt would cover new customers of 50 megawatts or more at an expected load factor of 80 percent or more, or of 150 megawatts or more at any load factor. All would pay demand charges on at least 75 percent of their contracted demand; those of 100 megawatts or more would sign for at least 15 years. In Duke’s illustration, security for a 500-megawatt customer is based on a maximum of about $587 million. No date has been set for the commission’s vote, NC Newsline reported.

Who Pays

How other customers fare depends first on whether the grid has room, finds a study The Brattle Group prepared with the nonprofit Energy Systems Integration Group and announced on Monday. In its model Southeast utility, a 500-megawatt load on a 15-year contract lowered existing customers’ rates by about 6 percent on average over the contract when spare generation and transmission capacity could serve it.The ModelThe study placed the same load in four prototypical settings, the Southeast, MISO, PJM and ERCOT, each host utility with a peak of 3 gigawatts. The results, Brattle says, “illustrate potential outcomes rather than forecasts for individual utilities.” The study leaves out distribution costs, almost half of ComEd’s $3.1 billion. With no spare capacity, the utility must build, and those rates rise by 0.44 cents a kilowatt-hour; if the load also arrives four years late, reaches half its contracted size and leaves five years early, the rise triples, to 1.32 cents.

Contract terms help: in the worst case, an 80 percent minimum billing demand cut the rise by 52 percent. But such mechanisms, the report says, do not “fully address cost shift risks, which can arise when the incremental cost of serving the new customer exceeds the system’s average embedded cost, even if the large load materializes exactly as planned.” By this paper’s reading, that is Mr. Stein’s gap: minimum bills and security against a no-show do not, by themselves, fully protect other customers when serving a data center costs more than the system’s average embedded cost.

In PJM, capacity-market price effects “can dominate rate impacts,” the study finds, and customer-specific tariffs protect less against them. It also warns: “Excessive charges could encourage inefficient self-supply, discourage economically beneficial development, or shift projects to jurisdictions with less cost-reflective policies.” Microsoft, a party to Duke’s settlement, proposed to Nevada’s regulators in May that assets built for a data center be split between a share the data center pays and a “system benefit” share spread across the rate base, as the report describes it.

In Montana, the Public Service Commission voted on Tuesday to put off until Nov. 10 its decision on the $15.4 billion merger of NorthWestern Energy and Black Hills, so that one commissioner could draft a further condition.The MergerThe vote was three to two; the commission’s staff had recommended approval. The combined company, Bright Horizon Energy, would operate in eight states. By state law, the commission must act by Nov. 12, the Daily Montanan reported. Nearly 30 members of the public urged it to oppose the deal, citing the utilities’ plans to serve data centers, the Daily Montanan reported. “I have Montanans struggling to pay their bills,” Commissioner Randy Pinocci said, according to the Daily Montanan; he does not want data centers paying less for power than his constituents. The staff attorney said data centers are part of a separate case.

In this paper’s reading, the gains follow the spare capacity. In the study’s Southeast model, a data center that fills it lowered its neighbors’ rates; where new construction cost more than the system’s average embedded cost, existing customers’ rates rose unless the tariff recovered the difference from the new load. Making data centers pay that difference would raise the hyperscalers’ cost of power where plants must be built, and favor sites with power in place. Utilities gain deposits, letters of credit and long contracts that shift the risk of a no-show off other customers.

The next rulings are close: Florida’s regulators take up Duke Energy Florida’s large-load tariff on Nov. 3, Montana’s commission is due to decide on Nov. 10, and Duke said on Oct. 7 that it expected North Carolina’s by mid-November. Hermantown, Minn., whose council cancelled Tuesday’s meeting on a data-center project to keep clear of early voting, takes it up on Friday at 6:30 p.m. Central.