AEP Ohio, PUCO Staff, Ohio Consumers' Counsel, Ohio Energy Group And Others Agree On How To Address Growing Data Center Power Needs

Rhea-AI Summary

AEP Ohio has filed a settlement agreement addressing the power demands of Ohio's growing data center industry. The agreement, supported by PUCO staff and consumer advocates, requires large data centers to pay for a minimum of 85% of their stated energy needs monthly, even if usage is lower. The plan includes a sliding scale for smaller facilities and mandates financial viability proof and exit fees for canceled projects. The requirements would be effective for up to 12 years, including a 4-year ramp-up period. This agreement aims to protect other customers from infrastructure improvement costs while maintaining Ohio's business attractiveness. Electricity demand in Central Ohio is expected to more than double by 2030, largely driven by data centers.

Positive

• Agreement ensures infrastructure costs are primarily covered by data centers, protecting other customers from rate increases
• Plan includes flexible terms for small and mid-sized data centers, maintaining market competitiveness
• Agreement provides path to end moratorium on new Central Ohio data center agreements

Negative

• Significant infrastructure investment required to meet growing data center power demands
• Previous data center proposal offering 75% minimum payment was rejected, indicating potential industry resistance

Insights

Utility Infrastructure Analyst

This settlement agreement represents a significant development in managing data center power infrastructure costs. The 85% minimum usage requirement for large data centers is a robust protective measure that ensures cost recovery for infrastructure investments. The sliding scale for smaller facilities and the 12-year commitment period with a 4-year ramp-up demonstrate a well-structured approach to infrastructure planning.

The agreement's financial viability requirements and exit fee provisions add important safeguards against stranded assets. This framework is particularly important given that Central Ohio's electricity demand is projected to more than double by 2030, largely driven by data centers. The settlement effectively balances infrastructure expansion needs with consumer protection, potentially setting a precedent for other utilities facing similar data center growth challenges.

Data Center Industry Analyst

The settlement introduces significant operational considerations for data center operators. The 85% take-or-pay requirement is higher than the industry-proposed 75%, which could impact project economics and site selection decisions. However, the sliding scale for smaller facilities shows market adaptability. The financial viability proof requirement and exit fee structure add new layers of commitment that could affect data center deployment strategies.

This framework could influence how hyperscale operators approach power procurement in Ohio and potentially other markets. The agreement's structure suggests a shift toward more stringent power commitment requirements in high-growth markets, which could accelerate the trend toward more efficient data center designs and improved capacity planning.

GAHANNA, Ohio, Oct. 23, 2024 /PRNewswire/ -- AEP Ohio, an American Electric Power (Nasdaq: AEP) company, today filed a settlement agreement that addresses the extreme power needs of Ohio's growing data center industry while protecting AEP Ohio's other customers. The staff of the Public Utilities Commission of Ohio, the Ohio Consumers' Counsel (OCC), the Ohio Energy Group (OEG), Ohio Partners for Affordable Energy, and Walmart joined AEP Ohio in the filing.

"Ohio's economic success in bringing data centers to our state comes with immense demands for electricity, and we have to meet those efficiently and responsibly," said Marc Reitter, AEP Ohio president and chief operating officer. "The agreement insulates our other customers – including residents, small businesses, manufacturers and other industries – from the impact of the necessary infrastructure improvements. Our goal throughout this process has been to provide customers with protections, while keeping Ohio an attractive place to run and grow a business. This proposal provides that balance and was developed with PUCO staff and consumer advocates. I'm grateful for the hard work of all of our stakeholders."

This agreement, which is subject to review and approval by the PUCO, requires large new data center customers to pay for a minimum of 85% of the energy they say they need each month – even if they use less – to cover the cost of infrastructure needed to bring electricity to those facilities. It also creates a sliding scale that allows small and mid-sized data centers more flexibility. And it requires data centers to provide proof they are financially viable and able to meet those requirements, as well as to pay an exit fee if their project is canceled or unable to meet the obligations outlined in the electric service agreement contract.

The requirements would be in place for up to 12 years, including a 4-year ramp-up period.

The agreement also outlines a process to end the moratorium on new Central Ohio data center agreements.

The settlement filed today by AEP Ohio, PUCO staff, the Ohio Consumers' Counsel, OEG – a manufacturing coalition – and others is the latest in PUCO case no. 24-508-EL-ATA. The case began in May 2024, when AEP Ohio filed a proposal to reconcile the costs of infrastructure improvements required for Ohio's growing data center industry.

Earlier this month, a group of data center industry leaders filed a separate agreement, which was not supported by AEP Ohio, the PUCO staff, OCC, or OEG. They proposed to pay for a minimum of 75% of the energy they say they will use and excluded important customer protections and included other problematic provisions in their deal.

Data center development has expanded rapidly in recent years across AEP Ohio's service territory, especially in Central Ohio. Electricity demand in Central Ohio, driven largely by data centers, already is expected to more than double by 2030.

"Our proposal recognizes the importance of data centers, not only to our region and Ohio's economy, but to the country at large," Reitter said. "We welcome the incredible investment large data centers are making in Ohio. Our agreement strikes a balance between the costly investments required for high-powered cloud and AI needs and protections for AEP Ohio's other customers."

AEP Ohio is based in Gahanna, Ohio, and is a unit of American Electric Power. AEP Ohio provides electricity to 1.5 million customers across 61 counties. News and information about AEP Ohio can be found at AEPOhio.com.

At American Electric Power, based in Columbus, Ohio, we understand that our customers and communities depend on safe, reliable and affordable power. Our nearly 17,000 employees operate and maintain more than 40,000 miles of transmission lines, the nation's largest electric transmission system, and more than 225,000 miles of distribution lines to deliver power to 5.6 million customers in 11 states. AEP also is one of the nation's largest electricity producers with approximately 29,000 megawatts of diverse generating capacity, including nearly 6,000 megawatts of renewable energy. AEP is investing $43 billion over the next five years to make the electric grid cleaner and more reliable. We are on track to reach an 80% reduction in carbon dioxide emissions from 2005 levels by 2030 and have a goal to achieve net zero by 2045. AEP is recognized consistently for its focus on sustainability, community engagement and inclusion. AEP's family of companies includes utilities AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana, east Texas and the Texas Panhandle). AEP also owns AEP Energy, which provides innovative competitive energy solutions nationwide. For more information, visit aep.com.

 

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SOURCE AEP Ohio

FAQ

What minimum energy payment requirement did AEP propose for large data centers?

AEP proposed that large data centers must pay for a minimum of 85% of their stated energy needs monthly, even if actual usage is lower.

How long will AEP's new data center requirements remain in effect?

The requirements will be in place for up to 12 years, including a 4-year ramp-up period.

What is the projected electricity demand growth in Central Ohio by 2030?

Electricity demand in Central Ohio is expected to more than double by 2030, primarily driven by data center growth.

What happens if a data center cancels its project under AEP's new agreement?

Data centers must pay an exit fee if their project is canceled or unable to meet the obligations outlined in the electric service agreement contract.