PSC Analysts Say We Energies’ Data Center Rates Pose Risks to Customers
Interest groups say We Energies’ proposal needs changes to protect customers
An artificial intelligence data center is built on land once slated for development by Foxconn in Mount Pleasant on Wednesday, May 8, 2024, in Mount Pleasant, Wis. Angela Major/WPR
Analysts for state utility regulators and interest groups say a proposal from We Energies for special electric rates charged to data centers could pose risks for other customers’ utility bills.
Public Service Commission of Wisconsin staff and interest groups raised concerns in their testimony that without stronger safeguards, the proposal could burden regular customers with higher costs.
“The bottom line is we think there are loopholes in what We Energies has proposed that actually do put customers at risk of paying additional costs with this data center wave,” said Tom Content, executive director of the Citizens Utility Board of Wisconsin.
Testimony filed with the PSC says serving data centers in Mount Pleasant and Port Washington could double We Energies’ energy demand by 2030 with the company preparing to spend $19.3 billion on new electric generation over the next five years.
Last year, We Energies filed an application with the PSC to approve special rates for data centers, aimed at requiring those data centers to cover the cost of building energy infrastructure for their developments. The proposed rates would apply to customers requiring enough electricity to power hundreds of thousands of homes.
It was the first attempt to create a rate structure for data center-scale customers in Wisconsin. We Energies officials have said the proposal would prevent costs from data centers from increasing bills for other customers.
“Making sure our customers aren’t stuck paying data centers’ costs is at the foundation of our customer protection plan,” We Energies spokesperson Brendan Conway said in a statement. “Under our proposal, data centers will pay their own way — covering the power they use and the cost of new generation and distribution built to serve them.”
The proposal would allow customers who need 500-megawatts or more to subscribe to a generation resource, like a solar farm or gas plant, that’s dedicated to their use.
One subscription would require data centers to cover all costs associated with the resource and receive all of the power from that resource. The other subscription would allow data centers to count a resource towards their energy needs. But they would pay 75 percent of the plant’s fixed costs while other utility customers would cover the remaining 25 percent and all fuel costs.
We Energies has argued that the 75-25 split would allow its regular customers to receive benefits from revenue generated by selling electricity on the Midwest energy market.
This plan would primarily apply to natural gas plants, which the utility has said would run at times when there’s high demand for energy like hot summer days.
Andrew Field, a utility auditor for the PSC, said in testimony to the commission that the issue with that plan is that revenues from the energy market are not guaranteed and depend on volatile energy prices.
If data centers use less power than expected, terminate service early or leave the state, Field said customers could still be paying plant and fuel costs without enough revenue to offset them.
Both the Citizens Utility Board of Wisconsin and a coalition of clean energy groups are calling for data centers to pay all costs for new resources and eliminate the 75-25 split for some resources.
Abby Novinska-Lois, executive director of Healthy Climate Wisconsin, said that We Energies has “not been transparent with the way they are talking to the public,” by saying the public will pay no costs related to data centers.
“The actual proposal is quite different,” she said. “Twenty-five percent of infrastructure and 100 percent of fuel costs are tremendous raises in utility bills for Wisconsinites.”
In rebuttal testimony to the PSC, Richard Stasik, vice President of regulatory affairs for We Energies’ parent company, said residential and large industrial customers could “see immediate rate increases” of 5 and 4.8 percent if data centers received service used the rates We Energies uses for large industrial customers instead of the company’s proposed data center rates.
But Content said there’s also risks of utilities building too many power plants to meet expected load growth and the artificial intelligence bubble bursting, resulting in tech companies changing their business plans.
“The tech sector is pretty volatile right now,” he said. “The big story is AI and data centers, but we weren’t even talking about that three years ago, and now it’s all we’re talking about. How do I know that we’re going to be talking about the same thing three years from now?”
Under We Energies’ proposal, data center customers would be required to sign a 10-year agreement with the utility to take on electric service under the proposed rate structure and to pay costs tied to serving their demand. Those agreements would renew every year-to-year after the initial 10-year period, and leaving the agreement early would require the data center to pay off unrecovered costs.
Testimony from PSC analyst Tyler Meulemans said the 10-year term “would not recover all costs incurred” to the utility.
Cassie Steiner, senior campaign coordinator for Sierra Club Wisconsin, said the 10-year term is also far shorter than the life of the power plants built to serve data centers.
“This payment agreement needs to be in place through the life of the infrastructure,” she said. “Otherwise, we’re all at risk for paying for these things, especially if data centers pull out or back out of plans.”
Environmental groups, including the Sierra Club, also argue that We Energies’ plan to meet new data center demand relies too heavily on fossil fuel infrastructure, like new natural gas plants.
PSC analysts, groups say We Energies’ proposed data center rates pose risks to customers was originally published by Wisconsin Public Radio.
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