Xcel Energy Proposal to PSC Pays Full Cost of Data Center Projects
State Public Service Commission has moved to tougher stance on data centers.
Data center. (CC0)
Xcel Energy has filed a rate proposal with Wisconsin utility regulators that would require data centers to pay all costs tied to their projects.
The utility filed an application Monday with the Public Service Commission. The proposal requires data centers or other large customers to pay all costs tied to new transmission lines or power plants needed to meet their energy demand.
“We recognize the growing energy needs of large customers, including data centers, and the important role they play in driving economic growth and innovation in Wisconsin. At the same time, it’s critical that growth is managed in a way that does not raise the rates of customers and supports the communities we serve,” Karl Hoesly, Xcel Energy’s president in Wisconsin and Michigan, said in a statement.
Xcel’s proposed rates are not tied to any specific customers or projects. However, the company has 2.9 gigawatts of pending requests from large customers in Wisconsin, said Tyrel Zich, regional vice president of regulatory policy for Xcel Energy.
For context, the Hoover Dam generates about 2 gigawatts of power or enough to power a city of 750,000 people.
“As we know, some of those requests are going to be speculative. They’re not all going to materialize,” Zich said.
Last year, the mayor of Menomonie put a hold on a $1.6 billion data center proposal by developer Balloonist, LLC in Xcel’s service territory, which includes western and northern Wisconsin. The city council there later passed an ordinance restricting data center development.
The utility’s proposed rates would apply to significant load additions of 100 megawatts or more for future projects that do move forward. New large electric customers would be subject to binding 15-year terms and minimum monthly payments regardless of how much power they use.
Tom Content, executive director of the Citizens Utility Board, said the ratepayer advocacy group will review the proposal to ensure customers are protected.
“The PSC has set a pretty firm stance … with the message to the utilities and to tech companies that the customers of the utilities who aren’t data centers should not be paying a dime or a nickel or a cent for data centers,” Content said. “We’re going to review this with that lens in mind.”
Cassie Steiner with the Sierra Club Wisconsin chapter said it would also review the proposal to ensure there are “appropriate guardrails” for customers, communities and the climate.
Robb Kahl, executive director of Madison-based Construction Business Group, said in a statement that large projects like data centers provide value to Wisconsin communities.
“Done right, this means more jobs, more economic activity and a stronger tax base,” Kahl said. “Xcel Energy’s proposal helps make sure these projects are done right.”
Under Xcel’s proposal, data center developers would face financial security provisions to ensure there’s enough money available in case they’re unable to pay their bills or want to leave the utility system’s early, in which case they would also face exit fees.
Zich said customers who don’t have a good credit rating would be required to post letters of credit or cash to the tune of hundreds of millions of dollars. Creditworthy customers or a parent company could pledge to assume financial responsibility if a subsidiary defaults.
Last month, the Public Service Commission changed Alliant Energy’s proposed rates for Meta. Regulators required the company to cover any costs if its subsidiary Degas, LLC couldn’t foot the bill for costs tied to a $1 billion data center campus in Beaver Dam.
In April, the PSC also changed financial support requirements under We Energies’ proposed rates for large customers, which data center developers and the utility have asked regulators to revisit. They want to lower the amount of money Oracle and others would need to put up as collateral for new projects.
Wisconsin utilities and tech companies have faced scrutiny from the public and regulators over use of nondisclosure agreements or keeping details of data center proposals hidden, including projected energy and water use.
Xcel’s application notes details of individual customer requests are confidential. Zich said the utility doesn’t disclose details about who is developing proposals or where they would be located until a customer wants to release that information to the public.
When asked whether the utility has signed nondisclosure agreements, utility officials say they treat all customers with the same level of confidentiality whether it’s a home or business.
“We effectively have a policy of nondisclosure for all customers,” Zich said.
Xcel hopes the commission will sign off on its proposed rates for large customers by February of next year.
Xcel Energy files rate proposal for data centers to pay full costs of projects was originally published by Wisconsin Public Radio.
If you think stories like this are important, become a member of Urban Milwaukee and help support real, independent journalism. Plus you get some cool added benefits.
