AEP Ohio Proposes Data Center and Crypto Financial Requirements Amid 30 GW of Service Requests

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Diving brief:

• Facing a potential data center load of about 30 GW, AEP Ohio on Monday asked state utility regulators to approve a proposal that would set increased financial requirements for new data centers and operations cryptocurrency.

• The proposed rates for data centers larger than 25 MW and crypto and mobile data centers larger than 1 MW would help ensure they pay for the new transmission needed to serve them, which could cost billions, according to filings with the Public Utilities Commission of Ohio.

• “AEP Ohio’s proposed data center rates will require data centers to make long-term financial commitments – to have more risk – to mitigate the risk of transmission infrastructure being built for data centers but are not necessary,” said Matthew McKenzie, vice president of regulatory and finance for AEP Ohio. in testimony to the PUC.

Dive Overview:

There is approximately 600 MW of data center load in AEP Ohio’s service territory in central Ohio, according to documents filed with the PUC. The utility has agreements to connect an additional 4.4 GW of data center load by 2030, which can be supported by the region’s transmission system.

However, AEP Ohio has received inquiries from companies considering building data centers that could add 30 GW of additional load, which would require new transmission – possibly 765 kV lines – on the PJM interconnection system, according to public service.

PJM recently approved approximately $5 billion in transmission projects in Dominion Energy and First Energy territories to help serve more than 7.5 GW of data center load in the Northern Virginia region, Kamran Ali, vice president of transmission planning and analysis for American Electric Power Service Corp., told the PUC.

In response to inquiries, AEP Ohio in March 2023 suspended accepting new service requests from data center customers so it could assess how they would affect the utility’s electric delivery system, Ali said.

The proposed rates will assist AEP in initiating potential location activities and identifying transmission routes in the central Ohio region as well as PJM’s development of potential regional solutions through a competitive solicitation process, it said. he declares.

“Without requiring data centers to make long-term financial commitments to support transmission investments, data center load growth could leave AEP Ohio with insufficient transmission capacity to support the type of ordinary economic growth , excluding data centers, which creates jobs and fuels Ohio’s economy. ” McKenzie said.

Additionally, if transmission facilities are built, but data center load does not materialize as expected, PJM’s retail customers would have to pay for unnecessary transmission capacity, he said.

Under AEP Ohio’s proposal, data centers would be required to commit to ten-year electrical service contracts, with the option to pay an “exit fee” after five years, according to McKenzie. Additionally, data centers would be required to pay a minimum demand charge based on 90% of their contracted capacity, compared to 60% under the utility’s current general service rate, it said. Mobile data centers, such as cryptocurrency mining operations, would be required to pay a minimum demand fee based on 95% of their contracted capacity.

The proposal would apply to service agreements entered into after AEP Ohio’s moratorium on them was lifted.

In the past, AEP Ohio’s largest customers were industrial facilities whose peak demand was in the range of a few hundred megawatts, according to McKenzie. Today, several AEP Ohio customers said they were considering building data centers that could hold loads of 1 GW or more, he said.

AEP Ohio has a general obligation to serve all customers within its service territory, but this obligation does not require the utility to extend service to customers in a manner that would be unreasonable or unfair to the utility and its others customers, McKenzie said.

Data centers have less of an effect on the local economy than typical commercial and industrial customers, Lisa Kelso, AEP Ohio vice president of customer experience, told the PUC.

On average, non-data center C&I customers support about 25 direct full-time equivalent jobs per megawatt, while data center customers support less than one direct FTE job per megawatt, she said .

Hyperscale data center owners are attracted to Central Ohio because of AEP Ohio’s reliable electric service, available fiber connectivity, water resources and retail choice for electric power, according to Kelso.

Some mobile cryptocurrency operations appeared in AEP Ohio’s service territory and then disappeared, she noted.

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