Data management and storage

Indiana Data Center deal Sparks Debate Over electricity Costs, Transparency

Indianapolis, IN – A settlement reached in Indiana between energy companies, Microsoft, adn consumer advocates aims to address how data centers contribute to the costs of maintaining the state’s power grid, but concerns remain about transparency and potential burdens on residential ratepayers. The agreement, finalized after negotiations involving Indiana Michigan Power (I&M) and Duke Energy, establishes parameters for data center payments for transmission service.

Kerwin Olsen, of the Citizens Action Council of Indiana, described the settlement as a “pretty good deal,” noting it included stronger consumer protections than initially proposed by state lawmakers. However, Olsen emphasized a key challenge: Indiana law currently doesn’t require large electricity consumers, such as data centers, to publicly disclose their energy usage.This lack of transparency makes it challenging to verify whether these facilities are fully covering their share of transmission costs.

The debate over data center energy costs extends beyond Indiana.A March 2024 report from the Environmental and Energy Law Program at Harvard University highlighted potential conflicts of interest, suggesting that both utilities and state governments have financial incentives to attract data centers. The report argues that utilities, seeking regulatory approval for rate increases, may offer discounted rates to data centers and then shift those costs onto regular customers. Existing state laws ofen prevent public disclosure of these preferential rates.

The Harvard report specifically cited the growing trend of “special deals” offered to large customers,effectively subsidizing their electricity costs at the expense of residential and small business ratepayers. The report’s authors, including Professor Emily Carter, a leading expert in energy policy, pointed to the need for greater scrutiny of utility rate structures and increased transparency in negotiations with data center operators.

Pennsylvania is taking a proactive approach to address these concerns. Designated as an “emerging data center hot spot” due to significant investments from companies like Amazon and Google, the Pennsylvania Public Utility Commission (PUC) is developing a standardized rate structure for data centers. PUC Chairman Stephen DeFrank stated the goal is to ensure data center developers contribute to necessary transmission upgrades, potentially totaling hundreds of millions of dollars, rather than passing those costs onto other ratepayers. The PUC is considering requiring developers to directly fund infrastructure improvements related to their energy consumption.

The increasing demand for electricity from data centers, driven by the growth of artificial intelligence and cloud computing, is straining power grids across the country. According to a recent report by the U.S. Energy Information Administration (EIA),data centers accounted for approximately 2.8% of total U.S. electricity consumption in 2023, a figure projected to rise significantly in the coming years. This growing demand is prompting regulators and consumer advocates to seek solutions that balance economic progress with equitable cost allocation.