Policy and Regulation

Midwest utility reaches deal with tech giants on data centers

The settlement will require new large load customers, including data centers, to make long-term financial commitments proportional to their size, which I&M says is meant to ensure that the costs to serve these customers are “reasonably recovered” from the customer, and not passed on to existing customers.
Midwest utility reaches deal with tech giants on data centers
(Photo by Scott Rodgerson on Unsplash )

Indiana Michigan Power (I&M), an American Electric Power (AEP) company, has filed a joint settlement addressing power demand increases with the recently announced data centers to be located in northeast Indiana, as well as potential future large load customers.

The settlement will require new large load customers, including data centers, to make long-term financial commitments proportional to their size, which I&M says is meant to ensure that the costs to serve these customers are “reasonably recovered” from the customer, and not passed on to existing customers.

I&M filed the joint settlement with the Indiana Office of Utility Consumer Counselor (OUCC), Amazon Web Services (AWS), Microsoft, Google, the Data Center Coalition (DCC), and the Citizens Action Coalition (CAC).

“Data centers will play a critical role in Indiana’s future economic development in the years to come, while requiring substantial increases in power generation and transmission infrastructure,” said Indiana Utility Consumer Counselor Bill Fine. “The terms in this agreement will ensure a balanced approach as those investments are made, protecting residential, commercial, and industrial customers from bearing the costs of new infrastructure necessary to serve new, large-volume customers.”

In April, AWS announced an $11 billion investment in a data center campus west of New Carlisle, Indiana, and Google announced a $2 billion data center in Fort Wayne. These investments are among the largest economic development projects in the state of Indiana, I&M said. Additionally, I&M said it is currently in conversations with more data center customers who have also expressed an interest in locating in the northeast Indiana region.

The signatories to this joint settlement—AWS, Microsoft, and Google—have also each agreed to provide an annual contribution of $500,000 for five years to the Indiana Community Action Association, which provides various programs to support low-income Indiana residents once those companies begin taking service in the I&M service territory.

Last month, AEP Ohio, an American Electric Power company, filed a settlement agreement over a proposed data center rate structure that drew pushback from big tech names like Google, Amazon, Microsoft and Meta. The 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. The original proposed rate structure would have imposed a 10-year commitment to pay for a minimum of 90% of the energy customers say they need each month.

The agreement also creates a sliding scale that is meant to give small and mid-sized data centers more flexibility. 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 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. In direct testimony to Ohio’s Public Utilities Commission in August, several individuals, including consultants and tech employees, opposed AEP’s request, arguing that the new rates would be “discriminatory” and “unreasonable.”

According to a study published by EPRI in May, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used. Demand for computing power from data centers, fueled by artificial intelligence and other new technologies, requires enormous amounts of power.  In the U.S., data center demand is expected to reach 35 GW by 2030, up from 17 GW in 2022, McKinsey & Company projects. Grid operators and utilities expect to see significant load growth driven by electrification, new manufacturing, and data center development. 

Originally published in POWERGRID International.