Artificial intelligence data centers in southeast Wisconsin will have to pay more for energy than they – and utilities – anticipated.
The state Public Service Commission approved We Energies’ special energy rate for large data centers on April 24, but not without making a series of changes to strengthen protections for existing ratepayers. The novel proposal intends to hold data centers responsible for their immense energy needs and prevent costs from raising residential electric bills.
The decision comes as We Energies looks to double its energy generating capacity by 2030, spending billions of dollars on new solar, wind and natural gas projects. They will chiefly serve Microsoft’s Mount Pleasant campus and the $15 billion Port Washington project for OpenAI and Oracle.
Tech giants including Microsoft and OpenAI pledged to cover all electricity costs associated with their data centers, including new power generation and transmission lines.
We Energies has said the new rate could serve as a model for other states looking to meet data center needs while protecting other energy customers. But consumer advocates raised concerns about weaknesses in the plan that could lead to cost shifting.
During the April 24 meeting, commissioners acknowledged the need for a new electric rate for large data centers. Allowing these projects to come online under the current rate structure would harm existing energy customers, they said.
But the commission said the plan, as proposed by We Energies, puts ratepayers risk of cost shifting.
“Existing Wisconsin customers should not pay a single cent to subsidize the service of data centers or very large customers, not now and not decades from now,” said Commissioner Kristy Nieto.
Data centers must pay full cost of natural gas plants
Most notably, the commission denied We Energies’ plan to divide the cost of two new natural gas plants between data centers and existing customers. The two plants total more than $2 billion and would supply power to the grid during peak demand periods.
We Energies proposed that data center companies pay 75% of the plants’ capital costs, while other ratepayers cover the remaining 25% as well as fuel costs.
Commissioners said this exposes existing customers to cost shifting and required data centers pay the full cost of the plants.
Eligibility for data center rate lowered to 100 megawatts
The commission also required projects enroll in the special rate if they use at least 100 megawatts of power.
We Energies initially proposed a mandatory 500-megawatt threshold. Data centers between 250 and 500 megawatts could opt in or remain on the large industrial rate.
For reference, the first two phases of Microsoft’s data center campus in Mount Pleasant will need around 900 megawatts. The Port Washington project could use up to 3.5 gigawatts at full buildout.
Data center service agreement lengthened from 10 to 15 years
The commission also lengthened data center service agreements from a proposed 10 to 15 years. The plan includes other commitments that keep data centers on the hook for costs through the new power plants’ lifetime.
Commissioners said a longer agreement protects customers during through data centers’ construction and ramp-up phases.
Large data centers face increasing public backlash
The decision comes as AI data centers experience a growing backlash at the local and state level.
Port Washington residents recently approved a measure requiring voter approval for any new data center project. The city of Madison passed a one-year moratorium on large data center development in January, and Milwaukee may not be far behind.
Nearly 70% of Wisconsin voters said the costs of data centers outweigh their benefits, according to polling from Marquette Law School. More than a third of respondents said they’re worried the projects will drive up electricity costs for everyone else.
Members of the Public Service Commission are appointed by the governor and approved by the state Senate for staggered six-year terms.
The utility also recently filed for a 9.25% electricity rate increase through 2028. The Public Service Commission is expected to rule on that case by the end of the year.
This story will be updated with more information.
Francesca Pica can be reached at fpica@usatodayco.com.
This article originally appeared on Milwaukee Journal Sentinel: Regulators modify, and then approve We Energies’ new electric rate for data centers
Reporting by Francesca Pica, Milwaukee Journal Sentinel / Milwaukee Journal Sentinel
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