State power regulators and interest group analysts say We Energy’s proposal for special electricity rates for data centers could pose a risk to other customers’ utility bills.
Wisconsin Public Service Commission staff and interest groups expressed concerns in testimony that without stronger safeguards, the proposal could impose higher costs on patrons.
“In short, we believe there are loopholes in We Energies’ proposal that would actually put customers at risk for additional costs with this wave of data centers,” said Tom Content, executive director of the Wisconsin Citizens Utilities Commission.
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Testimony submitted to the PSC By servicing data centers in Mount Pleasant and Port Washington, We Energies’ energy needs could double by 2030, and the company is preparing to spend $19.3 billion on new power generation over the next five years, the company said.
Last year, We Energies filed an application with the PSC to approve special rates for data centers, with the aim of requiring data centers to cover the costs of building energy infrastructure for data center developments. The proposed rates would apply to customers who need enough electricity to power hundreds of thousands of homes.
This was the first attempt to create a pricing structure for data center-scale customers in Wisconsin. We Energies officials said the proposal would prevent data center costs from increasing bills to other customers.
“Ensuring that customers are never stuck paying for their data centers is a cornerstone of our customer protection plan,” We Energies spokesman Brendan Conway said in a statement. “Under our proposal, data centers would be responsible for the electricity they use and the cost of new power generation and distribution built to serve them.”
The proposal would allow customers who need more than 500 megawatts to contract dedicated power generation resources, such as solar or gas plants.
A single subscription requires the data center to incur all costs associated with a resource and receive all power from that resource. Another subscription allows data centers to count resources according to energy demand. But they would pay 75% of the plant’s fixed costs, and customers of other utilities would pay the remaining 25% and all fuel costs.
We Energies has argued that the 75-25 split allows its regular customers to benefit from the revenue generated from selling electricity in the Midwest energy market.
The plan primarily applies to natural gas plants, which utilities say come online during periods of high energy demand, such as on hot summer days.
Andrew Field, PSC’s utilities auditor, said: In testimony to the committee The problem with that plan, he said, is that returns from the energy market are not guaranteed and it relies on volatile energy prices.
Field said if a data center consumes less power than expected and ends service early or leaves the state, customers could end up paying plant and fuel costs without generating enough revenue to offset it.
Wisconsin Public Utilities Commission and Coalition of clean energy organizations It requires data centers to pay for all new resources and eliminate the 75-25 split for some resources.
Abby Nowinska-Reuss, executive director of Healthy Climate Wisconsin, said We Energies won’t pay any costs associated with the data center and that We Energies has been “not transparent about how it interacted with the public.”
“The actual proposal is completely different,” she said. “Twenty-five percent of infrastructure costs and 100 percent of fuel costs represent a significant increase in utility costs for Wisconsin residents.”
in rebuttal testimony Richard Starsik, We Energies’ parent company’s vice president of regulatory affairs, told the PSC that residential and large industrial customers “could see an immediate rate increase” if their data centers were serviced at the rates We Energies uses for its large industrial customers, rather than the data center rates proposed by We Energies.
But Content said there was also a risk that power companies would build more power plants than they could handle the expected increase in load, or that the artificial intelligence bubble would burst, causing tech companies to change their business plans.
“The technology sector is pretty volatile right now,” he says. “The big topic is AI and data centers, but three years ago we weren’t even talking about that, and now that’s all we’re talking about. How do we know we’ll still be talking about the same things three years from now?”
We Energies’ proposal would require data center customers to enter into 10-year contracts with power companies to underwrite power services under the proposed rate structure and pay the costs associated with meeting demand. These contracts are renewed annually after an initial 10-year period, and early termination requires data centers to repay unrecovered costs.
Testimony of PSC Analyst Tyler Murmans He said that over a 10-year period, the power company “will not be able to recover all of the costs incurred.”
Kathy Steiner, senior campaign coordinator for Sierra Club Wisconsin, also said the 10-year period is much shorter than the lifespan of the power plants built to service the data centers.
“This payment agreement must be maintained throughout the life of the infrastructure,” she said. “Otherwise, we are all at risk of paying these costs, especially if the data center discontinues its plans or withdraws.”
Environmental groups such as the Sierra Club also argue that We Energies’ plans to meet the demand for new data centers rely too much on fossil fuel infrastructure, such as new natural gas plants.
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