Transmission operator’s proposal to apportion costs for Virginia data centers violates law, Maryland Office of People’s Counsel tells federal agency
BALTIMORE – Federal regulators should reject the regional electric transmission operator’s proposal for how to share the costs of $5 billion in transmission system investments that are planned to support Virginia data centers, the Office of People’s Counsel told the Federal Energy Regulatory Commission on Friday. OPC’s filing protested the proposal filed by regional operator PJM Interconnection, LLC.
“PJM’s proposal is fundamentally unfair to Maryland utility customers,” said Maryland People’s Counsel David Lapp. “It would impose massive cost burdens on Maryland customers even though most all the benefits of the transmission projects will occur in Virginia.”
PJM’s proposed transmission spending is primarily driven by 7,500 megawatts of new data center power demands that Dominion Power forecasts for 2027, mostly in Loudoun County, Virginia. That is more electric demand than the total electric peak demand of Maryland’s largest electric utility, which—in contrast to the forecasted Virginia data center demands—has been built up for 100 years.
PJM is proposing that Maryland customers pay for hundreds of millions of the costs—nearly as much as Virginia customers on a per kilowatt basis. But while Virginia’s costs will be offset by the new sales growth—from the data centers—Maryland’s utilities are not expected to experience the same exponential load growth in the next few years, OPC’s filing pointed out. That means that Maryland customer rates will have to rise to cover the costs while rate impacts for Virginia customers will be mitigated by new power sales to data centers.
PJM’s plan improperly relies on PJM’s default cost allocation process, OPC’s filing explains. Because the data centers are driven by Virginia’s substantial tax subsidies, PJM should have apportioned costs using its “multi-driver project” methodology that assigns greater costs to the state with the policy that is driving the demand.
“Virginia is giving energy-intensive data centers $3.6 billion in tax subsidies through 2025,” Lapp said. “Those subsidies reflect a public policy that impacts the regional power grid in ways that are at least as significant as clean energy policies. PJM’s refusal to treat those tax subsidies as a public policy is flawed and harms Maryland customers.”
PJM’s proposal also would impose an even greater share of the costs on Maryland customers during the construction of the projects because it uses 2022 power demands that do not include the projected data center power needs for which the transmission is being built. PJM’s already unfair allocation thus is exacerbated for any costs imposed on Maryland customers during the transmission construction phase, OPC’s filing explains.
Another risk to Maryland customers, OPC argues, results from the potential that all or portions of the projected increases in electric demand are delayed or never realized—for example, because not all the data centers are built. Should actual energy demands fall short of PJM’s projections, Maryland customers could be on the hook to pay for expensive projects that were never needed.
In December, OPC sent a letter to the PJM board asking it to delay voting on the projects, explaining that the “scale, scope, and cost” of the projects are “unprecedented—orders of magnitude larger and in greater complexity” than all other recent transmission planning and procurements. The time that OPC and other interested parties had to review PJM’s proposal—barely over one month—was wholly inadequate for $5 billion in investments, the letter said. The PJM board rejected OPC’s request and approved the projects. PJM then filed its proposal at FERC for approval. OPC’s filing on Friday protests that proposal, arguing it is unjust and unreasonable and in violation of the Federal Power Act.
OPC’s filing asks FERC to reject PJM’s proposal or to require PJM to remedy the problems OPC identifies in its protest.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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