Proposed data center consumer protection regulations need tightening, OPC tells state regulators
BALTIMORE – Proposed rules to address Maryland data centers fall short of protecting residential customers from all the costs associated with data center growth in Maryland, the Office of People’s Counsel said in comments filed with the Maryland Public Service Commission this week. The draft rules, proposed by Commission staff and subject to Commission review, may meet minimum statutory requirements, but they would still allow data center costs to be shifted to other customers and should be strengthened, OPC said.
“Maryland customers are already taking on big costs from data centers located primarily outside of Maryland,” Maryland People’s Counsel David S. Lapp said. “While we push for better federal rules to address those costs, Maryland has the power—and customers a clear need—to make sure data centers within Maryland take on every cost that they impose on residential customers who are experiencing massive energy burdens due to ever-increasing distribution rates and volatile supply costs.”
The Commission staff’s proposed regulations implement provisions in last year’s Next Generation Energy Act (NGEA) that require new standards for setting rates and terms for “large load customers”—effectively, data centers—to connect to the systems of the Maryland utilities. The NGEA’s purpose is to ensure “residential electric customers in the State [do] not bear the financial risks associated with large load customers interconnecting to the electric system serving the State.”
The new regulations are intended to protect customers from large electric system costs caused by data centers that do not actually develop, use less power than anticipated, or leave the system before they pay their full share of costs. In any of these situations, if left unaddressed, residential customers could end up footing the bill for infrastructure costs incurred for a data center.
OPC’s comments support the draft proposal’s language that would directly assign certain costs to each utility’s data center customers, but they explain that the regulations should also require each data center to enter into a contract with the relevant local utility before the utility starts service. Further, OPC explains, the minimum contract terms for the data center to pay for its own costs must be for a long enough time to ensure the utility serving the data center can collect enough money from the data center to cover its infrastructure upgrade costs. How long that takes will depend on several factors that the rules should account for, OPC said.
The rules should also be modified to leave the Commission in charge of the forms of collateral—that is, financial commitments to make sure that the data center can and does pay for the costs it has caused, OPC said. As written, the draft rules include a utility-advanced provision that gives the utilities discretion over the form of collateral. This, in effect, “strips the Commission of its authority,” OPC stated.
OPC’s comments also address the scope of the proposed rules, which apply only to “large load customers” of 100 megawatts (MW) or more—100 MWs can power about 80,000 homes. Although the 100-MW threshold for a data center is statutory, it is too high. Data centers that are much smaller can still impose significant costs on the electric system. Failing to include smaller data centers under the proposed regulations would lead to residential customers unfairly paying costs caused by data centers, OPC said. Federal regulators are proposing a threshold of 20 MW, and Virginia and Ohio rules will apply to data centers of 25 MW or more, OPC explained.
OPC argued that the Commission has general authority to adopt a threshold lower than 100 MW under its obligation to set just and reasonable rates but, to avoid legal uncertainty, it may wish to advise the legislature to lower the threshold for the statutory large-load rules.
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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