PJM staff’s proposed plan for addressing data centers detrimental to residential customers, OPC tells PJM Board
BALTIMORE – Residential customers would pay higher electric costs for less reliability under a proposal advanced by the staff of the regional transmission operator, PJM Interconnection, LLC, to address projected data center energy demand growth, the Office of People’s Counsel told the PJM Board of Managers this week. The Board should reject the staff proposal, OPC said, because it would “let data centers connect any way they want,” leaving the states to figure out the details of who pays at some later time.
The PJM staff proposal fails to meet the requirements of data center commitments in the Ratepayer Protection Pledge and a Statement of Principles from the White House and PJM Governors about data centers—both of which intend to protect ordinary households from paying for costs driven by the massive energy demands of data centers, OPC and other state consumer advocates said in the submission to PJM. By failing to create the necessary foundation, the PJM staff proposal makes it difficult—if not impossible—for states to adequately protect non-data center customers from costs and reliability issues created by forecasted data center demands.
“The PJM Board must assign costs and reliability impacts to the data center causing those costs and impacts and provide a clear path so that states can effectively carry out their own role of protecting residential customers,” said Maryland People’s Counsel David S. Lapp. “The Board’s decision this year will impact electricity costs and reliability for at least 15 years; it is essential that PJM adopts the right plan now.”
OPC helped lead a group of several state consumer advocates that prepared the submission to PJM and offered an alternative to the PJM staff proposal. PJM is reviewing various submissions as part of its “reliability backstop procurement”—intended to bring new generation on-line to meet the growing demands of data centers—and its “connect and manage” proposal, under which data centers could be connected to the PJM system but be subject to instructions to ramp down their energy demands to avoid reliability issues.
The state consumer advocates’ alternative proposal includes several features essential to protecting residential customers from higher costs and worse reliability because of data centers. The advocates’ proposal would:
- Establish a registry for purposes of tracking data centers that bring their own new generation, data center capacity-procurement obligations, and their “connect and manage” status;
- Only procure generation capacity resources for data centers that have made binding commitments to pay for the capacity;
- Establish credit and collateral requirements that protect existing utility customers from the risks of being stuck with costs if data centers don’t show up as forecasted;
- Require measures to address the insufficiency of effectively competitive markets and protect customers from potential price manipulation; and
- Exclude data centers under the “connect and manage” framework from being included—and driving up costs—in the capacity auction and transmission planning.
In contrast to the consumer advocates’ proposal, the PJM staff proposal would create an “unacceptable risk” that existing customers could pay for costs driven by projections of data center electric demand growth even if the data centers don’t materialize as projected, the consumer advocates warned, adding that the staff proposal would “unduly increase wholesale capacity costs and transmission prices for ordinary ratepayers.”
The PJM staff proposal would rely on data centers that do not bring their own generation to voluntarily agree to curtail their energy demands, rather than establish a mandatory curtailment requirement for those data centers, the submission stated. That would push the PJM system into emergency conditions more often, with PJM dictating demand reductions in areas that do not have data centers to turn off and causing higher energy prices in states that cannot assign those costs to data center customers, the comments stated.
“PJM must adopt a mandatory ‘connect and manage’ program to incentivize data centers to bring their own new generation into PJM and to participate in the PJM procurement,” Lapp said. “Mandatory reductions are necessary to meet the data centers’ ‘Ratepayer Protection Pledge’ and protect other customers from subsidizing data centers.”
Other state consumer advocates joining the submission include the Pennsylvania Office of the Consumer Advocate, the Illinois Office of Attorney General, the Illinois Citizens Utility Board, and the Delaware Division of the Public Advocate.
The PJM Board is expected to make a decision on the rules for the procurement and “connect and manage” proposals in July.
For more on how the electric demands required to support data centers are driving up costs and OPC’s advocacy to protect Maryland customers, visit OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in 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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