FILE PHOTO: This May 20, 2015 photo shows server banks inside a data center at AEP headquarters in Columbus, Ohio.
John Minchillo / AP Photo
Pennsylvania weighs how to manage power-hungry data centers
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Rachel McDevitt/StateImpact Pennsylvania
John Minchillo / AP Photo
FILE PHOTO: This May 20, 2015 photo shows server banks inside a data center at AEP headquarters in Columbus, Ohio.
Utility regulators are bracing for a surge in electricity demand driven in large part by the opening of new, power-intensive data centers in Pennsylvania.
The buildings house large numbers of sophisticated computers that make our digital lives possible, from cloud storage and streaming movies to generative artificial intelligence.
AI is particularly energy-hungry and could transform the energy sector over the next decade, according to the International Energy Agency.
In Pennsylvania, tech companies are calling for fair treatment and predictability, while utilities are asking for policies to protect against exorbitant costs to connect the new users, which they otherwise would have to pass on to ratepayers.
Players in this dynamic recently presented their arguments to Pennsylvania’s Public Utility Commission, which is tasked with ensuring reliable utility service at reasonable rates.
Large electricity users hoping to connect to the grid will take up a portion of existing power generation, which could affect costs. They may also need new transmission infrastructure.
PUC commissioners said they want to determine an appropriate fee to accommodate large users and a fair allocation for the added costs between new and existing users.
Brendon Baatz, who works on energy market development at Google, said the PUC should not charge data centers special fees to connect to the electric grid or impose different rates for certain users based on what they do. He said those practices could be discriminatory and introduce unnecessary complexity and risk for businesses.
“If you have a new customer who is a battery manufacturer and they have a 300-megawatt-load and they sit next to a data center who’s also a 300-megawatt-load, they’re both imposing the same electric demands on the system and their user profiles are not that different,” Baatz said. “So, in our view, there’s really no reason to treat them differently.”
Tech representatives said data center operators need certainty to create an economic benefit for Pennsylvania and add jobs. According to the Data Center Coalition, the industry provided 603,900 direct jobs nationwide in 2023.
“Without certainty, we risk over-investment, stranded assets, and potentially higher costs for existing customers,” Baatz said.
But representatives from utility companies said the extreme energy demand of data centers could impact the grid and raise costs for other customers if the centers are not managed correctly.
C. James Davis, director of rates and energy procurement at Duquesne Light Company, which serves the Pittsburgh region, said their peak load was nearly 2,700 MWs in 2024. Some data centers planned in Pennsylvania have the potential to scale up to use 900 to 1,000 MWs.
“A single data center could account for as much as 30% of the current peak load in our entire service area in Allegheny and Beaver counties,” Davis said.
That share of power is similar to what the IEA found in a report released last month.
“In the United States, power consumption by data centres is on course to account for almost half of the growth in electricity demand between now and 2030,” the energy security watchdog said, noting that processing data could consume more electricity by the end of the decade than for manufacturing all energy-intensive goods combined, including aluminium, steel, cement and chemicals.
Davis recommended the PUC protect ratepayers from the cost to support new large load customers and to require those customers to bring their own generation onto the grid.
In Central Pennsylvania, electric utility PPL said it’s equipped to handle the increased load.
“In fact, we have nine gigawatts of new load under agreement today – more than double our territory’s peak load,” said Joe Lookup, vice president of transmission and distribution for planning and asset management at PPL.
Lookup said load additions have the potential to lower rates for existing customers, while enhancing reliability and rate stability. He said the upgrades needed to add large users to the grid can benefit the grid at-large.
Electric prices are already rising.
The price to secure future electricity in the regional electric grid hit a record high last year, totaling nearly $14.7 billion, compared to the previous year’s $2.2 billion.
PJM Interconnection, the regional electric grid operator, operates a capacity market, which means that power plants are paid to commit to generating electricity in the future. Generators sell their capacity at annual auctions.
The head of PJM blamed the price spike on retirements of older power plants, increased demand, and new rules to account for the risk of extreme weather.
PPL said its default rate for residential customers will increase to 12.491 cents per kilowatt hour on June 1, up from 10.771 cents per /kWh.
The typical Pennsylvania household uses about 10,250 kwh of electricity per year, according to 2020 data from the Energy Information Administration.
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