How much should data centers pay for the massive amounts of new power infrastructure they require? Wisconsin’s largest utility, We Energies, has offered its answer to that question in what is the first major proposal before state regulators on the issue.
Under the proposal, currently open for public comment, data centers would pay most or all of the price to construct new power plants or renewables needed to serve them, and the utility says the benefits that other customers receive would outweigh any costs they shoulder for building and running this new generation.
But environmental and consumer advocates fear the utility’s plan will actually saddle customers with payments for generation, including polluting natural gas plants, that wouldn’t otherwise be needed.
States nationwide face similar dilemmas around data centers’ energy use. But who pays for the new power plants and transmission is an especially controversial question in Wisconsin and other “vertically integrated” energy markets, where utilities charge their customers for the investments they make in such infrastructure — with a profit, called “rate of return,” baked in. In states with competitive energy markets, like Illinois, by contrast, utilities buy power on the open market and don’t make a rate of return on building generation.
Although seven big data-center projects are underway in Wisconsin, the state has no laws governing how the computing facilities get their power. Lawmakers in the Republican-controlled state Legislature are debating two bills this session. The Assembly passed the GOP-backed proposal on Jan. 20, which, even if it makes it through the Senate, is unlikely to get Democratic Gov. Tony Evers’ signature. According to the Wisconsin Examiner, a spokesperson for Evers told the Milwaukee Journal Sentinel on Jan. 14 that “the one thing environmentalists, labor, utilities, and data center companies can all agree on right now is how bad Republican lawmakers’ data center bill is.” Until a measure is passed, individual decisions by the state Public Service Commission will determine how utilities supply energy to data centers.
The We Energies case is high stakes because two data centers proposed in the utility’s southeast Wisconsin territory promise to double its total demand. One of those facilities is a Microsoft complex that the tech giant says will be “the world’s most powerful AI datacenter.”
The utility’s proposal could also be precedent-setting as other Wisconsin utilities plan for data centers, said Bryan Rogers, environmental justice director for the Milwaukee community organization Walnut Way Conservation Corp.
“As goes We Energies,” Rogers said, “so goes the rest of the state.”
Building new power
We Energies’ proposal — first filed last spring — would let data centers choose between two options for paying for new generation infrastructure to ensure the utility has enough capacity to meet grid operator requirements that the added electricity demand doesn’t interfere with reliability.
In both cases, the utility will acquire that capacity through “bespoke resources” built specifically for the data center. The computing facilities technically would not get their energy directly from these power plants or renewables but rather from We Energies at market prices.
Under the first option, called “full benefits,” data centers would pay the full price of constructing, maintaining, and operating the new generation, and would cover the profit guaranteed to We Energies. The data centers would also get revenue from the sale of the electricity on the market as well as from renewable energy credits for solar and wind arrays; renewable energy credits are basically certificates that can be sold to other entities looking to meet sustainability goals.
The second option, called “capacity only,” would have data centers paying 75% of the cost of building the generation. Other customers would pick up the tab for the remaining 25% of the construction and pay for fuel and other costs. In this case, both data centers and other customers would pay for the profit guaranteed to We Energies as part of the project, though the data centers would pay a different — and possibly lower — rate than other customers.
Developers of both data centers being built in We Energies’ territory support the utility’s proposal, saying in testimony that it will help them get online faster and sufficiently protect other customers from unfair costs.
Consumer and environmental advocacy groups, however, are pushing back on the capacity-only option, arguing that it is unfair to make regular customers pay a quarter of the price for building new generation that might not have been necessary without data centers in the picture.
“Nobody asked for this,” said Rogers of Walnut Way. The Sierra Club told regulators to scrap the capacity-only option. The advocacy group Clean Wisconsin similarly opposes that option, as noted in testimony to regulators.
But We Energies says everyone will benefit from building more power sources.
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