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Researched by Industrial Info Resources (Sugar Land, Texas)--As the rates that Ohio's households pay for electricity climbs due to data center construction, an AEP Ohio (Columbus, Ohio) scheme implemented by the Public Utilities Commission of Ohio (PUCO) in July may be helping rein in speculative and excessive demands for data center power use, lowering estimates for the need for projects to expand capacity, resulting in less of an effect on household ratepayers.
There is no doubt about it: Data centers are coming to Ohio in a fast and furious manner. Industrial Info is tracking more than $61 billion worth of active data center projects in the state (although not all of these will move forward), with most of these planned for Ohio Zone 3, which includes Greater Columbus. As an example of the size of some of these facilities, one complex currently under construction, Meta Platforms' (Menlo Park, California) Prometheus development northeast of Columbus, will be capable of handling the most rigorous artificial intelligence tasks, but the multi-building complex, which will begin operating next year, is projected to consume more than 1 GW of power on its own. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can learn more by viewing the related project reports.
And its projects such as this one that have caused concern for Ohio's primary utility, AEP Ohio, the state-focused subsidiary of American Electric Power Company Incorporated (Columbus). By the summer of 2024, the company had received inquiries from data center companies proposing to add 30 gigawatts (GW) of new demand to its Ohio service territory. Additional demand means additional projects for new power generation and transmission, costs of which are often passed on to residential ratepayers. Faced with overwhelming pending demand, AEP paused data center applications and began proposing sector-specific tariff ideas to PUCO, which did, in fact, change the tariff scheme for the facilities, and this seems to have gone some way in curbing excessive demand requests.
In October 2024, AEP Ohio proposed charging data center owners for a minimum of 85% of the power that they requested, whether they used it or not--in effect placing the costs of capacity additions onto the businesses for which they were intended, rather than the average homeowner. The scheme went into effect in July of this year and will be in place for 12 years. Upon the decision, PUCO told AEP Ohio to end its moratorium on new data center connections.
The plan's implementation wasn't quite soon enough to preempt an increase homeowners' rates in the meantime. In late July, The Washington Post reported that the typical household power bill in Columbus spiked 27% this summer. The newspaper reported that AEP and an independent monitor found that Columbus households on the utility's standard plan in June began paying about $20 more per month--$240 a year--with the blame categorically put on data centers.
The 85% minimum payment scheme was, of course, challenged by data center developers, including heavyweights Amazon (Seattle, Washington) and Google (Mountain View, California), but last month PUCO rejected their bid to overturn the plan.
And the new tariff scheme's implementation seems to have had a dramatic effect in culling unnecessary power requests from the state's data center developers. News outlet Biz Journals reported that AEP Ohio updated its interconnection requests from 30 GW to 13 GW, a reduction of more than 50%.
The fall in requests prompted the Ohio Manufacturers Association to call AEP's initial figure "inflated," and file a motion with PUCO to open an investigation. AEP acknowledged the previous inflation but stated that the new tariff scheme had allowed the utility remove "the most speculative or uncertain data center projects," hence the lower numbers. The utility said "the number may reduce further--and become more accurate--as AEP Ohio continues the data center tariff process by presenting binding contracts for data centers to sign."
Despite this reining-in of speculative and possibly duplicate proposals, AEP Ohio customers may still be in store for a bit more payment pain. June's payment increase occurred the month that the results of the PJM Interconnection's 2024 power auctions were implemented. PJM is the largest grid in the U.S., covering 13 states and the District of Columbia, or approximately one in five Americans. The grid operates in a competitive market in which utilities such as AEP Ohio cannot build power generation, but instead must rely on outside developers. The PJM auctions determine what power plant owners will be paid to guarantee that they generate electricity during times of extreme demand to help avoid blackouts. The auctions are held each summer, with the resulting prices taking effect the following June. The $24 extra seen on Columbus' power bills this summer was the result of auction prices shooting up more than 800% last year, rising to $269.92 per megawatt-day from the previous year. And this year, the auction's price rose to a new record high, although at a less dramatic 22%, to $329.17 a megawatt-day.
The PJM's soaring rates have prompted actions not only from Ohio, but from other states. Governors in many of the grid's 13 states feel they lack sufficient influence in PJM's decisions, particularly regarding costs and energy planning. In their view, PJM has not been proactive enough in controlling prices, and they have accused the PJM's governing board of sitting on a backlog of renewable energy projects waiting to be connected to the grid.
As of last week, the 13 governors are now part of the bipartisan PJM Governors' Collaborative, which intends to push for reforms, particularly more input into PJM's decision-making. The governors of Virginia and Pennsylvania, two of the grid's largest customer bases, have threatened to leave PJM entirely unless reforms are implemented. "If PJM refuses to change, we will be forced to go in a different direction. That is not a path that I am eager to chart, but I am not willing to stand idly by and let PJM dictate our future," Pennsylvania's Democrat Governor Josh Shapiro said at a conference of the governors held last month in Philadelphia.
Glenn Youngkin, the Republican governor of Virginia, which holds the largest concentration of data centers in the world, also raised the idea of his state leaving PJM. "This is a crisis of not having enough power, and it is a crisis in confidence," he said. "It's this crisis that demands real reform, real reform immediately--and at the top of the list is that states must have a real say."
Until top-down reform at PJM can occur to satisfy states' demands, schemes such as Ohio's that directly target data centers may be the best options for individual states to take, removing some of the financial burdens from residential customers and placing them more squarely on the data center owners who will benefit most from the construction of new generation.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
There is no doubt about it: Data centers are coming to Ohio in a fast and furious manner. Industrial Info is tracking more than $61 billion worth of active data center projects in the state (although not all of these will move forward), with most of these planned for Ohio Zone 3, which includes Greater Columbus. As an example of the size of some of these facilities, one complex currently under construction, Meta Platforms' (Menlo Park, California) Prometheus development northeast of Columbus, will be capable of handling the most rigorous artificial intelligence tasks, but the multi-building complex, which will begin operating next year, is projected to consume more than 1 GW of power on its own. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can learn more by viewing the related project reports.
And its projects such as this one that have caused concern for Ohio's primary utility, AEP Ohio, the state-focused subsidiary of American Electric Power Company Incorporated (Columbus). By the summer of 2024, the company had received inquiries from data center companies proposing to add 30 gigawatts (GW) of new demand to its Ohio service territory. Additional demand means additional projects for new power generation and transmission, costs of which are often passed on to residential ratepayers. Faced with overwhelming pending demand, AEP paused data center applications and began proposing sector-specific tariff ideas to PUCO, which did, in fact, change the tariff scheme for the facilities, and this seems to have gone some way in curbing excessive demand requests.
In October 2024, AEP Ohio proposed charging data center owners for a minimum of 85% of the power that they requested, whether they used it or not--in effect placing the costs of capacity additions onto the businesses for which they were intended, rather than the average homeowner. The scheme went into effect in July of this year and will be in place for 12 years. Upon the decision, PUCO told AEP Ohio to end its moratorium on new data center connections.
The plan's implementation wasn't quite soon enough to preempt an increase homeowners' rates in the meantime. In late July, The Washington Post reported that the typical household power bill in Columbus spiked 27% this summer. The newspaper reported that AEP and an independent monitor found that Columbus households on the utility's standard plan in June began paying about $20 more per month--$240 a year--with the blame categorically put on data centers.
The 85% minimum payment scheme was, of course, challenged by data center developers, including heavyweights Amazon (Seattle, Washington) and Google (Mountain View, California), but last month PUCO rejected their bid to overturn the plan.
And the new tariff scheme's implementation seems to have had a dramatic effect in culling unnecessary power requests from the state's data center developers. News outlet Biz Journals reported that AEP Ohio updated its interconnection requests from 30 GW to 13 GW, a reduction of more than 50%.
The fall in requests prompted the Ohio Manufacturers Association to call AEP's initial figure "inflated," and file a motion with PUCO to open an investigation. AEP acknowledged the previous inflation but stated that the new tariff scheme had allowed the utility remove "the most speculative or uncertain data center projects," hence the lower numbers. The utility said "the number may reduce further--and become more accurate--as AEP Ohio continues the data center tariff process by presenting binding contracts for data centers to sign."
Despite this reining-in of speculative and possibly duplicate proposals, AEP Ohio customers may still be in store for a bit more payment pain. June's payment increase occurred the month that the results of the PJM Interconnection's 2024 power auctions were implemented. PJM is the largest grid in the U.S., covering 13 states and the District of Columbia, or approximately one in five Americans. The grid operates in a competitive market in which utilities such as AEP Ohio cannot build power generation, but instead must rely on outside developers. The PJM auctions determine what power plant owners will be paid to guarantee that they generate electricity during times of extreme demand to help avoid blackouts. The auctions are held each summer, with the resulting prices taking effect the following June. The $24 extra seen on Columbus' power bills this summer was the result of auction prices shooting up more than 800% last year, rising to $269.92 per megawatt-day from the previous year. And this year, the auction's price rose to a new record high, although at a less dramatic 22%, to $329.17 a megawatt-day.
The PJM's soaring rates have prompted actions not only from Ohio, but from other states. Governors in many of the grid's 13 states feel they lack sufficient influence in PJM's decisions, particularly regarding costs and energy planning. In their view, PJM has not been proactive enough in controlling prices, and they have accused the PJM's governing board of sitting on a backlog of renewable energy projects waiting to be connected to the grid.
As of last week, the 13 governors are now part of the bipartisan PJM Governors' Collaborative, which intends to push for reforms, particularly more input into PJM's decision-making. The governors of Virginia and Pennsylvania, two of the grid's largest customer bases, have threatened to leave PJM entirely unless reforms are implemented. "If PJM refuses to change, we will be forced to go in a different direction. That is not a path that I am eager to chart, but I am not willing to stand idly by and let PJM dictate our future," Pennsylvania's Democrat Governor Josh Shapiro said at a conference of the governors held last month in Philadelphia.
Glenn Youngkin, the Republican governor of Virginia, which holds the largest concentration of data centers in the world, also raised the idea of his state leaving PJM. "This is a crisis of not having enough power, and it is a crisis in confidence," he said. "It's this crisis that demands real reform, real reform immediately--and at the top of the list is that states must have a real say."
Until top-down reform at PJM can occur to satisfy states' demands, schemes such as Ohio's that directly target data centers may be the best options for individual states to take, removing some of the financial burdens from residential customers and placing them more squarely on the data center owners who will benefit most from the construction of new generation.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
