House passes ratepayer protection bill to limit data center cost shifts

The bill would “largely reinforce” a transition that is already underway as more states adopt large-load tariffs and is unlikely to pass the Senate before the midterm elections, analysts say.

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Dive Brief:

• The U.S. House of Representatives on Wednesday passedthe Ratepayer Protection Act — a bill designed to prevent data centers and other large computational loads from shifting their grid and power generation costs onto existing customers — in a 417-3 vote.
• The bill requires states to “consider” adopting a set of standards for loads larger than 100 MW — something that is already underway in most states. The House bill is “somewhat behind the regulatory curve” and would “largely reinforce” that transition, ClearView Energy Partners said in a client note Thursday.
• The bill is unlikely to pass the Senate before midterm elections in November, but could eventually become law, ClearView said. Because of the Senate’s compressed pre-election schedule, passing the bill may require unanimous consent, leaving an opening for senators seeking stronger consumer protections to block the legislation, the research firm added.

Dive Insight:

Although the bill is unlikely to pass soon and would likely have limited impact given the proliferation of large-load tariffs among states, its passage reflects a broad, bipartisan backlash against data center development and AI.

At the same time, utility companies see the potential for significant growth from building the grid infrastructure needed to serve data centers, which can use as much power as small cities. Some have argued that large loads can bring down prices by spreading out fixed costs while spurring grid investment.

State regulators are increasingly looking to codify ratepayer protections through new rules such as requiring prospective large-load customers to pay upfront for system impact studies, ramp up to full load within a set number of months and pay an exit fee if they stop development or significantly reduce service. Only 13 states lack any utility tariffs setting requirements for data centers and other large loads, and at least three of those states were considering proposed requirements as of July, according toa large load tariff databasemaintained by the Smart Electric Power Alliance.

The Ratepayer Protection Act would require state utility regulators and unregulated utilities to consider adopting large load standards ensuring cost recovery for the “full, incremental” cost of any generation, transmission or distribution upgrade needed to serve the large-load customer.

It would also require large loads to provide financial assurances before grid upgrades are made and guaranteed cost recovery if a large load exits its power supply contract early.

The bill “ensures large data centers pay for the infrastructure they require while giving states the flexibility to determine what works best for their communities,” Rep. Gabe Evans, R-Colo., the bill’s co-sponsor, saidin a press release. Rep. Kathy Castor, D-Fla., was the bill’s other primary co-sponsor.

The bill gives state utility regulators and unregulated utilities a year after its passage to begin considering whether they need to adopt large load tariffs or service requirements. They would have a total of two years to make a final decision.

The bill’s inclusion of power supply costs could be significant, ClearView said, noting that interconnection agreements typically only cover transmission and distribution infrastructure.

“In addition to the significant incremental development costs, requiring data centers to [Bring Your Own New Capacity] could extend the construction process of data centers by years, as it typically takes far longer to construct a power plant than develop a data center,” the research firm said.

The bill’s outlook in the Senate is unclear.

Sen. Martin Heinrich, D-N.M. and ranking member of the Senate Energy and Natural Reh is also aimed at protecting ratepayers from data center costs. The bill would require FERC to set rules on large load interconnections, including for cost allocation, financial security requirements and cost estimate disclosure

Heinrich has said the House bill doesn’t go far enough

The Center for Data Innovation contends the bill should apply to all large loads, not just data centers.

“Congress should apply the standard uniformly to any customer at 100 MW or more, establishing a separate rate class for these large electricity users,” Michelle Lopes Maldonado, the group’s associate director of AI policy, said in a statement. “This preserves the cost-recovery principle while eliminating sectoral favoritism and ensuring residential users are not left paying the bill.”

Filed Under:Generation,Transmission & Distribution,Regulation & Policy