What we learned about how Ohio and neighboring states are shielding electric customers from data center costs

CLEVELAND, Ohio — Utilities and policymakers in Ohio and neighboring states are requiring data center developers to make larger, longer-term financial commitments before power companies expand the electric grid to serve them.

The safeguards are intended to keep households and small businesses from paying for infrastructure built for projects that are canceled, delayed or use less electricity than planned. The approaches include minimum monthly charges, long-term contracts, collateral requirements, exit fees and campuses supplied partly or primarily by their own power plants.

These are five takeaways from the original article, which compared how Ohio, Michigan, Pennsylvania and West Virginia are responding to the financial risks created by rapidly growing data center electricity demand.

1. The safeguards shift the risk of unneeded infrastructure

Data centers can request enough electricity to require new substations, transmission lines and other expensive infrastructure. Utilities must begin planning and construction years before knowing whether a proposed facility will open or use all the power it reserved.

If the expected demand does not materialize, utilities could seek to recover the remaining costs from other customers. New tariffs address that risk by requiring data centers to reimburse construction expenses, provide collateral and pay minimum monthly charges based partly on reserved capacity rather than electricity actually used.

The objective is not simply to make data centers pay larger electric bills. It is to ensure they remain financially responsible for infrastructure built specifically to serve them.

2. Lawmakers are trying to extend protections beyond individual utilities

The Public Utilities Commission of Ohio approved protections for customers served by AEP Ohio, but they do not automatically apply to every electric utility in the state.

Ohio lawmakers considered broader legislation that would have created a statewide data center rate class and directed utilities to prevent data center costs from being shifted to other customers. The proposal, contained in House Bill 646, stalled before lawmakers began their summer recess.

U.S. Sen. Jon Husted, an Ohio Republican, introduced a federal Ratepayer Protection Act on July 20. The proposal would require state utility regulators to consider standards under which data centers and other large electricity users pay the incremental generation, transmission and distribution costs needed to serve them.

A House version advanced from the Energy and Commerce Committee on July 21 by a 52-0 vote. The legislation would not set electric rates itself or require every state to adopt identical rules. State utility commissions would retain authority over their rate structures.

3. Ohio and Michigan require payment for reserved power

AEP Ohio’s data center tariff applies to new facilities requesting more than 25 megawatts, including affiliated sites that collectively exceed the threshold.

The AEP Ohio tariff generally requires customers to pay monthly charges based on as much as 85% of their contracted capacity, even when they use less. The initial contract can last as long as 12 years, combining a ramp-up period of up to four years with eight additional years.

Customers also can be required to provide collateral equal to half of their projected minimum charges. After completing five years following the ramp-up period, a customer can terminate service by paying an exit fee equal to 36 months of minimum charges.

Michigan regulators approved similar protections for new Consumers Energy customers requesting at least 100 megawatts. Those customers must sign 15-year contracts and pay for at least 80% of their contracted demand.

A Michigan customer leaving early would owe an exit fee based on the minimum monthly bill multiplied by the number of months remaining in the contract. The utility must attempt to reduce that cost by reallocating unused capacity when possible.

4. Some projects pair data centers with dedicated power generation

Some developers are pursuing large campuses with nearby power generation, reducing their reliance on utilities to build new capacity across the existing electric system.

The former Homer City coal plant site in Indiana County, Pennsylvania, is being redeveloped as a data center and natural gas power campus covering more than 3,200 acres. The developer says the planned generation facilities could supply up to 4.4 gigawatts for data centers and the local electric grid. Pennsylvania environmental regulators approved the project’s final air-quality plan in November 2025.

West Virginia law allows certified microgrid districts to generate electricity for businesses operating within their boundaries. Facilities in those districts must constitute new electric demand and are not required to connect to a regulated public utility.

The districts generally may send no more than 10% of their electricity outside their boundaries, and that power can be delivered only to the wholesale market. The structure is designed to place generation and distribution costs primarily on the district’s power provider and customers rather than other utility customers.

5. The industry disputes a simple link between data centers and higher rates

The Data Center Coalition, an industry trade group, commissioned a study that found no consistent historical relationship between statewide electricity-demand growth and residential rate increases under existing rate structures.

The Energy and Environmental Economics report identified inflation, fuel-price volatility, power plant retirements, grid modernization and wholesale-market rules among the other factors affecting customer bills. It also said some large customers can produce more utility revenue than they cost to serve, potentially benefiting other customers.

The report acknowledged that data center demand is contributing to higher capacity prices in the PJM Interconnection, the regional grid that includes Ohio and parts of neighboring states. It also said the available research remains limited and that the absence of documented historical cost-shifting does not eliminate future risks.

The regional safeguards address that uncertainty. Rather than resolving every dispute over what has caused past rate increases, they establish who will bear the cost if utilities build infrastructure for data center demand that does not materialize.

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