By admin 
A battle over protecting the electric bills of Xcel Energy residential and small business customers from the costs of burgeoning data centers is set to begin Wednesday before the Colorado Public Utilities Commission.
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The PUC required Xcel Energy — the state’s largest electricity provider with 1.6 million customers — to develop a “large load tariff,” a set of requirements designed to protect retail customers from the cost of data centers and other high-demand electricity customers.
Xcel Energy filed its proposed tariff in April and since then it has been the focus of a debate between environmental and consumer advocates who want even tougher protections and business and data center groups seeking to trim requirements.
Hearings on the proposed tariff are scheduled to run for several days beginning Wednesday afternoon.
“It’s a big deal,” said Eric Frankowski, executive director of the Western Clean Energy Campaign, a consumer and environment advocacy group. “This determines how data centers are brought into the mix and what it means to every other customer in the Xcel system.
“If they get it right then data centers can join the state’s economy and contribute to it and it doesn’t affect customers’ rates,” he added. “If wrong, we are all kind of screwed. Rates will soar; the grid will be stressed.”
One controversial element in the proposed tariff is a “speed to market” pathway, which would enable Xcel Energy and a developer to negotiate a confidential contract that would not necessarily have the tariff’s safeguards and would require rapid PUC approval.
“The concept is necessary to provide an option for large load customers who require greater commercial flexibility,” Jack Ihle, the company’s vice president for data centers and large loads, said in PUC testimony.
But Frankowski said speed to market could “potentially undermine the tariff.”
Environmental groups are also worried data centers’ big electricity demands will jeopardize the state’s goal of cutting greenhouse gas emission by 80% over 2005 levels by 2030 and result in data centers relying on natural gas and coal-fired generation.
“Load growth stands to raise system costs, increase cumulative greenhouse gas emissions, risk delays of approved retirements of fossil-fuel generation units,” Clare Valentine, a senior policy advisor with environmental law nonprofit Western Resource Advocates, said in a filing.
WRA is urging the commission to expand renewable energy options in the tariff.
The PUC hearings on data center rates are taking place against the backdrop of a pushback on rapid data center development across Colorado. Eight municipalities and counties have enacted or are considering moratoriums or caps on data centers.
Proposed projects have sparked community opposition in Colorado Springs, Brighton and Weld County. A coalition of environmental and community groups delivered a petition with 5,000 signatures to the PUC urging it to protect customers.
“On the PUC side, we’re moving full steam ahead to accommodate this,” said Joe Pereira, director of the Colorado Office of the Utility Consumer Advocate. “On the flip side, the general population has not determined what the public interest around these entities looks like.”
Still, large-scale data centers and their interconnection to the electric grid “represent a foundational platform for national prosperity,” August Ankum, a consultant for the Data Center Coalition, an industry group, said in PUC testimony.
“In the short-run,” Ankum conceded, “the introduction of large load data centers into the system may cause network augmentations that are costly. Ratepayers need to be protected against those costs.”
With business groups arguing for the tariff to do less and consumers and environmental advocates calling for it to do more, Xcel Energy says its approach is a compromise.
“The company’s proposals reflect a reasonable and balanced middle ground between approaches that would impose commercially impractical obligations and approaches that would reduce customer responsibility in ways that could unreasonably shift costs and risk to existing customers,” Ihle of Xcel said in a filing.
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As an example of the difference in approach, while Xcel is calling for 15 year contracts the PUC staff recommended 20 years and the Data Center Coalition proposed a 10-year term.
The large load tariff would apply to new customers needing 50 megawatts of power or more and each would have to pay a $120,000 application fee to cover Xcel Energy’s costs in handling the request and doing the necessary studies.
Xcel Energy would do a study to determine the costs to the grid the project would create and allocate those costs for new generation and transmission to the data center.
Xcel Energy estimates it will need 2 gigawatts of generating capacity just for data centers by 2030. Currently total capacity is just over 7 GW. (A gigawatt can power about 700,000 households per year.)
A data center would have to sign interconnect and electric service agreements and a 15-year contract for electricity. It would have to commit to paying for at least 80% of the projected electricity.
Data centers would be subject to minimum monthly bills. As an example, Xcel Energy said in a filing that the monthly bill from a 500-MW data center could be $22 million.
The center would also have to provide a credit guarantee, such as 60 months of minimum bills, and if it wanted to get out of its contract it would have to pay an exit fee equal to the sum of the remaining monthly bills on the contract.
A big question is how many of these requirements, and numerous others in the tariff, end up in the confidential speed-to-market agreements. The company has changed the name of agreements to the more anodyne “custom contracts.”
Michael Pascucci, Xcel Energy’s director for regulatory policy, said in PUC testimony that a custom contract would still be “consistent with the company’s core commercial terms, including cost responsibility, minimum commitments, and appropriate risk protections.”
One concern raised by some environmental and government groups is that the custom contracts will rely heavily on natural gas generation.
The Colorado Energy Office, for example, proposed that a contract not be permitted to use gas-fired generation, unless it has a zero-emissions pathway such as carbon capture.
But, Pascucci said “the company expects that advancing a scenario that relies solely or primarily on new gas generation will be extremely unlikely.”
Xcel Energy, he said, will ensure that any custom contract has sufficient clean energy resources so the company can meet the 80% carbon emissions reduction goal in 2030 and beyond.
Under Xcel Energy’s proposal, the PUC and other parties would have 120 days to review the custom contract “due to the unique nature of the marketplace and speed at which today’s large load customers seek interconnections.”
Reviews of the contract by outside parties would be limited by the tight timeframe and so much of the detail being confidential, the utility consumer advocate’s Pereira said.
But the company said the commission’s usual process, which allows for extensive review and reconsideration, “does not acknowledge commercial realities.”
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