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As data center developers invest billions in Pennsylvania, the state is weighing who should pay the literal price of their arrival.
The Public Utility Commission is set to develop a proposed model tariff — a framework outlining a utility’s rates, charges, and terms of service — for “large load” customers like data centers.
The PUC held a hearing in the spring to examine how to protect household consumers when companies or organizations that use a significant amount of electricity, such as data centers, connect to the grid.
While the PUC has some regulatory power itself, what it determines from the hearing will likely be used to inform lawmakers’ decisions, said Rep. Rob Matzie (D., Beaver), former chair of the House Consumer Protection, Technology and Utilities Committee which frequently works with the PUC.
"The Commission is working to review this information in a timely manner,” said PUC press secretary Nils Hagen-Frederiksen.
He did not provide a timeline for any potential decision.
Dozens of data centers are planned or already built in Pennsylvania, and state officials are pushing to make the Keystone state a leader in landing the facilities, fueled by the AI industry.
In testimony, the state Office of Consumer Advocate emphasized protecting residents from stranded costs — where utilities invest in improvements for projects that don’t materialize or use the projected electricity, leaving those households with the bill.
“Any stranded investments from large load customers paid by ratepayers hinders economic development by raising the cost to businesses and reducing spending by residents,” said Darryl Lawrence, acting consumer advocate for the Office of Consumer Advocate, in submitted testimony.
The testimony from consumer advocates, electricity distribution companies, and companies that build or rely on data centers will “inform future policy” and the creation of the model tariff, according to the PUC’s news release announcing the hearing.
It’s a national concern: how to parse out charges as demand for electricity grows. Some states have been addressing the issue.
Ohio’s PUC this month ordered that data centers must pay a minimum of 85% of their highest forecasted electricity use, even if they use less, to cover infrastructure costs. AEP Ohio, an electric company, previously asked state regulators to require data center developers to pay for at least 90% of the electricity they requested for 10 years, whether they use that much or not.
Lawmakers in Georgia are dealing with how to avoid costs shifting to small ratepayers, while increasing the state’s energy capacity.
Pennsylvania will grapple with the issue in the coming months: Almost 60 parties — including developers, electricity companies, advocacy groups, and citizens — submitted public comments after the hearing.
And industry leaders have their eyes on Pennsylvania, with executives from Google, Amazon, Duquesne Light Co., FirstEnergy Pennsylvania, the trade organization Data Center Coalition, and others testifying at the PUC hearing.
Amazon announced a $20 billion plan to build two data centers in Bucks and Luzerne counties earlier this year. And President Donald Trump and U.S. Sen. Dave McCormick recently announced $90 billion in AI, energy, and data center investments in Pennsylvania at an AI and energy summit.
Duquesne Light Co. requires large load developers to handle the costs of their own studies and infrastructure investment, said Jamie Davis, director of rates, energy procurement, and federal/RTO affairs for Duquesne Light Co., in testimony to the PUC.
Those costs should fall to large load developers when there is no benefit to other customers, he said.
DLC also recommends that large load customers generate their own power to reduce any impacts on existing customers and the grid. The company serves over 600,000 customers in Southwestern Pennsylvania.
Officials at FirstEnergy Pennsylvania, which serves over 2 million customers in the state, told the PUC in testimony for the hearing that developments such as data centers can pose new challenges.
“The large loads we are talking about today often require significant investment in the transmission system,” said Kelly Gower, vice president, Finance & Regulatory for FirstEnergy Pennsylvania. "The requests we are discussing are often for new customers to be situated in geographic areas where electrical systems were not designed to support loads needed anywhere near those which are now being requested.”
State legislators are introducing an increasing number of bills specifically addressing the influx of data centers to the state, with many bills streamlining permitting.
Matzie said he will introduce legislation aimed at protecting Pennsylvanians from increased costs or blackouts and brownouts, a growing concern as data centers put stress on the grid.
The language of the bill, which he expects will be finalized and introduced in the fall, is dependent on insights from the PUC.
“We value the expertise over at the Public Utility Commission and what they do and how they do it, so that's a key component,” he said. "They will be key drivers in coming up with what this final language will look like.”
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