Let's Talk About Data Centers

I remember learning about the gold rush in school and thinking how crazy it was that roughly 300,000 people flocked to California in hopes of striking it rich simply by panning in a stream.

Well, that’s kind of how I feel right now. I get calls almost every week from companies interested in building a data center in our service territory. Some are so large that it is difficult to get your head around it. In a recent call, the proposed data center would use 10 billion kilowatt-hours each year! That is 15 times larger than what all our current customers use, and it’s showing no signs of slowing down. We’re in a modern-day gold rush.

Nothing gets members riled up more than talking about data centers, and I imagine with all this buzz, you are wondering what MEC’s position is and how a data center could impact you. Here’s what you need to know:

First and foremost, MEC is legally obligated to serve any data center, or similar facility, built within our service territory. It’s that way for all electric utilities. However, that doesn’t mean that we can’t put up guardrails to protect MEC, and ultimately you, from potential pitfalls.

That’s exactly what our board of directors did recently with our Large Load Tariff. It was drafted to specifically address concerns about the financial liability and risk associated with a massive data center. The tariff ensures that commercial customers requiring a maximum demand of more than 10 MW must:

• Pay application fees of $100,000 - $250,000
• Participate in and pay for any required extensive engineering studies to determine what construction would be required to build and maintain electric service
• Pass strict credit screenings to ensure that only truly serious and financially sound companies can build
• Fund the construction of infrastructure to serve the facility
• Agree to a long-term contract that includes a demand charge exit fee (essentially an early termination fee), which includes future demand charges remaining in the contract term, along with all outstanding distribution, transmission, and any other stranded costs
• Provide significant collateral to cover several years of the demand charge exit fee up front
• Ensure that all temporary service needed during construction is paid up front

Bottom line: This tariff ensures that data centers foot the bill, not you, and that we will not be stuck holding the bag if something goes wrong.

What the tariff doesn’t do is make it impossible for a large, financially stable company to build a data center in our territory. Why? A customer of this size could bring incredible benefits to you as a member. It could help offset a significant portion of our fixed costs and potentially provide rate stability to all customers. We want MEC to be able to take advantage of that kind of opportunity while also ensuring we aren’t putting the cooperative or its members’ rates at risk.

At the end of the day, though, most of the calls I get end as soon as the interested party learns how difficult and expensive it will be for them. That doesn’t mean that someday a company won’t come along and decide our service territory is where they want to pan for gold (or data) and strike it rich. But with this new tariff, we are prepared if that day comes, and we will work to establish a relationship that benefits all customers. After all, our responsibility—first and always—is to serve you and protect MEC’s long-term health.