American Electric Power’s (AEP) subsidiary Indiana Michigan Power (I&M) has filed a unique customer-specific contract with Google that could set a new precedent for utility-hyperscaler partnerships in the face of surging data center demand. The petition, filed with the Indiana Utilities Regulatory Commission (IURC), outlines a dual-purpose arrangement designed to address power capacity constraints in one of the fastest-growing digital infrastructure regions in the U.S.
The contract, a result of collaborative efforts between I&M and Google, features two key components: a Clean Capacity Arrangement (CAA) and a custom demand response program tailored to Google’s artificial intelligence (AI) workloads at its $2 billion Fort Wayne data center campus. I&M anticipates peak demand growth of 8.3% CAGR from 2024-2034, driven largely by the addition of hyperscaler data center loads. The contract aims to support I&M’s mission to provide reliable and affordable service in a region experiencing significant economic growth.
Under the CAA, Google will transfer a “specified amount” of long-term accredited capacity from clean energy resources into I&M’s PJM capacity portfolio via the Capacity Exchange System. While the exact megawatt amount is redacted in public filings, testimony from Caleb Loveman, Regulatory Consultant Staff at I&M, confirms that the commitment will scale annually. This transferred capacity will be used to fulfill I&M’s Indiana retail capacity obligations, reducing the utility’s need to secure additional generation resources and mitigating long-term financial and operational risks for all customers.
“The CCA will provide an efficient, additional method to support meeting… growing capacity obligations with PJM,” Loveman explained. “It reduces the amount of long-term generation I&M would otherwise need to acquire and lowers long-term risks associated with acquiring and operating generation.” The arrangement also aligns with Indiana’s “all of the above” energy policy and Google’s sustainability goals.
The contract also includes a custom demand response program structured around Google’s ability to flex operations and reduce load during system peaks. This program features two offerings: one tailored to Google’s capabilities and another that qualifies under PJM’s Emergency Demand Response Program. When the grid is under stress, Google will reduce or shift its electricity consumption at the Fort Wayne data center, helping I&M lower peak demand, reduce capacity and transmission needs, and deliver system-wide cost and reliability benefits.
“The arrangement includes defined curtailment schedules, compliance testing, and performance penalties,” Loveman said. “It benefits I&M, and all of its customers, by reducing the cost of providing service through lower capacity and transmission costs.”
The filing seeks regulatory approvals, including, if required, as an Alternative Regulatory Plan under Indiana law. All costs associated with the CCA and the demand response participation credits provided to Google will be recovered through I&M’s existing Resource Adequacy Rider, treating them as capacity-related purchase costs applicable to all Indiana retail customers.
This contract represents a significant departure from traditional utility-customer relationships and could serve as a template for future hyperscaler-utility partnerships. As the data center boom continues to trigger regulatory responses across multiple states, the Indiana agreement goes further by creating a resource contribution model. Several states, including South Carolina, Utah, Minnesota, Illinois, and New Jersey, are also considering or have implemented targeted tariffs, cost-allocation mechanisms, or regulatory requirements for large-load customers, particularly data centers.
The timing of this arrangement coincides with unprecedented stress in PJM’s capacity markets. The regional transmission organization’s latest Base Residual Auction for the 2026–2027 delivery year cleared at record-high prices of $329.17/MW-day across all zones, representing a 22% increase over the prior year’s already elevated levels. PJM’s forecasted peak load for 2026–2027 surged by more than 5,400 MW compared to the previous year, with hyperscaler growth cited as a key contributor.
As rapid AI adoption drives an unprecedented surge in digital energy demand, the Indiana agreement could shape the future of data center power. It highlights the need for innovative solutions to balance flexibility, ensure reliability, and support carbon-free energy resource development. The contract’s success could influence how other utilities and hyperscalers navigate the complexities of grid infrastructure and capacity planning in the face of exponential data center growth.