The Public Utilities Commission of Ohio (PUCO) has approved a significant tariff structure that mandates large new data center customers to pay for at least 85% of their subscribed electricity usage, regardless of actual consumption, for up to 12 years. This decision, backed by AEP Ohio and various stakeholders, aims to address the surging demand from hyperscale data centers and protect other ratepayers from the cost of grid expansion. The order also outlines a phased process to lift AEP Ohio’s moratorium on new service agreements in Central Ohio, allowing stalled data center development to resume under the new tariff structure.
PUCO Chair Jenifer French stated, “Today’s order represents a well-balanced package that safeguards non-data center customers on an industrial and residential level while establishing a dependable and reasonable environment for data centers to continue to thrive within Ohio.” This order culminates a regulatory saga that began in March 2023 when AEP Ohio imposed a moratorium on new data center service agreements to study the impact of these requests on its power delivery system. AEP Ohio projected data center loads would rapidly accelerate to reach 5 GW in Central Ohio by 2030, necessitating major new high-voltage infrastructure.
The regulatory process saw two competing settlements. A coalition of data center operators proposed a flexible tariff framework emphasizing market mechanisms and avoiding arbitrary terms. In contrast, AEP Ohio’s stipulation, co-signed by PUCO staff and other stakeholders, included stricter provisions such as financial assurances and penalties for canceled projects. PUCO ultimately adopted AEP Ohio’s proposal, determining it more effectively aligned cost causation principles with grid investment realities.
The approved tariff structure requires large new data center customers—those with loads above 25 MW—to pay for at least 85% of their subscribed monthly capacity for up to 12 years, with a four-year ramp-up period, exit fees for early termination, and financial assurance requirements. Existing facilities are grandfathered unless they expand capacity beyond 25 MW. This framework aims to ensure infrastructure investments are aligned with real, durable load growth, preventing speculative development from shifting upgrade costs onto AEP Ohio’s 1.5 million customers.
The Data Center Coalition (DCC) criticized PUCO’s ruling, expressing disappointment and arguing that the decision deviates from established ratemaking principles. Lucas Fykes, DCC’s director of energy policy, stated, “The data center industry is committed to paying its full cost of service. DCC will continue to advocate for evidence-based solutions in Ohio and across the country that support data center development and advance an affordable and reliable electricity grid for all customers.”
This decision could set a precedent for other states grappling with similar challenges. As data center demand continues to grow, regulators and utilities will need to balance the need for infrastructure investment with the cost burden on other ratepayers. The Ohio model may influence how other jurisdictions approach tariff structures and grid expansion to accommodate the rapid growth of hyperscale data centers. The debate highlights the tension between fostering economic growth and ensuring equitable cost allocation, a challenge that will likely shape the future of energy regulation in the sector.