Pa. Utility Regulator Issues Data Center Guidance

Pennsylvania’s utility regulator recently approved an order to guide how data centers and other energy-intensive customers can connect to the electric grid to ensure that existing ratepayers don’t shoulder the costs for infrastructure upgrades.

The Public Utility Commission unanimously approved a model tariff for large load customers following an extensive review to address the rapid expansion of large load customers and the potential impacts on customer costs, infrastructure planning, and system reliability.

Pennsylvania is at the epicenter of a data center boom, with electric capacity for these facilities expected to expand from 182 megawatts (MW) in 2026 to more than 7,196 MW by 2036. The more than 4,000% growth outpaces every other PJM state, according to a study by the Pittsburgh Technology Council.

The study found the state has a “once-in-a-generation opportunity” to leverage its existing strengths in manufacturing and energy to become a leader in data center development. The state is the top energy exporter in the 13-state region served by grid operator PJM Interconnection.

PJM has been struggling to meet the rapidly rising electric demand and ensure reliability of the grid while also meeting the needs of data centers and is working to speed up its interconnection process. As electric prices continue to skyrocket and utility bills for residential customers rise, policy makers and legislators across the country have been working to develop standards for data center development that will ensure that grid reliability is maintained and that the costs of generation and infrastructure upgrades is paid by the developers, and not ratepayers.

“Data centers and advanced manufacturing are driving a level of load growth that we have not seen in generations,” said PUC Chairman Steve DeFrank. “This action represents an important step toward establishing clear rules that support economic development while ensuring that existing customers are protected from unnecessary costs.”

The model tariff defines large load customers as those who plan to use more than 50 MW of power individually or 100 MW for multiple projects. It calls for infrastructure upgrades needed for interconnection to be recovered directly from the large load customer and adds requirements for upfront payments and collateral to ensure those costs are covered even if the project doesn’t move forward or meet expected demand. It also requires utility distribution companies to list large interconnection applications and their size on a website and gives large-load customers the option to build their own generation facilities to power the project, bypassing the grid.

The tariff is an important first step for the state, which has about 50 data center projects proposed. Making sure ratepayers are protected from rapidly rising electric costs and utility infrastructure upgrades has been a focus of Gov. Josh Shapiro, who along with other policy makers, is putting pressure on PJM to rapidly modernize its rules and allocate the costs to the data center developers.