Pacific Power to charge new Oregon data centers for all costs associated with growing energy need

Oregon’s second largest investor-owned electric utility could soon directly assign the costs of new energy projects and infrastructure needed for data centers to data center operators.

Pacific Power last week agreed to the deal following months of negotiations with staff of the Oregon Public Utility Commission, the watchdog Citizens’ Utility Board and a handful of environmental and community advocacy groups.

The Citizens’ Utility Board in a news release Tuesday called the agreement “the strongest from a for-profit electric utility yet” under Oregon’s new POWER Act, which mandates the state’s monopoly electric utilities create a separate rate class for data centers to ensure other customers aren’t subsidizing the massive energy demand from the server farms.

Both Pacific Power and the state’s largest electric utility, Portland General Electric, have raised customer rates 50% since 2020, while most customer classes became more energy efficient, and data centers grew to make up nearly one-quarter of all retail electricity sales statewide.

The three-member Public Utility Commission is expected to approve Pacific Power’s deal on Nov. 13, according to Charlotte Shuff, a spokesperson for the Citizens’ Utility Board. Shuff expects the Data Center Coalition, an industry group representing the tech companies, will attempt to appeal.

The coalition also appealed a recent PGE proposal to assign costs based not on how much each rate class is driving “peak demand” on the system, which is moments when usage is at its highest point. The state utility commission rejected the appeal, but the citizens’ board expects the coalition will bring the case to the Oregon Court of Appeals.

While Pacific Power’s plan assigns costs based on who is driving overall demand, PGE’s plan assigns costs based on how much each customer class is growing and adding to the system’s highest demand periods.

After the state’s Public Utility Commission approved PGE’s proposal in July, the company announced rates for data centers would increase by nearly 30% while residential payers would see their bills decline slightly.

Pacific Power goes further

Pacific Power’s proposal goes further than PGE’s by requiring new data centers that receive electricity from Pacific Power to cover the costs for all new energy generation and storage projects needed to power them, including new power plants and batteries, even if those additions also benefit other customers. Data centers would also pay for any upgrades that are needed to serve them, even if those same upgrades benefit other customer classes.

Data centers would be responsible for the cost of all wires and poles built for them to receive distributed power, and all costs related to energy purchased on the market from other companies to power them. If a 100 megawatt transmission line is needed to serve a 50 megawatt data center as well as other residential and industrial customers, the data center would pay for 50% of the transmission line, directly corresponding with its overall demand, according to the citizens’ board.

New transmission lines can cost several million dollars per mile to build, and the West is in need of more than 12,000 miles of new transmission according to one recent estimate.

Shuff said Pacific Power’s proposal came a long way in recent months and “to their credit they (Pacific Power) worked really hard to get to this. We’re really pleased with where we landed,” she said.

The utility serves more than 650,000 Oregon customers, and has seen energy demand grow by 8% between 2013 and 2023 due to data centers, according to a Sightline Institute analysis of U.S. Energy Information Administration data.

PGE is the state’s largest electric utility, serving 930,000 customers, and has absorbed the most data center load growth of any private utility in the state during the last decade, according to that analysis.

PGE’s system of charging customers based not on overall demand growth but “peak demand growth” is driven in part by the fact that they serve a higher number of small data centers in densely populated counties, according to Bob Jenks, executive director of the Citizens’ Utilities Board. Pacific Power’s data center customers are mostly large facilities in more rural parts of the state.

It’s easier to make the case that building a new transmission line in Washington County could benefit all customer classes, who are all using more air conditioning in the summer, he explained, “whereas if you build a data center in Madras, it’s pretty clear whether or not new energy investments and infrastructure costs associated with that are for the data center or not,” Jenks said.

Drew Hanson, a PGE spokesperson, reiterated in an email the different challenges the two utilities face.

“(Pacific Power’s) service area is larger and more spread out, so a single data center may require infrastructure built specifically for that customer, such as a new transmission line, substation, or power resource. In those cases, costs can be tied more directly to the customer creating the need,” he said.

Pacific Power’s plan applies to future data centers, while PGE’s applies to future and existing data centers. Pacific Power will need to address costs associated with its current data center customers and their demands next spring. The company has just a handful of data center customers at present “but dozens want to get onto their system, and some of them are massive,” Jenks said.

Source: Washington State Standard

This article was originally published by Washington State Standard.