State regulators approved new rates and terms for future data centers wanting to locate in the service area of East Kentucky Power Cooperative, or EKPC, a collection of 16 cooperatives providing electricity in nearly three-quarters of the state’s counties.
The Thursday order by the Kentucky Public Service Commission granted the cooperative’s request for a special tariff that outlines the rates and terms for prospective data centers, but modified it with new conditions.
One key change is that any special contract reached with a data center customer would have to be approved by the PSC in order to go into effect. The PSC order also encouraged the utility to ensure that data center companies are transparent about the project with the community they are trying to locate in.
EKPC President Tony Campbell applauded the PSC order in a press release, saying the tariff “ensures all cooperative members are treated fairly when data centers are developed in Kentucky and consume large amounts of electricity,” He added that data centers “will provide the infrastructure enabling the next era of progress in science, technology, productivity, communications, and even national security.”
Kentucky lawmakers in recent years have passed bills to attract new data centers, as they compete with other states to land the massive, energy-guzzling facilities that power tech companies’ cloud, streaming and artificial intelligence services.
The companies and lawmakers tout the tax benefits data centers will bring to the communities where they locate, but new projects announced across Kentucky this year have so far faced resistance from locals who have questioned their transparency, locations, environmental impacts and potential to increase their utility bills.
The new PSC order addresses those concerns, noting that “community resistance to data center development is a significant, bipartisan trend across the U.S.”
The PSC order “encourages” EKPC to “collaborate with data center developers to proactively address community concerns through an engagement program.” This includes engaging with the local community during the conceptual phase about the project’s scope, size and impacts, and being transparent by hosting public meetings to answer questions about potential harms and benefits.
The power cooperative’s application for a special tariff rate specified that prospective data centers would have to agree to a special contract with terms and conditions for payment and service, but the PSC order added that state regulators would also have to approve it.
Under the approved tariff, the rate would apply to data centers using at least 15 megawatts of power, with certain conditions added for those using more than 250 megawatts. The PSC also modified the EKPC request by removing the cap on data centers’ application fees and increasing their collateral requirements. The goal is to ensure that “no costs are passed onto non-qualifying customers” and “allow for more protection for other rate payers as well as EKPC.”
Responding to the order, Elisa Owen, a Kentucky organizer with environmental advocacy group the Sierra Club, said she is “encouraged” the commissioners “have noticed that transparency is really important for people to be able to trust the regulatory process.”
“We can't have (data center) contracts that aren't transparent,” Owen said. “So I am happy that the commission made some suggestions. The question is whether or not they will hold the companies to those suggestions. If they don't, then the tariff is, in my view, inadequate.”
Owen cited an undisclosed company’s plan to operate a prospective data center in Mason County that would use a staggering 1.2 gigawatts (1,200 megawatts) of power — nearly the amount that the entire Spurlock power plant of EKCP generates in that county. The project has drawn opposition from residents about the lack of transparency from the developer.
Similar local pushback to prospective data center projects has also sprung up this year in Oldham, Meade and Simpson counties. Oldham County’s fiscal court passed a moratorium on data centers that caused a prospective company to scrap its project, while planning and zoning committees in Meade County and Franklin’s city government voted unanimously this month against rezoning efforts sought by the data center companies.
One data center is currently approved to be built in Louisville, but an effort to pass a moratorium on any additional data centers until regulations can be updated is currently stalled.
Byron Gary, an attorney for environmental group Kentucky Resources Council, also said he was overall pleased with the order, particularly removing the cap on application fees, increasing collateral requirements and the remarks about improving public participation and transparency for data center projects.
“This is certainly an issue that we've been hearing a lot about here in Kentucky lately, with folks disappointed that they're not finding out about (data center projects) until they're well along in their planning process,” Gary said. “Increased transparency would certainly be a good thing.”
Gary added that the order said the commission would “look favorably” upon data center contracts that include language exploring energy efficiency initiatives.
In a separate order this week, the PSC approved the request of Louisville Gas and Electric and Kentucky Utilities to spend $3 billion to build two new gas power plants, which they say are needed to generate enough power to serve future data centers they expect to be built in Kentucky. The PSC declined to approve a new tariff specifically for high-energy customers like data centers, saying they would have to examine it more thoroughly in a separate rate case that is still pending.
The EKPC serves about 570,000 customers across 89 counties, including in Mason County, where the 1.2 gigawatt data center was proposed. EKPC operates a coal-fired power plant in that county that makes up roughly 40% of the 3 gigawatts of power it generates among its four power plants. Most of its power generation is from coal, but it is quickly diversifying to include more gas and solar.
Environmental and consumer advocacy groups have been critical of data centers for the enormous amount of power they consume and how they have led to increased utility bills in areas where they are operating. The groups criticized the approval of the LG&E/KU request to build more gas plant units and extend the life of another coal plant unit, saying that data centers and AI are a speculative bubble and the push for more carbon emissions instead of investing in renewable energy will worsen the global climate change crisis.
