As data center companies eye Pennsylvania for new locations, state lawmakers are considering how to regulate the facilities.
A proposal in the state House would require large data centers to use 25% renewable energy and have them pay into utility assistance programs. House Bill 1834 would also have the Public Utility Commission create new regulations in an attempt to shield ratepayers from price spikes.
Data centers are used to power computing tasks, including new, power-hungry, artificial intelligence technologies.
At a Wednesday hearing in Harrisburg, Pennsylvania House Energy Committee chair Rep. Elizabeth Fiedler (D-Philadelphia) said the centers can bring jobs, tax revenue, and other economic benefits.
"We know at the same time from experts that they also demand massive amounts of energy, and we need to be sure that growth in this sector doesn't come at the expense of families and small businesses back home, people who are already struggling with rising utility bills," Fiedler said.
PUC Chairman Stephen DeFrank said energy prices are driven by peaks in demand, so accurately forecasting how much power data centers will use is critical.
"We have an iceberg coming towards us. We can't steer away from the iceberg if we don't know how big the iceberg is," DeFrank said.
The electric grid operator for the region that includes Pennsylvania projects that demand for power in the region will rise dramatically by 2030, in large part due to "hyperscale" users, such as data centers.
But, it's unclear if all the projected demand will materialize.
Lucas Fykes, director of energy policy for Data Center Coalition, said the industry group has best practices for new facilities looking to connect to the power grid, so utilities know what to expect. He said there is danger in over- or underestimating needs.
"There should be multiple points of contact throughout the process to make sure that — if those load forecasts need to be right-sized — both the customer and the utility are engaging and collaborating in that process," Fykes said.
Dan Diorio with the coalition cautioned that overregulating will discourage the industry's growth in Pennsylvania.
"It's important that policies are durable long term and they do not single out one industry or one end use," Diorio said. "Data center-driven load growth definitely has an opportunity to generate significant new revenues for electric utilities, and those revenues create downward pressure on the rates that all customers pay."
DeFrank, with the PUC, recommended that the bill not single out data centers, but instead focus on "large load users," so as not to be discriminatory to one type of customer.
The PUC is close to issuing a framework for utilities to handle connecting large load users, DeFrank said. That framework, known as a model tariff, would be nonbinding.
HB 1834, if passed, would create binding requirements statewide.
" Mandating that the commission establish uniform and binding rules for large load interconnection will help to mitigate excessive competition among utilities and a potential race to the bottom," DeFrank said.
Amy Brinton with the Pennsylvania Chamber of Business and Industry said the commonwealth is well-positioned to host data centers.
" Our vast natural gas supply, strong pipeline network, and existing generation capacity form a foundation few states can rival to ensure long-term economic growth and a resilient electric grid," she said.
Brinton highlighted the revenue-generating potential of data centers, especially if sited on underutilized places in Pennsylvania, such as brownfields. She said in Loudoun County, Virginia, data centers occupy 3% of total land, but contribute 38% of county tax revenue at $875 million.
A study by Virginia's legislature found that data centers in that state are so far covering their own costs.
But, the report said increased growth in the industry is likely to raise electric bills for everyone, and recommended creating a separate customer class for data centers.
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