PA House Panel Moves Forward Data Center Costs, Utility Profits Proposals

By Peter Hall | Pennsylvania Capital-Star

As electricity customers absorb more price hikes, state lawmakers on Wednesday considered three proposals to keep costs in check as the industry prepares to serve fleets of data centers.

The House Energy Committee advanced three bills addressing electricity company profits, data center infrastructure costs, and ensuring speculative developments do not skew electricity demand forecasts.

“I’m really worried about what people are going to see on their bills this winter and the choices that they’re going to have to make as a result,” Chairperson Elizabeth Fiedler (D-Philadelphia) said as she urged action on the measures.

Steve Petro, the committee’s executive director, said members are hopeful that the bills can pass the House and Senate in the remaining eight voting days before the end of the session.

Electricity customers have seen their bills jump by up to 20% two years in a row. It’s a result of forecasted growth in demand as data center developers informed utilities they intend to build and connect to the grid.

Data centers are large warehouse-like structures that house thousands of computers to power artificial intelligence, streaming services, e-commerce and other online services. Each hyperscale data center can consume as much power as a small city.

While state and federal policymakers have outlined steps to insulate consumers from price increases associated with the data center industry, most utility regulation happens at the state level and requires legislative action.

House Bill 2828, introduced by Fiedler, would codify in state law the principle that data center builders should have responsibility for the additional cost utilities incur to serve them. That’s the main theme shared between agreements the Trump administration brokered earlier this year with Gov. Josh Shapiro and other governors of the PJM states and separately with major players in the data center business.

“It will mandate that when data centers are built and utilities respond by upgrading infrastructure, that the cost of that infrastructure is paid for by the data center, not by the residents we all represent,” Fiedler said.

The bill would require electric utilities to adopt a model rate structure the Pennsylvania Public Utility Commission issued in May that assigns the cost of new infrastructure to large electricity consumers, among other measures to ensure retail electricity customers don’t experience higher prices or reduced reliability as a result of data center construction.

Additionally, it  would require data centers and other large loads to curtail their electricity use during spikes in demand on the hottest and coldest days of the year and states that data centers cannot be exempted unless they have sufficient backup power.

Most data centers are constructed with diesel or natural gas powered backup generators, sometimes numbering in the hundreds. Fiedler’s measure  was amended to include a requirement that backup generators meet federal emission standards or a more stringent standard.

House Bill 2755 would require investor-owned electric transmission companies to be members of a regional transmission organization (RTO). In Pennsylvania, that’s PJM Interconnection, a Montgomery County-based nonprofit company that  manages the electricity supply for the commonwealth and 12 other states, plus Washington, D.C.

State Rep. Chris Pielli (D-Chester), the prime sponsor, said making membership in PJM mandatory would cut off an incentive that federal regulators allow to encourage utilities to join RTOs. That amounts to a 0.5% profit bonus paid directly by customers, he said.

While membership is technically voluntary, all Pennsylvania electric utilities are members of PJM and the incentive serves little purpose, Pielli said. He noted the Pennsylvania Public Utility Commission would need to file a complaint with the Federal Energy Regulatory Commission to end the incentive.

“The logic is that if RTO participation is mandated by state law, then FERC’s incentive is no longer applicable,” he said.

Pielli added that several states including Maryland, New Jersey and Ohio have passed similar requirements and prevailed in litigation, winning federal court decisions upholding their mandates. 

While economists are working to estimate the potential savings for Pennsylvania consumers, in New Jersey, eliminating the profit bonus saved ratepayers there about $20 million a year, he said.

Rep. Kyle Donahue (D-Lackawanna) said municipalities across the state are being overwhelmed by speculative land use applications for data center projects. House Bill 2775, co-sponsored by Donohue and Fiedler, would require developers to demonstrate their commitment to a project before beginning that process.

“This is a simple bill designed to separate the real from the fake,” he said. “With this bill, if you’re a data center developer, you need to apply for electric service and pay for any fees associated with that application before you seek zoning approval.”

The proposal  passed unanimously with a proviso that the language would be amended before a vote on the House floor to address concerns of the Pennsylvania State Association of Township Supervisors.

The committee also passed resolutions directing the Joint State Government Commission to produce a report investigating how heat from data centers can be captured and repurposed and directing the Legislative Budget and Finance Committee to study environmental, fiscal and local government aspects of data center decommissioning.

Pennsylvania Capital-Star is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Pennsylvania Capital-Star maintains editorial independence. Contact Editor Tim Lambert for questions: info@penncapital-star.com.