Pacific Power Finally Excludes Regular Oregon Ratepayers From Data Center Energy Costs After 50% Hikes

The tension reached a boiling point last month when the Citizens’ Utility Board expected the Oregon Public Utility Commission to approve Pacific Power’s deal on November 13. However, this approval is not a slam dunk. Shuff, a spokesperson for the Citizens’ Utility Board, expects the Data Center Coalition, an industry group representing the tech companies, to attempt an appeal. The coalition has already made history in this regard. They appealed a recent proposal from Portland General Electric to assign costs based on "peak demand" moments, which are the times when usage is at its highest point on the system. The state utility commission rejected that appeal, leaving the coalition looking toward the Oregon Court of Appeals.

It is important to understand the difference between the two main players in this drama. Portland General Electric’s plan charges customers based on how much each class is growing and adding to the system’s highest demand periods. After the commission approved PGE’s proposal in July, the company announced that data center rates would increase by nearly 30 percent while residential payers would see their bills decline slightly. Pacific Power’s proposal, however, goes much further. It requires 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. This includes new power plants and batteries, even if those additions also benefit other customers.

Under Pacific Power’s logic, data centers would also pay for any upgrades needed to serve them, regardless of who else benefits. They would be responsible for the cost of all wires and poles and every dollar of energy purchased on the open market from other companies. The math gets complicated when you look at infrastructure. 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 percent of the transmission line. This directly corresponds to its overall demand. 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. We are talking about a massive infrastructure overhaul funded by a specific industry.

Bob Jenks, executive director of the Citizens’ Utility Board, explained the geographical nuance that makes Pacific Power’s approach necessary. Pacific Power’s data center customers are mostly large facilities in more rural parts of the state. Drew Hanson, a PGE spokesperson, reiterated that the two utilities face different challenges. 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 or substation. In those cases, costs can be tied more directly to the customer creating the need.

This contrast highlights why the debate over the POWER Act is so heated. It is harder to make the case that building a new transmission line in a densely populated county like Washington County could benefit all customer classes, who are all using more air conditioning in the summer. However, if you build a data center in Madras, it is pretty clear whether or not new energy investments and infrastructure costs associated with that are for the data center or not. The Citizens’ Utility Board serves more than 650,000 Oregon customers and has seen energy demand grow by 8 percent between 2013 and 2023 due to data centers. PGE, serving 930,000 customers, has absorbed the most data center load growth of any private utility in the state during the last decade.

There is a distinct divide in how these utilities operate their rate designs. PGE’s system of charging customers based on "peak demand growth" is driven by the fact that they serve a higher number of small data centers in those dense urban areas. Pacific Power’s plan applies to future data centers, while PGE’s applies to both 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. As the Pacific Northwest grapples with the digital economy, the question remains whether the ratepayers or the tech companies will end up footing the bill for the region's energy future.

First reported by Good Good Good.