AEP Ohio says new data center tariff is working

AEP Ohio is touting the success of a new data center billing model, known as a tariff. In an update to the Public Utilities Commission of Ohio, the company explained the new requirements have slashed its projections for new power demand from 30,000 megawatts to about 5,700 megawatts. To put those figures in perspective, AEP notes peak demand for all its Ohio customers has landed between 8,000 and 10,500 megawatts in recent years. But critics, like the Ohio Manufacturers Association, contend AEP's figures were inflated from the beginning, and what they're sharing now is just the company coming clean about the actual demand for power. Wheat from chaff AEP painted its new tariff as a way to figure out which proposals are shovel-ready and which ones are just figuring it out as they go along. "When required to make financial commitments under the Data Center Tariff," the company explained in a press release, "more speculative or uncertain data center projects did not sign contracts, effectively filtering them out — as the tariff was designed to do." Ohio regulators turn down appeal, OK utility's data center billing plan The tariff requires developers to pony up on the front end and make good on their projections for power demand. Under the agreements, data centers are on the hook for monthly billing minimums based on their contract or previous usage; they also face exit fees should the company decide to leave before their contract expires. When AEP went back to developers to gauge interest, projects representing only about 13,000 megawatts were willing to pay for a formal engineering study — the first step in the tariff process. After that, when the company presented service plans and financial obligations in black and white, only 5,642 megawatts-worth of projects were willing to sign. Prior to approval of the data center tariff, AEP had signed 12,219 megawatts-worth of data center contracts. The company expects the almost 18,000 megawatts of projects under contract to come online by 2035. AEP stressed that as a regulated utility it's obligated to serve everyone, from individual homeowners to gargantuan, power-hungry facilities. At the same time, the company has to balance the interests of all its customers. Ratepayers wind up footing the bill for the poles and wires needed to connect new customers, and AEP doesn't want to build out the infrastructure for projects that never come to fruition. "Getting accurate estimates from our data center customers is critical because it gives us the clarity to plan and align infrastructure investment," AEP Ohio President & COO Marc Reitter explained. "We filed the tariff with one goal: to protect businesses and residents across Ohio." Not so fast… AEP's plan to impose heightened restrictions on data centers saw immediate pushback — and not just from the tech companies who want them. Organizations representing manufacturers and other energy-intensive customers argued AEP shouldn't be able to single out a particular industry, and they're now challenging the data center tariff in the Ohio Supreme Court. "Which type of business is next on the utility's chopping block?" the Ohio Manufacturer's Association asked in its appeal. Ohio Manufacturers' Association challenges new utility billing for data centers The challengers add that while AEP dangled the threat of 30,000 megawatts in new demand right around the corner, it provided no concrete evidence to state regulators to back up its claims. "Mere speculation and conjecture is not evidence," the OMA complaint continues, "nor should such speculation and conjecture have been relied upon by the PUCO to reach its conclusions in this case." In a recent report, OMA claimed inflated forecasts are having a real impact on ordinary consumers' bills. The regional grid operator, PJM Interconnection, runs what's known as a capacity market to ensure it has enough power available down the road to meet demand. But if forecasts are overblown, ratepayers could be paying in the here and now for illusory future demand. In a statement, OMA President Ryan Ausberger dismissed AEP's progress report for the new tariff. "Let's be clear: AEP has not reduced its actual load forecast," he said. "The 30,000 MW number was always AEP's speculative claim to the media but never used as a load forecast for planning. Pointing to a smaller contract total has not changed what AEP is telling PJM about future demand. We need proof from AEP, not more claims." "Until forecasts are independently reviewed and verified, instead of based on unvetted assumptions," he added, "Ohioans are being asked to fund infrastructure for a future that exists on paper, not on the grid." Follow Ohio Capital Journal Reporter Nick Evans on X or on Bluesky.