Small midwestern towns trying to catch up with proper regulation of Data Centers.
Opting out – the “stop the world I want to get off” argument is not realistic.
The video above profiles Illinois and Wisconsin communities impacts, rowdy town hall meetings where citizens react, and lawmakers trying to play catch up. Those meetings look a lot like ones I have been to in regard to siting renewable energy projects, and I’m a little concerned there may be blowback and crossover on these issues.
Misinformation is a problem, and as I try to clarify for myself what exactly is going on, I’ll be posting here those resources I find useful.
There has been quite a controversy near the University of Michigan campus in Washtenaw County Michigan, where a major league Data Center is planned for the small community of Saline Township.
In my mind, this project is an attempt to do things right, with a closed loop internal cooling system, no demand on local water supplies, and a massive battery storage build, paid for by the developer, that will become a valuable resource for the statewide grid, help build out renewables, and relieve pressure on ratepayers.
In addition, the Michigan Legislature, and the utility regulator (Public Service Commission) have issued rules that should address the most urgent problems and keep a lid on rates. Still up in the air, how will new generation for these installations meet Michigan’s ambitious clean air and carbon rules that have strict goals in coming decades?
Today, the Michigan Public Service Commission (MPSC) approved new tariff provisions that are an important first step toward protecting Consumers Energy (Consumers) customers from the massive costs that would be incurred to serve potential data centers. The ruling establishes new tariff provisions for service of data centers and other large-load customers of Consumers — which are the first such tariff provisions in the state.
With data centers continuing to demand enormous amounts of electricity to power them, shifting the costs onto everyday ratepayers, these new tariff provisions will help ensure Michiganders don’t have to foot the bill for the massive energy infrastructure spending that would be needed if large data center growth comes to the state.
“When data centers arrive, they typically bring the threat of higher utility bills and too often the undermining of clean energy goals. Today’s ruling is an important step towards reducing the risk of the former but, unfortunately, fails to address the latter. We are heartened to see the approval of protections against stranded asset costs, and a pathway to ensuring that data centers do not raise costs for Michiganders who are already facing increasingly unaffordable utility bills. We agree with the Commission that such a result would be unacceptable, and look forward to working with all stakeholders to ensure that data centers pay their own way. At the same time, we will continue to fight to ensure that data centers that do come to Michigan are served by clean energy, rather than dirty fossil fuels,” said Shannon Fisk, director of state power sector advocacy at Earthjustice.
“This ruling is an important first step towards protecting Michiganders from the energy costs of data centers, and the speculative rush that’s threatening to drive up our already high costs of electricity and deplete our water supply. We cannot afford to continue building high-cost gas, or running expensive, dirty, and old coal plants just to feed the data center rush. We expect regulators and our utilities to prioritize the use of cleaner, cheaper renewable energy to benefit all Michiganders,” said Elayne Coleman, Sierra Club Michigan chapter director.
“The MPSC’s order makes strides on customer protection, ensuring that ratepayers aren’t subsidizing large customers like data centers. The Commission falls short on compliance with Michigan’s renewable and clean energy standards. Without guard rails from the public service commission order, it creates uncertainty about whether these large new customers will be powered by clean energy and ultimately help Michigan meet its clean energy goals,” said Derrell Slaughter, Michigan Policy Director for Climate & Energy, at NRDC.
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University of Michigan has just issued a guidebook for communities who may consider Data Center development.
University of Michigan, What Local Governments Should Know about Data Centers:
Since policies technologies, and best practices for data center siting are rapidly evolving, readers should treat this guide as a working document. We plan to revise it or add supplementary guides as we learn more.
When thinking about a data center’s sustainability, something to note is that even in data centers that have minimal direct use of water for cooling,
there may still be indirect use of water. That is because most U.S. power plants are thermoelectric and require significant amounts of water to operate.
This indirect water impact is no different from that of other high-demand electricity users, and can be minimized when data centers are located in electricity grids that have less reliance on thermoelectric power plants or when the data centers themselves are powered by electricity sources that do not require water for operations (e.g., wind and solar power).
Consequently, this water use is rarely in the community hosting the data center, but rather in communities that host power plants that supply electricity to the grid. While Michigan’s electricity fleet has been reducing its reliance on thermoelectric power plants as it adds renewables to the grid, in 2024, Michigan’s electric power plants withdrew roughly 5.4 billion gallons of water per day for power plant cooling.
Citizens Utility Board of Michigan:
The MPSC’s order establishes a comprehensive framework for how Consumers Energy must structure its electric service to very large load customers—primarily data centers—under the General Primary Demand Rate (Rate GPD). The order is a response to the unprecedented scale and risk posed by these loads, aiming to safeguard existing ratepayers from bearing the cost of these loads, while enabling Michigan to attract major commercial investments.
Key Points of the Order
Who’s Covered?
- The revised tariff applies to any new customer with a load of 100 MW or greater at a single site, or an aggregated load of 100 MW+ across multiple sites under common ownership (each site must be at least 20 MW).
- The provisions are end-use neutral, meaning they apply to any qualifying large load, not exclusively data centers.
Long-Term Commitment:
- Large load customers must sign up for at least 15 years, with automatic 5-year renewals unless they give 4 years’ notice to leave or reduce their usage.
- A ramp-up period of up to five years is permitted, subject to negotiation.
Minimum Payment:
- Even if a large load customer uses less electricity than planned, they still must pay for at least 80% of what they agreed to use. This applies after the ramp-up period.
Exit Fees and Financial Security:
- If a large load customer leaves early, they pay an exit fee to cover the costs Consumers Energy spent on serving them. The exit fee is equal to the minimum billing demand multiplied by the remaining months in the contract, including infrastructure costs.
- Large load customers must provide financial guarantees (like a letter of credit or cash deposit) to make sure they can pay the exit fee if needed.
Capacity Reductions:
- Large load customers may execute a one-time discretionary reduction of up to 10% of contracted capacity with four years’ notice, without Commission approval (but must notify Staff).
- Further reductions require payment of a pro-rated exit fee or Commission review.
Administrative Fee:
- An upfront administrative fee of $100,000 is required for project proposals, reconciled to actual costs. This ensures that the cost of evaluating new large load requests is not borne by existing ratepayers.
Annual Reporting:
- Consumers Energy must report every year on how many large load customers they have, how much power they use, and any changes in contracts.
Cost Allocation and Rate Design:
- The order does not immediately create a separate rate class for large loads but requires Consumers to present six alternative cost allocation and rate design proposals in its next rate case.
- Prior to serving any large load customer under the new provisions, Consumers must file an ex parte application demonstrating that costs are not being shifted to other customers.
Clean Energy Requirements:
- Michigan law requires data centers to procure 90% of their electricity from clean sources if they wish to claim sales and use tax exemptions.
- The order does not require large load customers to buy a certain amount of renewable energy in this tariff. Instead, these issues will be handled in other proceedings.
- Consumers must discuss voluntary green pricing options with prospective large load customers.