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As previously reported, on May 13, 2024, Ohio Power Company (“AEP”) filed an application seeking approval for two new customer classes, and related tariffs: (1) the Data Center Power tariff for new data center customers expected to use a monthly maximum demand of 25 megawatts (MW) or greater; and (2) the Mobile Data Center tariff for new mobile data center customers, i.e., crypto miners, expected to use a monthly maximum demand of 1 MW or greater (the “Application”). On May 30, 2024, AEP held a technical conference on the Application at the Public Utilities Commission of Ohio (the “Commission”) offices.

Excerpts from Amazon’s Comments

“A 90% minimum demand charge is simply too restrictive and does not give customers the flexibility they need to address changes to their businesses and operations. Amazon submits that the Commission should consider a more reasonable minimum billing demand charge, such as 75% of contract capacity. This threshold provides customers with a sufficient amount of load flexibility without unduly punishing customers that did not accurately forecast load requirements years after making contract capacity commitments to AEP Ohio. A 75% minimum billing demand also represents a measurable increase from the current 60% level, which will ensure more accurate load forecasting while fairly accounting for future load variability. 

Additionally, the tariff should allow a customer to aggregate its electricity consumption and its contract capacity commitments across sites within AEP Ohio’s service territory for the purpose of calculating whether the customer’s load exceeded the minimum billing demand. 1 This structure mirrors how transmission revenue requirements are calculated by AEP Ohio and recovered through the existing BTCR Rider. Allowing the aggregation of these commitments across multiple customer locations gives the customer the necessary flexibility to adjust individual site operations to respond to unique developments that may impact a specific site while maintaining the overall billing demand floor. This aggregation model prioritizes the cost recovery for AEP Ohio without increasing the risk to the utility of stranded or uneconomic investments.”

“The tariff should permit customers to exit their electric service agreements at any time with a 12-month exit fee.

Another critical aspect of AEP Ohio’s new tariff relates to the minimum term of the customer’s electric service agreement and the “exit fee” proposed by AEP Ohio. Under the proposed tariff, a new or expanding customer may cancel its electric service agreement after five years, but only if the customer pays an “exit fee” equal to three years of minimum demand charges. From an economic perspective, the proposed tariff effectively has a minimum term of eight of the required ten-year term.

While Amazon is sensitive to the need to ensure firm load commitments, the proposed fiveyear minimum term combined with the three-year exit fee goes too far, providing flexibility to the customer only in years 5 and 6. Currently, electric service agreements under AEP Ohio’s tariffs have one-year terms and do not impose exit fees. That framework makes sense because it imposes costs on electric distribution customers that take service and allows customers to exit their service agreements if their operations or business changes, or they move or cease operations. Expanding the minimum contract term to five years would run counter to AEP Ohio’s goal of efficiently allocating capacity to customers who will actually use it. It would also materially limit customers’ abilities to respond to changes in operations, markets, services or technologies.”

“AEP Ohio should implement grid enhancing technologies and facilitate behind-the-meter generation to address near term constraints. 

One of AEP Ohio’s goals in its current filing is to avoid capacity constraints on its distribution network in Central Ohio through new financial mechanisms impacting data center customers. To address the threat of capacity constraints, AEP Ohio should consider less expensive, non-wires and customer-driven solutions such as Grid Enhancing Technologies (“GETs”) and tariff provisions that aid the development and interconnection of behind-the-meter generation resources.”

Excerpts from Constellation

“Based on the Application, including the plain language of the Tariffs, the testimony, and attachments, there are several important topics that are not adequately addressed, if they are addressed at all. These topics include: 

• AEP’s unlawful proposal to directly procure supply for data center default service customers with demand of 25,000kW or greater for some time, rather than procuring through competitive processes; 
• AEP’s similar attempted illegal subversion of the current competitive SSO processes for data center default service customers with demand under 25,000kW;
• Misleading language regarding data centers’ eligibility to secure their energy needs behind-the-meter; 
• Confusion surrounding required participation by data centers in demand response programs, 
• Inconsistency in auction product descriptions as being fixed price/full requirements or having energy settled at PJM Day-Ahead prices; 
• Lack of clarity regarding how data center ramping during an auction term is to be handled; and
• Absence of a proposed Master Supply Agreement

Information gleaned from the technical conference held on May 30, 2024, further demonstrated that the Tariffs are ambiguous on their face, and that AEP has not considered important questions relating to data centers that are a necessary part of any such special tariffs, assuming that the Commission is inclined to permit tariffs based on a customer’s specific business. Moreover, when data center customers are not shopping, SSO suppliers should be procuring energy for data center customers on default service. AEP should be required to retain the basic framework for energy supply and related requirements. Indeed, it is critical that, if the Commission proceeds to consider this Application in this proceeding at this time despite its noncompliance with Ohio law and insufficiencies, the Commission’s decision should reject and expressly prohibit AEP itself from engaging in the supply of energy for data center customers.2 No circumstances have been presented, nor should the Commission entertain them on its own accord, to allow AEP, as an electric distribution utility, to provide competitive generation service to customers – even if they are data center customers.”

“SSO Suppliers Should Serve All Default Service Load 

AEP’s Application addresses energy supply options for data centers. Appropriately, data center customers, like other customers, may choose to obtain their electric power and energy supply from a Competitive Retail Electric Service (“CRES”) supplier. However, AEP has indicated that data center customers that do not shop continuously or are dropped by their CRES supplier will not be served under the existing auction framework for SSO default service; rather, AEP will conduct a special default service auction for certain of those customers. The data center customers may not revert to the SSO default service because AEP proposes to itself procure supply in PJM-administered markets for data centers on default supply until the auction is held or in the event the special auction is not successful.3 Additionally, a mobile data center customer that has an aggregate monthly maximum demand below 25,000kW will only ever be served by AEP, procuring supply in PJM-administered markets.”

“The Commission should reject AEP’s proposal to provide certain default service to data center customers directly, for a number of reasons. First, AEP’s testimony in support of its Application provides no support for their proposed scheme. There is no reason provided why AEP considers itself the only entity that can procure energy supply for any particular default service data center customers. Tellingly, the narrative testimony of AEP witness McKenzie does not even address this aspect of their proposal.5 The only reference to AEP itself procuring supply for data center customers is found in the proposed Tariffs6 attached to Mr. McKenzie’s testimony, and in the attachment to his testimony regarding the Data Center RFP auction,7 authored by some unknown person(s) at NERA, which itself fails to provide any rationale for AEP procuring power and energy for default service customers, rather than energy supply being provided by SSO suppliers as is the case for every other customer. There is simply no evidentiary support for AEP’s proposal. Nor is there any rationale provided for the seemingly arbitrary threshold for data center customers on default service, with those having a demand of less than 25,000kW would be served by AEP, which would be served differently than data center customers with a demand of 25,000kW and above in addition to being served differently from any other default service customer. Second, the utility directly procuring default service supply is at odds with competitive markets generally, and Ohio regulations specifically. Ohio’s electric-utility industry was restructured years ago to unbundle the three major components of electric service (generation, distribution, and transmission) and to achieve retail competition with respect to the generation component of electric service.”

“The AEP Application is premature at best, and the Commission should decline to set a schedule at this time. The Commission should instead require that AEP re-file the Tariffs that comply with Ohio law, if AEP so desires, and the Commission should reject and expressly prohibit AEP itself from engaging in the supply of energy for data center customers (except in the very limited and unlikely circumstance of a regular SSO auction failing to procure supply). Requiring AEP to re-file the Tariffs will allow AEP time to consider the feedback it has received, resolve the ambiguities arising from the current proposed Tariff language, and remove the anti-competitive restrictions from the Tariff.”

Excerpts from Google’s Comments

For all the reasons discussed herein, Google recommends a collaborative and comprehensive process to explore multiple concepts addressing underlying issues, as we believe it would yield the best outcomes for all AEP customers in furtherance of Ohio’s economic growth. We have concerns that AEP Ohio’s proposal fails to reasonably address these shared challenges and bring these comprehensive solutions to fruition. 

Specifically, as a first step, we recommend that the Public Utilities Commission of Ohio (“PUCO” or “Commission”) find that the present docket is not the appropriate process for changing customer classifications or modifying existing charges. Changes to rate classifications and customer charges should be considered in a base rate case, where cost of service, rate of return and rate design issues can be comprehensively addressed, rather than through the tariff-filing.5 Google also recommends that the Commission initiate a Commission Ordered Investigation (“COI”) into the best way to address load growth from data centers in Ohio. This COI case would enable a more comprehensive investigation that, at a minimum, considers: 

1. Improvements to AEP’s current load forecasting methodology to ensure that “speculative” load requests do not result in inaccurate forecasting. 
2. Potential technological solutions, in addition to necessary Extra High Voltage (“EHV”) construction, that would likely result in significant cost-savings for customers, while unlocking capacity at a quicker pace than greenfield transmission projects. For example, in order to accommodate load growth in Texas, AEP installed advanced reconductoring technologies, which doubled the capacity on 240 mi of existing transmission lines and reduced line losses by 40%, equivalent to savings of over $30 million in its first year.6 
3. Developing reasonably stringent collateral agreements to ensure that “speculative” customers are not driving up transmission investment costs for other customers.

4.Obtaining more contractual certainty from prospective data center load to ensure the load “shows up”, while also providing reasonable certainty to data centers about the true timing and cost of being served by AEP Ohio. 

5. Safeguards to guarantee that capacity under existing contracts remains unaffected by any modifications considered in this case. 
6. The potential need for developing new customer classifications and rate designs to properly assign costs related to any new transmission system investments. Addressing these concerns in a broader proceeding will allow the Commission to properly balance the interests of AEP Ohio, data center customers, and all of AEP Ohio’s other customers who may be impacted by investment in EHV. These are just a few of the significant topics that AEP Ohio and the various stakeholders need to consider to effectively address planning for data center load growth and potential EHV investment required to support this growth. We believe that addressing these concerns in a COI case will enable the Commission to properly balance the interests of AEP Ohio, data center customers, and all other AEP Ohio customers. To help facilitate this investigation, the Commission should engage an independent auditor to consider the relevant issues and potential paths forward. After the completion of the investigation, the Commission should consider rate classification and rate design issues comprehensively in AEP Ohio’s next rate case proceeding. 

To the extent the Commission decides to consider AEP Ohio’s application in this case, the Commission should issue a reasonable procedural schedule that sets a full evidentiary hearing. A full evidentiary proceeding is necessary to properly address the issues in the case. Considering the number of parties that have sought intervention and the importance of the issues in this case, the Commission should schedule an evidentiary hearing for early 2025. This will provide all parties sufficient time to conduct discovery and prepare testimony.

Excerpts from Interstate Gas Supply Comments

“The prohibition on customer-owned generation should be eliminated.” 

“As part of the Application, AEP proposes tariff language prohibiting customer owned generation by the data center customers taking service under the tariffs. Specifically, the tariffs provide “[t]he Customer’s facilities shall not be connected to any source of power other than the delivery point specified in the Contract, without written notice and mutual agreement between the Company and the Customer.” 

“IGS opposes the limitation on customer-owned generation proposed by AEP and recommends that it be eliminated. Given the huge increase in demand AEP faces, prohibiting customer-owned generation would only compound the issues outlined by AEP. Large energy users, such as data centers, should be encouraged to offset their demand on the grid by installing customer-owned generation. The Commission has set that tone in its review of cases filed under R.C. 4905.31 and Ohio Adm.Code 4901:1-38 for approval of economic development and unique arrangements. One of the criteria that the Commission considers when reviewing such applications is “[w]hether the applicant has explored or taken advantage of other opportunities for operational savings such as … shopping for or self-generating electricity ….”3 To the extent that an energy-intensive facility can self-generate electricity and demand less from the grid, it is in the public interest that it does so.”

“The Commission should deny AEP’s proposal to conduct separate SSO auctions for certain customer classes.

AEP’s proposal is seeking to create two new customer classes and provide a separate auction for customers who elect not to shop for generation. AEP witness McKenzie asserts, “AEP Ohio expects that all data center customers will choose to be supplied by a CRES provider.”4 IGS opposes changes to the SSO proposed by AEP in its Application. Given that an SSO auction for data center customers does not seem likely or necessary, any changes to the Company’s SSO should be decided in its next Electric Security Plan. Moreover, the issue of splitting SSO auctions by customer class has been litigated recently, more than once, before the Commission.5 The Commission has denied those proposals each time.”

“The Commission should deny the proposed minimum stay provision. 

“The terms for default service for the new customer classes includes a minimum stay of six months. During that time, customers would not be allowed to shop for generation service. IGS opposes the minimum stay proposed for the SSO. Even if the Commission approved the SSO proposal for the new customer classifications, it should reject the minimum stay provision. To prevent anticompetitive effects, default service pricing should cover all retail risks and costs, including the risks of migration to and from default service to competitive service, which should not be limited by minimum stay periods, or other artificial barriers. A minimum stay provision discourages market development by forcing customers to remain with AEP’s default service and limiting their choices for generation service.”

Excerpts from RESA Comments

“AEP Ohio proposes a number of additional changes that are anticompetitive and unnecessary to serve AEP Ohio’s stated objective of making new transmission investment while ensuring that the new load pays its fair share of the new transmission investment.

Specifically, AEP Ohio’s proposed tariffs for data centers and mobile data centers includes: 

– Provisions prohibiting the new data centers from being served under the existing standard service offer (“SSO”) auctions; 

– Restrictions on customer choice through a minimum 6-month stay; – Limitations on behind-the-meter generation; 

– Forced market program participation; and 

– AEP Ohio’s provides itself with a preference in default service generation procurement activities. 

None of these anticompetitive market provisions, however, are necessary to implement now to obtain the financial commitment from the new data center load to protect existing customers from the cost of new transmission infrastructure. 

And, as AEP Ohio explained, it projects that the new transmission infrastructure will not be constructed for 7-10 years to serve the 30,000MW of data center load that has inquired about locating in Central Ohio. Accordingly, the competitive market issues for this load will not be relevant for nearly a decade, and over the next 7-10 years AEP Ohio will have multiple electric security plan (“ESP”) cases. There is more than sufficient time to consider any retail electric generation or customer-sited issues and absolutely no need to determine these issues in a rush using the expedited process AEP Ohio has proposed in this proceeding. 

RESA recommends that this proceeding be limited to the Commission’s consideration of whether it should adopt, modify and adopt, or reject the long-term service/financial commitment provisions of AEP Ohio’s proposed tariffs related to the need to construct new transmission infrastructure to serve the data center load that has inquired about locating in Central Ohio or may require in the future.”

“AEP Ohio’s Data Center Tariff and Mobile Data Center Tariff contain a number of provisions impacting competitive services which are not discussed or scantly discussed in the Application and testimony. AEP Ohio’s failure to adequately explain or support these provisions necessitates that the Commission not adopt them as part of this proceeding. Moreover, as discussed herein, there will be a number of future proceedings, most notably ESP proceedings, where any competitive market or customer-sited issues associated with the future of new data center load can be thoroughly addressed.”

“SSO Generation Service 

AEP Ohio’s proposed data center tariffs require any applicable data center customer that returns to the SSO to receive retail electric generation service outside of the existing SSO auction process. AEP Ohio’s Application only briefly mentions its proposed new SSO generation procurement process. The Application acknowledges that it has proposed a separate process, asserts that more detail is contained in witness McKenzie’s testimony and provides a one sentence explanation of AEP Ohio’s proposed rationale. That rationale for a new SSO auction process, as explained in that one sentence in the Application is that “including that [data center] load in the regular SSO auction could add unacceptable risk and complications for participating suppliers, thus increasing prices for all SSO customers (with crypto miner [data center] load of less than 25 MW being served through market procurement).” AEP Ohio’s testimony briefly mentions that it is proposing a separate process, and Attachment MSM-3 to the testimony of AEP Ohio witness McKenzie includes a proposed process for the new generation procurement, but otherwise AEP Ohio offers no discussion on why this separate process needs to occur, or analysis of any alleged harms of not doing so, or the benefits of its proposal.

Having failed to offer or include any testimony containing a detailed explanation and rationale for the change, AEP Ohio leaves the Commission no basis upon which to consider altering the long-established auction process, the Commission must reject AEP Ohio’s separate SSO procurement proposal at this time. Moreover, without a detailed explanation in AEP Ohio’s Application and testimony, it is not easy to understand how AEP Ohio’s proposed concept is materially different in concept than what some intervenors had proposed in the recent ESP V case, proposals that AEP Ohio opposed, and which the Commission declined to adopt (some intervenors had proposed to separate the auction into a residential vs. nonresidential, or separated by rate schedules into somewhat natural breaks into the load types generally referred to as residential, commercial, and industrial). It is also important to note that the proposals from certain of these intervenors in the ESP V case were accompanied by detailed and lengthy testimony presenting their arguments and analysis for their proposed change to the auction structure. Even so, the Commission concluded that “[n]othing in the record of [the ESP V] case convinces the Commission that the modifications to the SSO auction process, as advocated by OCC and Constellation, are necessary or appropriate.” AEP Ohio’s failure to support its separate SSO procurement process with any analysis warrants rejection of the proposal at this time. Material changes to the SSO auction process, such as what AEP Ohio proposes, are best handled in an SSO proceeding where the parties can more fully address the intricate and interrelated issues.”

“The minimum stay provision is unlawful and unreasonable. 

AEP Ohio’s proposed minimum stay is unlawful and unreasonable and must be rejected. As noted above, AEP Ohio has proposed that customers served under the new data center tariff will be required to stay on the SSO to receive generation service for a minimum of 6-months. The ultimate length of the minimum stay would be the 6-month SSO data center load procurement period, plus the time until the next procurement period begins.27 AEP Ohio proposes two 6-month procurement periods, one beginning June 1st and one beginning December 1st . 28 Accordingly, if a customer returned to the SSO on June 1st or December 1st, they would have a 364-day minimum stay period. The Commission has previously considered this very issue for AEP Ohio and struck down the restrictions on customer choice as unlawful and unreasonable.”

Amazon’s Comments   (06/25/2024)
Constellation Comments  (06/25/2024)
Google’s Comments (06/25/2024)
Interstate Gas Supply Comments  
RESA Comments (06/25/2024)
24-0508
In the Matter of the Application of Ohio Power Company for New Tariffs Related to Data Centers and Mobile Data Centers