Maryland Protests Data Center Costs

By Ethan Howland of UtilityDive

A group of 80 Maryland state lawmakers are backing a complaint at the Federal Energy Regulatory Commission over the PJM Interconnection’s cost allocation for transmission lines that support data centers.

Driven by the way PJM spreads transmission costs, Maryland ratepayers will pay $1.6 billion over the next decade for transmission projects that were approved in the grid operator’s last three regional transmission expansion plans that are designed to mainly serve out-of-state data centers, Maryland’s ratepayer advocate — the Office of People’s Counsel — said in its May 7 complaint.

“While PJM’s rules are unfair for many PJM states, they impact Maryland disproportionately simply because Maryland sits next to Data Center Alley in Virginia,” the Maryland lawmakers said in a Wednesday filing at FERC. “Given the projections of massive data center growth — more than 80,000 megawatts over the next 20 years — PJM is likely to bill Maryland customers billions more for future data center-driven transmission costs.”

The complaint at FERC comes amid an intense focus across the United States on how data centers can affect the electric bills of existing ratepayers through increased generation and transmission costs. The complaint centers on the transmission side of the equation. It contends that FERC is barred from approving transmission cost allocation methodologies that assign costs to ratepayers that won’t gain “roughly commensurate” benefits.

PJM’s cost allocation methodology assigns half of certain regional transmission projects based on a load-ratio share across its footprint, which assumes that all transmission built will benefit the entire grid, according to the ratepayer advocate’s complaint. The other half of transmission costs are assigned via a “solution-based distribution factor analysis,” which fails to capture certain reliability issues caused by data centers, the ratepayer advocate said.

Spreading data center-driven transmission costs across PJM’s footprint could lead to overbuilding, according to the complaint.

“By socializing data center-driven transmission costs to all ratepayers, it insulates states and utilities that attract speculative load growth from overbuilding and stranded asset risk while shifting those risks to neighboring states’ ratepayers,” the ratepayer advocate said.

Further, state-level large-load tariffs fail to address, and may make worse, the misallocation of transmission costs caused by PJM’s transmission cost allocation methodology, according to the complaint. 

Also, recent FERC-approved utility “transmission security agreements” between utilities and data centers are “often confidential, highly variable, and fail to protect existing customers,” the ratepayer advocate said.

The agreements leave ratepayers exposed to transmission costs caused by data centers, according to the ratepayer advocate. “Moreover, they carry potential legal consequences that may prove difficult to unravel,” the ratepayer advocate said. The ratepayer advocate said FERC should order PJM to revise its cost allocation methodology so that data centers pay for the transmission projects that they cause.

As a start, PJM should be required to assign the costs of transmission projects that are designed to serve data centers and other large loads to the grid operator’s zones where the data centers are located, according to the complaint. That would allow state-level large load tariffs to address those transmission costs, the ratepayer advocate said.

“The upstream leakage of a substantial portion of data center driven costs at the regional level to other zones through the current operation of the PJM tariff creates an unjust subsidy for that data center load,” the ratepayer advocate said.

The complaint calls on FERC to order PJM to re-study the baseline reliability projects approved in its last three regional transmission expansion plans to determine the costs caused by forecast load growth from data centers. 

FERC has extended the comment deadline on the complaint to July 27.