Ohio has no statewide shield against new data center power costs

COLUMBUS, Ohio -- The clock is ticking for Ohio lawmakers to protect regular electric customers from higher bills and possible outages tied to the data center boom.

PJM, the grid operator for Ohio and 12 other states, opened a special auction Wednesday to buy more power after its regular auction came up short this summer.

PJM is offering power plant operators much higher prices to hopefully entice them to make more electricity available when the grid needs it most. But somebody has to pay for that power.

PJM warned that higher costs could spill onto residential electric bills if Ohio doesn’t put protections in place.

An effort to create a new customer class for large power users stalled last spring.

The grid operator is also asking federal regulators to let large users connect even when there isn’t enough power to reliably serve them, so long as those customers shut down during power shortages.

The problem is PJM has no authority to decide who Ohio or any state in its region curtails in an emergency.

“PJM’s proposal essentially places existing Ohio consumers at risk of subsidizing both the cost and consequences of resource inadequacy for large data center loads,” according to the Ohio Consumers Council.

Why PJM needs a special auction
 
PJM runs capacity auctions twice a year to make sure the region has enough power available in the future.

The goal isn’t to buy enough electricity for an average day. The grid needs extra power, called capacity, for the hottest afternoons, the coldest nights and moments when a storm or equipment failure knocks part of the system offline.

Capacity can sound wasteful because customers pay for electricity they may never use, but having just enough risks outages when demand spikes.

Reliability matters, especially to places like hospitals that cannot simply stop functioning.

In its last two capacity auctions, PJM did not buy as much of that cushion as it wanted. The grid operator expects to have enough power to serve customers, but the smaller cushion raises reliability concerns during extreme weather or other emergencies--especially when demand is growing.

PJM forecasted that data centers will account for 30 gigawatts of the region’s 32 gigawatts of projected peak-load growth from 2024 to 2030.

Thirty-two gigawatts is an enormous amount of power. It could run 24 million homes or every Ohio household five times over.

That’s why PJM created this special auction to buy extra capacity for the shortfall created by the rapid rise in demand. But there is another problem: price.

Capacity prices have climbed sharply in recent years. To protect customers from skyrocketing bills, PJM capped prices in its regular auction at $325 per megawatt-day.

That cap limited costs, but it also kept some power plant operators from bidding.

“It’s capped at a level that will not incentivize new generation,” said Jon Gordon, Ohio director for Advanced Energy United, a clean energy trade group.

PJM plans to offer up to $555 per megawatt-day in this special auction. But it warned states that without legal protections, those higher costs could be spread across all customers.

Who gets cut?
 
PJM’s second proposal deals with large load users that want to connect before enough new generation is available.

The plan is called the Interim Resource Adequacy Service, or IRAS, and it would let data centers come online so long as they agreed to reduce or shut off electricity use when the grid is short on power.

Basically, they could use the cushion built into the system when it’s not needed.

PJM would create a registry to track large users, including where they are, how much power they need and whether they have backup generators.

When the grid gets strained, PJM would tell utilities to cut large users first. The idea is that this would lower the risk of outages for residential customers.

But the Ohio Consumers’ Counsel said the plan leaves too much to the states.

PJM can tell utilities how many megawatts need to come offline, but state utility laws determine which customers actually get cut.

Ohio does not have a statewide law spelling that out.

“Residential consumers should not pay for any of the costs and reliability risks created by data centers,” OCC’s Maureen Willis said. “If a data center comes onto the grid without enough generation to serve it, that customer—not Ohio families—should bear the costs and consequences.”

The watchdog also objected to PJM’s plan to pay data centers when their power is curtailed.

The idea comes from a long-standing practice of paying customers to cut use, because reducing demand has the same effect as adding power to the grid.

But OCC said this is not that kind of situation: “Why reward these entities for a situation they created by compensating them?”

How long does Ohio have?
 
The special auction results are expected in December, but customers won’t see those charges immediately. The auction is tied to the 2028/2029 capacity year, which begins June 1, 2028.

Lawmakers had a bill on the table this spring that would have created a new customer class for large power users, but House Bill 646 fell apart after the Republican supermajority couldn’t agree on the details.

“The legislature should take it up this year, if possible... ,” House Speaker Matt Huffman, a Lima Republican, said. “And, you know, if not, then as soon as possible in January."

But Democrats weren’t convinced that will happen.

“I’m concerned that it doesn’t get done, and we all get stuck with the bill,” Sen. Kent Smith, a Euclid Democrat, said.

Smith and the rest of the Statehouse returned to Columbus Wednesday and approved a 90-day gas tax holiday.

Rep. Tristan Rader, a Lakewood Democrat, said lawmakers should have used the session to take up data center protections instead.

“Ohio lawmakers have direct authority over how our utilities charge customers and the conditions we place on data-center development. We do not control global oil supplies or the war in Iran,” Rader said. “We should use the authority we actually have to protect Ohio families.”