(WKYT) – Several Kentucky communities have passed moratoriums temporarily halting approval and construction of data centers, giving elected officials more time to understand how data centers work and what protections are needed.
Some residents fear data centers will drive up their utility bills.
“The energy of those data centers increases our electric bill as citizens,” said Nicole Merz, who lives in Nicholasville.
However, Kentucky Power says data centers could actually lower electric bills for eastern Kentuckians.
Coal decline has driven up costs
Eastern Kentucky has faced decades of challenges, many driven by the decline of the coal industry.
“Those challenges have sort of come to knock on the door of Kentucky Power and its customers,” said Amanda Clark, director of economic and business development for Kentucky Power.
Kentucky has lost more than 19,000 coal-related jobs since 2009, and the number keeps falling.
“Rates keep going up because we’re losing load and we’re losing customers,” Clark said. “As we add load and as we add customers, those rates get stabilized.”
Large project could offset costs
Kentucky Power says data centers are part of the solution.
Bitcoin mining company TeraWulf announced plans to build a hyperscale data center in Kentucky Power’s service territory in Ashland. It will eventually need more than one gigawatt of electricity.
“That equates to essentially all the other customers that we have in Kentucky Power service territory,” Clark said. “That’s a very large piece of those fixed costs. If you have one customer who’s paying 50% of the fixed costs of everything else, logic tells you that helps relieve rate pressures.”
Without data centers, Clark said stabilizing Kentucky Power’s rates would require 175,000 new residential customers.
“We have 162,000 right now,” Clark said. “So I need 175,000 new homes across our service territory. I need about 800 Hobby Lobbies and TJ Maxx stores. So in terms of how do we get there quicker, this is the path.”
Sister company plans rate cuts in Indiana and Michigan
In July, Kentucky Power’s sister company, Indiana Michigan Power, laid out a plan to lower rates for residential customers based on large load growth there.
“What this looks like is we are lowering the base rate for our customers,” said Stephanny Smith, director of communications and engagements for Indiana Michigan Power. “If our customers look at their monthly bill, that base rate is one of the largest line items on their monthly bill. So we’re lowering that by five percent.”
Smith said the move is only possible because data centers are covering a large share of fixed costs.
Kentucky Power points to tariff protections
Kentucky Power says it is protecting existing customers through its large load tariff, a framework large customers like data centers must follow before coming to the state.
“We put those protections in place in tariff,” Clark said. “There’s no special contract. There’s no special rate for these customers. It is their fair share and then some. Any infrastructure upgrades, they’re paying for up front. If they decide to leave, they’re paying for that too.”
Asked about critics who question whether Kentucky Power benefits financially from data centers coming into the state, Clark responded.
“For us, yes, it’s load. Yes, it’s revenue,” Clark said. “That revenue directly affects every customer that we have. If we don’t do anything to affect that, those rates keep going up.”
Public Service Commission points to executive order
WKYT requested an interview with the Kentucky Public Service Commission for this story, but they were unavailable.
In response to our request, the Kentucky Energy and Environment Cabinet sent us a statement. They pointed to Gov. Andy Beshear’s executive order protecting ratepayers, which requires the Public Service Commission to prohibit utility companies from increasing rates to recover costs caused by the development or operations of a data center.
Read the full statement below:
Last month, Gov. Beshear announced an executive order that protects ratepayers by requiring the Public Service Commission to prohibit utility companies from increasing rates to recover costs caused by the development or operations of a data center. The executive order also requires data center developers to submit an energy plan to the Energy and Environment Cabinet (EEC) showing how they will protect Kentucky families and businesses by not raising electric bills.
The Public Service Commission reviews the rates and contracts that utilities use when serving large customers like data centers. These rates and contracts can include protections for ratepayers by:
- Requiring data centers to pay their share of the costs associated with their electricity use.
- Allowing the utility to reduce or temporarily stop the data center’s power during certain situations.
- Requiring the data center to pay a deposit for expensive upgrades to the electric system.
In addition to those ratepayer protections, Gov. Beshear’s executive order also directs EEC to deny any permitting applications where a data center would negatively impact air quality, water use, water quality, water supply, federal jurisdictional wetlands or natural resources, requires any data center project developer to pay their fair share of taxes, and requires developers to engage in a transparent dialogue with the communities they are seeking to join – ultimately leaving the final decisions up to local communities once all other requirements are met.