PA Environment Digest Blog: Data Center Stampede Trampling PA Ratepayers Part III: PJM Market Monitor - Data Centers Have Cost Existing Ratepayers $16.6 Billion Already; Centers Should Bring Their Own Power Generation To Prevent More Large Price Spikes

On October 22, the House Energy Committee held a hearing on the impacts of the rush to develop A.I. data centers on the electric grid and ratepayers in Pennsylvania and House Bill 1824 (Matzie-D-Beaver).

Rep. Elizabeth Fiedler (D-Philadelphia) serves as Majority Chair, and Rep. Martin Causer (R-Cameron) serves as Minority Chair.

Part of the agenda featured the independent PJM Market Monitor, the PA Office of Consumer Advocate and the PA Utility Law Project.

These witnesses offered their comments on how A.I. data centers have already caused a $16.6 billion surge in electric prices paid by ratepayers in the PJM service area and outlined the adverse consequences of not taking effective action to protect ratepayers as part of data center development.

They also offered remarkably similar solutions--

-- Require data centers to bring their own generation - PJM Market Monitor, PA Consumer Advocate, PA Utility Law Project

-- Authorize the PUC to set conditions for allowing centers to be served by the grid - PA Consumer Advocate, PA Utility Law Project

-- Require center contributions to Universal Service Assistance Programs and LIHEPA to reduce the impact of electricity prices increases on lower income ratepayers - PA Utility Law Project

-- Need to prioritize existing loads and ratepayers on the grid - PJM Market Monitor, PA Consumer Advocate, PA Utility Law Project

-- Require centers to take electrical service on an interruptible basis during supply shortage periods - PA Consumer Advocate, PA Utility Law Project

-- Authorize the PUC to set power curtailment priorities - PA Consumer Advocate, PA Utility Law Project

-- Encourage backup generation at centers other than diesel to reduce environmental impacts - PA Consumer Advocate

PA Environment Digest is highlighting their testimony because it is critical the public understand these impacts to cut through the hype surrounding the stampede to develop these facilities.

Independent Market Monitor For PJM

Dr. Joseph Bowring, the Independent Market Monitor for PJM is the organization responsible for promoting a robust, competitive and nondiscriminatory electric power market in PJM regional electric grid by implementing the PJM Market Monitoring Plan.

What If Legislature Fails To Act?

Rep. Mandy Steele (D-Allegheny) asked each of these three witnesses what if the General Assembly fails to act to protect ratepayers.

Dr. Bowring said-- “First of all, customers across PJM have already paid more than $16 billion purely as a result of data center load. So that's happened.

“And that part of it cannot be directly affected by decisions of the Pennsylvania Public Utility Commission because that is at the wholesale power level.

“But there is a way to address that, and that is, I keep repeating, we need more generation, we need the data centers to bring their own generation to address that and that will mitigate those very large cost increases.”

PJM Market Monitor Testimony

Thank you very much for the opportunity to testify today. As you know, my role is not as a consumer advocate. I'm the Independent Market Monitor for PJM.

So, as Independent Market Monitor, we're an advocate for competitive wholesale power markets.

The purpose of wholesale power markets, and particularly competitive wholesale power markets, is to produce the lowest possible costs of power, but no lower, and the lowest possible cost for reliable power.

So that's the essential point of the PJM wholesale capacity markets, and that's really our fundamental role is to help that happen.

So as the Independent Market Monitor for PJM, which is the wholesale market for power, I address issues related to the wholesale power markets and not retail rate making.

So House Bill 1834 would have a direct impact on the PJM wholesale power markets. And my testimony is an attempt to address that potential impact.

PJM Market ‘Short’ On Power

So one of the things that has sort of come up today but not been made totally clear is that the PJM capacity market is not only tight, as having no exit, it's actually short.

So it's our view as market monitors that it is illogical and inconsistent with reliability to add large loads that cannot be served reliably.

Seems like a common sense point, but it's not necessarily widely accepted.

Establish A Load Queue

So our recommendation is to establish a load queue.

So if you're a large load, if you're a thousand megawatt data center or a 500 megawatt or whatever the size is, and you want to be interconnected to the grid, you get in a queue and you're served when you can be served reliably.

Or, Bring Your Own Generation

Now, to the extent that that takes longer than data centers want to wait, our primary alternative to that is to bring your own new generation.

So it was talked about this morning somewhat, but bringing your own new generation is our key recommendation.

It's a way to prevent wealth transfers. It's a way to prevent large price increases for other customers.

And it's a pragmatic, in our view, market solution that allows data centers to come to market quickly and consistent with competitive markets.

Cost PJM Ratepayers $16.6 Billion Already

So we've done a series of analyses on wholesale power markets and the bottom line for the last two capacity auctions, the role of data centers, the impact of data centers, both existing and forecast, was to increase payments by all customers by $16.6 billion.

That's about half of the total cost of capacity in PJM for the last two auctions.

So the impact of data centers is very large. It does not have to be like that, but it is at the moment, and we believe that our proposal to have data centers bring their own new generation would help.

And this is consistent with the comments we actually heard from Mr. Bair [PA Building & Construction Trades Council] this morning.

Load Forecasting

Another question that came up frequently was load forecasting.

And we think that bringing your own new generation is the best and most direct way to address uncertainty load forecasting.

This is very different than putting down money for [an electric] substation.

It's putting down a billion dollars for a new power plant, and that is the best way to get market discipline; best way to get a competitive outcome; and best way to make sure your data forecasts make sense.

So I support the broad goal to the extent it's appropriate for me as Market Monitor to support this [House Bill 1834] to authorize the Pennsylvania PUC to establish a regulatory framework for data centers.

But the real point there is that it's essential for the wholesale power market set that the expectations for data centers be accurate.

So I take part of the purpose of the bill to be increased transparency and certainty about expected data center loads that will help the PJM markets operate more efficiently.

So the states and the state public utility commissions, while they don't dominate in the wholesale power market, do have an important role to play, and play that role with respect to data center loads and the impact that data center loads on wholesale power markets.

So we think the market solution, as I say, is to bring your own new generation.

PJM Expedited Connection For Bring Your Own Generation

And if you do that, we recommend that PJM establish an expedited interconnection process for new generation and new law to allow both to come on quickly.

As everyone has said, data centers play a critical role in our economy. We need more generation.

Carrying them together is an excellent solution going forward for the markets, for data centers and for generators.

New Generation Must Match Load Needs

The Market Monitor recommends that the new [electric] generation match the nature of the load.

So it has to both be locationally relevant, it has to be in the same general area.

It has to be electrically deliverable to the load, but it also has to match the characteristics of the load.

So as we heard, the data center load is 8760 [hours in a year], 99.999% reliability or the so-called five-9s.

So the power has to be provided reliably year-round.

Renewable Energy

So there's a 25% renewable requirement in the bill. We don't think that's consistent actually with the way that the market's currently working.

At the moment in 2024, for example, about a little less than 8% of total power generated in PJM was from renewable resources.

So if the data center were drawing power from the grid, it would've been met by 7.7% renewable.

Pennsylvania, as well as other states in Pennsylvania, have renewable portfolio standards.

That's a matter of state policy. I'm not going to express an opinion about it.

[I] just wanted to give you the basic facts about the nature of renewable energy in the PJM power market at the moment.

State Utility Commissions

There are other specifics in House Bill 1834 about the interaction between data centers and PJM, also power markets, and in particular, the bill directs Pennsylvania PUC to review each data center contract to determine the impact on the grid, the effect on the reliability grid, and the impact on rate payers.

So from my perspective as a Market Monitor, those provisions recognize the fact that decisions by the Commission with regard to data centers do have an impact on PJM.

As you've heard, the Pennsylvania PUC, and really no PUC within the PJM footprint, can by itself fully address the impacts of addition to large new data center loads, and it's essential to remember that.

So it's my view that the provisions of the bill would provide Pennsylvania PUC with specific authority to make an important contribution.

But again, I'm not supporting any specific detailed requirements of the bill. That's a retail ratemaking matter and a state policy matter.

In my view, the Pennsylvania Public Utility Commission is best situated to decide on the appropriate detailed requirements for serving data centers at the state level.

There is an ongoing discussion in the PJM stakeholder process about how to address these issues at the RTO [Regional Transmission Organization] level.

That's why we are recommending our approach to bring your own new generation.

Flexibility is really not an answer despite what you heard from Reliability First [at this hearing].

The only answer, as you heard from Mr. Bair, is to bring new generation to meet that load.

If we add 30,000 megawatts of new data centers, we need 30,000 plus megawatts of new generation, generation that can match the data center load in terms of time. That has to be available year round.

Thank you.

Click Here for copies of written testimony.

Click Here for Part I of the hearing video - industry, business, unions, PUC, utilities

Click Here for Part II of the hearing video - Independent PJM Market Monitor, Consumer Advocate, PA Utility Law Project

Click Here for House Energy Committee summary.

Rep. Elizabeth Fiedler (D-Philadelphia) serves as Majority Chair of the House Energy Committee and can be contacted by calling 215-271-9190 or click here to contact. Rep. Martin Causer (R-Cameron) serves as Minority Chair and can be contacted by calling 717-787-5075 or by sending email to: mcauser@pahousegop.com.

(Photo: Part of proposed 3,200 acre Homer City A.I. Data Center Campus with largest proposed natural gas power plant in the US.)

Data Center Stampede Trampling PA Ratepayers:

-- Data Center Stampede Trampling PA Ratepayers Part I: PA Utility Law Project - Utility Terminations Up 30% Already; Prioritize Existing Loads; Centers Need To Help Pay For Utility Assistance [PaEN]

-- Data Center Stampede Trampling PA Ratepayers Part II: PA Consumer Advocate - PUC Should Set Conditions For Centers To Be Served By The Grid; Set Power Curtailment Priorities [PaEN]

-- Data Center Stampede Trampling PA Ratepayers Part III: PJM Market Monitor - Data Centers Have Cost Existing Ratepayers $16.6 Billion Already; Centers Should Bring Their Own Power Generation To Prevent More Large Price Spikes [PaEN]

-- PA PUC To Take Up Model Tariff For Connecting Large Load/A.I. Data Centers To The Electric Grid At Nov. 6 Meeting; Other Changes Needed [PaEN]

-- PUC Votes To Suspend, Investigate PPL Electric's Proposed 7%, $356 Million Rate Increase [PaEN]

NewsClips On House Energy Committee Hearing:

-- WITF: PA House Committee Considers Shielding PA Ratepayer’s Wallets From A.I. Data Center Energy Costs

-- WHYY: PA Legislation Aims To Protect Ratepayers From A.I. Data Center Energy Strain, Costs

-- WESA - Rachel McDevitt: PA Lawmakers Consider Rules For A.I. Data Centers; Industry Warns Of Over-Regulation

-- Tribune-Democrat: PA Lawmakers Weigh Economics, Grid Failure As Regulations Considered For A.I. Data Centers Energy Use To Prevent Further Electric Cost Spikes [PDF of Article]