Delaware lawmakers stepped up their efforts to protect homes and businesses from big rises in electric rates resulting from new data centers and other heavy users of electricity.
A substitute bill would require energy users of at least 50 megawatts to obtain approval of the Public Service Commission for an “Energy Service Agreement” ensuring a new user, not residents or businesses, pay the full cost of its energy demand including costly new transmission.
“It is the intent of the General Assembly that residential retail electric customers, and all other industrial and commercial customers, other than large energy-use facilities, should not bear the financial costs or risks associated with large energy-use facilities interconnecting in the electric system,” said the bill, which amends an earlier measure calling for a special tariff for new heavy users of electricity.
The bill, introduced on May 21, would also require contracts between the user and the utility to be at least 10 years; that the user would pay at least 90 percent of supply costs, and that its peak load contribution will be at least 90 percent of contract capacity.
Public concern about more rises in electric rates if new data centers are approved in Delaware has risen in the last year, especially in response to a plan to build Project Washington, one of the country’s biggest data centers, covering 6 million square feet in New Castle County. If fully built, the plant would use 1.2 gigawatts of electricity, about half of what the whole State of Delaware uses.
Although Project Washington was denied both by the state environmental agency DNREC, and on appeal by a board that determines whether industrial plants can be built in Delaware’s Coastal Zone, the project developer, Starwood Digital Enterprises, says it will appeal to the state’s Superior Court, and that it remains confident that the massive 6 million square-foot center will be built as planned.
If the court upholds the state rulings, some analysts have speculated that Starwood will submit another application that would address the official objections.
“Six months ago, states and communities were competing for who could offer the best incentives for how to bring data centers into their communities, with little knowledge about how this booming industry would impact ratepayers."Sen. Stephanie Hansen (D-Middletown)
Whether or not Project Washington is built, supporters of the new bill say Delaware must be ready for an influx of the centers that enable AI given a surge in the number of plans across the country. They argue that state government has a responsibility to set regulation that protects ratepayers from huge energy demands of the centers as electricity demand is forecast to exceed new supply in the next few years.
According to the Delaware Sierra Club, six data centers are now planned in the state, using a total of 2.1 gigawatts, or almost as much as the 2.4 GW used by the state as a whole.
“Six months ago, states and communities were competing for who could offer the best incentives for how to bring data centers into their communities, with little knowledge about how this booming industry would impact ratepayers,” said Sen. Stephanie Hansen (D-Middletown), who chairs the Senate’s Environment, Energy and Transportation Committee, and is a sponsor of the new bill.
“Today, there is much better understanding about how data center development, with its massive need for electricity, is having on the electric bills of its citizens,” Hansen said at a press conference to announce the bill. She said PJM, which operates the electric grid in Delaware and 12 other northeastern and midwestern states, has concluded that data centers are the main cause of higher costs in the wholesale electric capacity market – in which generators agree to provide future power if needed.
Hansen said it’s incumbent on state government to set standards for data centers and other large energy users that will ensure other electric rates won’t rise in response to the new centers. The bill combines the requirements of the original HB233 with those of SB205, a Hansen-led bill which expanded the role of the PSC in evaluating applications by large energy users.
SB205 failed to advance from a Senate committee in January after criticism by trade unionists and some Republican lawmakers that it would discourage investment.
State Rep. Frank Burns (D-Newark), lead sponsor of HB233 and its substitute, said he also wants to protect residents from reliability issues, specifically power outages that some activists have predicted will result from the expected shortfall in supply as demand surges.The bill would have data centers be required to reduce their power use when reliability outages arise.
“We can’t have people who are sitting at home with oxygen generators, and who are dependent on home medical equipment as well as our water-treatment facilities having the power cut off because of the impacts of these large energy users,” Burns told the press conference. He also hopes the bill will incentivize power generators to add capacity in Delaware.
The state’s Public Advocate, Jameson Tweedie, said the bill isn’t anti-business, but is a response to an unprecedented surge in data center plans across the country.
“We welcome new jobs and economic opportunities, but we have to make sure that those opportunities are done fairly to other residents of Delaware,” Tweedie said. “We have to make sure that those highly profitable customers like data centers are paying their fair share.”
If the amended HB233 becomes law, Delaware would join several other states including Minnesota which have passed similar measures.
Among Republican members of the House, there are arguments that the bill would discourage investment by data center developers as states across the country compete for the development despite growing public claims that the centers have negative effects despite jobs created during construction.
Some aspects of the bill, such as how data centers will acquire and transport power, make sense, while there are other parts that appear to be inspired by ideology rather than sound public policy, said Joseph Fulgham, a spokesman for the House GOP.
He called a requirement that the PSC considers whether a plant will use local workers “a nod to organized labor”, while he said data centers should not be required to pay into the state’s Green Energy Fund.
Such requirements would increase the financial and regulatory costs of data center development in Delaware, and discourage investment, Fulgham said. “This proposal would erect significant hurdles to local data center development, driving up power and regulatory costs to discourage such facilities from being built here,” he said.
Still, Fulgham predicted the bill will be approved by both parts of the Legislature in the current session that ends June 30. In the House, its chances of success are increased by the fact that Speaker Melissa Minor-Brown is a prime sponsor, he said.
By May 27, HB233 had 10 Democratic cosponsors across both houses, said Joe Edelen, a spokesman for the Senate Democrats.
Gov. Matt Meyer has consistently said ratepayers should not have to share in the cost of big new power users like data centers.On the May 28 edition of Delaware Public Media/WHYY’s ‘Ask Gov. Meyer,’ signaled he would sign HB233 if it’s approved by the General Assembly.He also lauded lawmakers for their work on the issue.
“I appreciate the leadership of the state legislature, particularly Sen. Hansen, in saying ‘you can come here, but if you come her you have to be responsible partners,’” said Meyer.
“Once they understand the bill, and that it’s doing exactly what their constituents are asking for in an election year, there’s going to be good support."Dustyn Thompson, director of the Delaware Sierra Club
The bill’s chances of passing the General Assembly are increased by its requirement that the PSC gets to approve or deny a large-user application, as also required by SB205, argued Dustyn Thompson, director of the Delaware Sierra Club, and a member of the Energy Stakeholders Group, a panel of experts chaired by Hansen.
Thompson, too, predicted that the bill will be approved by the Legislature. He said the environmental group’s recent discussions with Republican lawmakers showed that the bill contains many measures favored by the GOP, and that will help its chances.
“Once they understand the bill, and that it’s doing exactly what their constituents are asking for in an election year, there’s going to be good support,” Thompson said. “If I was…a betting man, I would bet that the bill gets through the Legislature this year.”
