Opinion: Kentucky should allow data centers to build independent power grids
An opinion piece argues that Kentucky should permit data centers and other large consumers to build their own independent power grids. This measure would prevent residential ratepayers from bearing the costs of increased electricity demand from these facilities and alleviate strain on the existing regulated grid. The author contends that current Kentucky law, which defines any entity generating and selling power as a utility, unnecessarily hinders such development.
An opinion column in the Lexington Herald Leader suggests a solution to concerns that data centers will increase Kentuckians' electric bills: allowing large consumers to build their own power grids. Authors Joseph Verruni of the Bluegrass Institute and Travis Fisher of the Cato Institute advocate for what they call Consumer-Regulated Electricity (CRE), where data centers finance, build, and operate their own generation systems completely islanded from the existing regulated grid.
The authors argue that CRE systems would impose no costs on other ratepayers, add no strain to the regional grid, and would not allow for the shifting of stranded infrastructure costs onto residential or industrial customers. They explain that current Kentucky law makes such independent systems difficult by defining any electricity generator selling to others as a "utility," subjecting them to regulations like obtaining a certificate of public convenience and necessity and navigating the 1972 Certified Territory Act, which grants exclusive service rights to incumbent suppliers.
They propose a "modest fix": the General Assembly could exempt islanded systems serving new, nonresidential customers from the definition of a public utility and the certified territory framework. Such systems would still be subject to environmental, safety, and building codes. The authors note that similar laws have been passed in Ohio (leading to private grids in New Albany), New Hampshire, Utah, and West Virginia, positioning Kentucky at a disadvantage for investment. They also highlight that CRE would allow tech companies to pursue their environmental pledges without impacting the state's existing grid or lobbying for specific energy standards.