South Dakota PUC Approves MDU Power Service for Proposed Leola Data Center
The South Dakota Public Utilities Commission (PUC) unanimously approved a settlement agreement, allowing Montana-Dakota Utilities (MDU) to provide electricity to the proposed Leola Data Center, overriding the traditional service area of FEM Electric Association. This decision clears a significant regulatory hurdle, though the project still requires conditional use permit approval from the local county zoning and planning board. The settlement also reduced the data center's footprint and included safeguards for future power demands.
The South Dakota Public Utilities Commission (PUC) has unanimously approved a settlement agreement, designating Montana-Dakota Utilities (MDU) as the electric provider for the proposed Leola Data Center. This decision grants a service territory exception for the facility, which is located in an area traditionally served by FEM Electric Association, and clears a major regulatory hurdle for the project.
The settlement, a result of negotiations between the data center developers, MDU, and rural electric cooperatives, includes several key provisions. The proposed footprint of the data center has been reduced from 20 acres to just over nine acres. Additionally, the agreement ensures that the electrical infrastructure within this specific footprint will be used solely by the Leola Data Center to maintain the MDU contract. A significant safeguard stipulates that if the facility ceases to operate as a high-capacity data center or its power demand drops below two megawatts, MDU's service rights will terminate and revert to FEM Electric. Bill Van Camp, attorney for the Leola Data Center, and Brett Kennedy, representing MDU, expressed satisfaction with the terms, with Van Camp highlighting the tech sector's unpredictability as a reason for the safeguard's inclusion.
Representatives from Basin Electric Power Cooperative and East River Electric also supported the agreement, deeming it a strong compromise that balances protection for incumbent utilities with the accommodation of new industrial loads. Amid public debate regarding the energy demands of data centers, PUC Chairman Chris Nelson clarified the commission's limited authority. He noted that the Leola project still faces a separate conditional use permit process with the McPherson County zoning and planning board and that the PUC will open a subsequent docket to review the specific electric service agreement to ensure grid reliability and that developers, not ratepayers, cover infrastructure upgrade costs.
Commissioner Gary Hanson praised the collaborative approach that prevented a protracted legal battle over the service territory. With the utility exception secured and the docket record finalized, the Leola Data Center's future now depends on the pending county zoning approval and the developer's submission of finalized facility maps.