Kentucky lawmakers urged to allow private power grids for data centers
An opinion piece advocates for changes to Kentucky law that would allow large energy consumers, such as data centers, to build and operate their own independent electricity grids. This system, called Consumer-Regulated Electricity, aims to prevent data centers from burdening residential ratepayers with increased energy costs. The proposed policy is already in place in states like Ohio and New Hampshire.
Joseph Verruni, an energy policy fellow at the Bluegrass Institute, and Travis Fisher, director of energy and environmental policy studies at the Cato Institute, advocate for Kentucky to permit large energy consumers, including data centers, to construct and operate their own independent electricity grids. This approach, termed Consumer-Regulated Electricity (CRE), aims to prevent data centers from increasing electric bills for residential ratepayers in Kentucky cities such as Owensboro, Lexington, and Bowling Green, by requiring them to finance and build their own power generation.
Current Kentucky law restricts such "islanded" systems, classifying any entity generating and selling electricity as a "utility," which necessitates a certificate of public convenience and necessity and adherence to the 1972 Certified Territory Act. The authors contend that these statutes are obsolete, predating the substantial energy demands of contemporary data centers, and create needless barriers to development.
For CRE systems, three conditions are proposed: they must be electrically isolated from the existing grid, serve only sophisticated customers who voluntarily contract for service, and comply with all standing environmental and safety regulations. The authors note that states including Ohio, New Hampshire, Utah, and West Virginia have already enacted similar legislation, facilitating the development of private grids for data center hubs.
Verruni and Fisher suggest a "modest fix": the General Assembly should exempt islanded systems serving new, nonresidential customers from the definition of a public utility and the certified territory framework. They argue that this would depoliticize corporate energy decisions on Kentucky's grid, allow companies to independently pursue environmental pledges, and establish a future-proof policy for any large industrial consumer, ultimately safeguarding ratepayers while attracting investment.