Without state legislative action, utilities drive negotiations with large data centers
Residents in Boyd and Greenup counties, Kentucky, are raising concerns about a proposed hyperscale data center's impact on electricity bills and the local environment. While Governor Andy Beshear states data centers must pay for their own energy infrastructure, environmental advocates argue that state utilities and the Public Service Commission are primarily responsible for ensuring ratepayer protection. Utilities have adopted specific rules, but advocates believe more could be done to safeguard consumers.
Residents in Boyd and Greenup counties, Kentucky, have voiced strong concerns regarding a proposed hyperscale data center, particularly its potential impact on local electricity bills and the environment. At a press conference, Governor Andy Beshear addressed these anxieties, asserting that any data center wishing to operate in Kentucky would be required to pay for 100% of its energy and any necessary new means of production, suggesting such developments could also boost local property taxes.
However, environmental advocates, including Byron Gary of the Kentucky Resources Council and Lane Boldman of the Kentucky Conservation Committee, dispute the governor's direct control over ratepayer protections. They argue that Kentucky's electric utilities, through their rules, rates, and contracts — which require approval from the Kentucky Public Service Commission (PSC) — are the actual mechanisms for preventing existing ratepayers from subsidizing large data center customers. A Republican-sponsored bill aimed at mandating such protections died in the recent legislative session, though lawmakers plan to revisit the issue next year.
In the interim, several investor-owned and nonprofit electric utilities in Kentucky have taken the initiative to adopt their own data center-specific rules. Kentucky Power plans to serve the Boyd County project under its industrial customer rates. Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU), along with East Kentucky Power Cooperative (EKPC), received PSC approval last year for their specialized "Extremely High Load Factor" rules.
Despite these adoptions, Gary contends that utilities could implement more robust protections, drawing on recommendations from a Brattle Group report. His suggestions include incentivizing data centers to be flexible with electricity usage during peak demand, requiring contributions for infrastructure costs, or mandating that data centers provide their own power plants. Utility spokespersons, including Nick Comer for EKPC, Sarah Lynch for Kentucky Power, and Liz Pratt for LG&E and KU, defend their current rules as sufficiently protective, highlighting aspects like long-term contracts and capacity payment requirements. Pratt also argued against a "one-size-fits-all" legislative approach, stating that such matters are best handled by the PSC due to the varying regulatory models of each utility.