Modesto district considers how to safeguard ratepayers against data center impacts
The Modesto Irrigation District is considering new safeguards, such as requiring upfront collateral and potentially creating a separate rate tier, to protect local ratepayers from the financial impacts of large data centers on the electricity system. Concerns about water usage and potential project abandonment are also being discussed by the board. The district clarified it has no jurisdiction over land use approvals, which lie with Stanislaus County and its cities.
The Modesto Irrigation District (MID) is evaluating measures to shield local ratepayers from the potential financial and resource impacts of large data center developments. During a recent board presentation, Jack Rodgers, MID's pricing and risk management administrator, reported that the district has received inquiries since 2018 for "large-load" projects, including data centers for artificial intelligence, ranging from 25 to 400 megawatts. These facilities are known for significant electricity and water consumption, prompting concerns about strain on the district's power supply and infrastructure.
MID's existing process involves initial meetings and a required large-load study, paid for by the potential customer, to assess system impacts and upgrade costs, ensuring ratepayers are not burdened. However, Rodgers noted that data center companies can default or withdraw, leaving local utilities with unfunded system improvements. To mitigate this, the district is considering requiring upfront collateral, potentially millions of dollars, from developers to cover such risks.
Board members, including Janice Keating, advocated for a separate rate tier specifically for data centers to ensure full cost recovery. Keating also raised concerns about water use, particularly for a hypothetical data center at the former FMC plant site that might use recycled water but could still discharge into contaminated soil. Board Member John Boer echoed these "red flags," emphasizing the risks of project abandonment and resource commitment.
The district clarified that it lacks jurisdiction over land use approvals, which fall under Stanislaus County and its cities. While MID can comment on environmental reviews, General Manager Jimi Netniss committed to informing the board about any significant projects under consideration, as most inquiries have not progressed beyond initial discussions.