Data centers can raise electricity prices. WA wants to prevent that
Washington state utility regulators are developing new guidelines to prevent data centers from increasing electricity costs and risks for other customers, following the failure of a related state bill. These guidelines will impact how investor-owned utilities contract with large power users like AI data centers. The discussions involve utilities, tech companies like Amazon and Microsoft, and environmental groups.
After a state bill aimed at regulating data centers' electricity use failed in the last legislative session, Washington’s Utilities and Transportation Commission (UTC) has taken up the effort to draft new guidelines. The commission intends for these guidelines to prevent large power users, such as AI data centers, from passing on electricity costs or risks to other customers, influencing future rate and contract approvals for investor-owned utilities.
Earlier this month, the UTC hosted a workshop where various stakeholders, including utilities, tech companies like Amazon and Microsoft, consumer advocates, and environmental groups, debated fair pricing and contract terms for data centers. Proposals included mandating data centers to reduce power during shortages, implementing surcharges for hard-to-measure costs, and requiring longer contracts or larger upfront payments. Amazon and Microsoft, whose lobbyists opposed the initial state bill, have resisted some of the stricter proposals, despite publicly pledging that their data centers should not raise electricity prices for other customers.
Concerns about data centers straining the electrical grid and increasing power costs are growing, leading several Washington cities and counties, including Seattle, Spokane, and Skagit and Snohomish counties, to enact temporary moratoriums on large data centers. Evidence from the East Coast, particularly Northern Virginia, suggests that data center demand has significantly driven up electricity capacity costs, with Monitoring Analytics estimating a $9.3 billion increase in the PJM region by 2025-26 due to data center load.
The UTC is also examining issues such as the amount data centers should pay upfront for new infrastructure, required long-term contracts and exit fees, distinguishing serious projects from speculative requests, and public disclosure of project information. Commissioner Ann Rendahl acknowledged the difficulty in quantifying the indirect cost impacts of data centers. A draft policy statement is expected this fall, with a final version planned by year-end.