PECO signs agreements with data centers requiring them to pay for their own grid upgrades

At a recent Philadelphia City Council hearing on rising electricity bills, Tom Bonner, director of policy, advocacy and external affairs at PECO, an electric utility serving Philadelphia and its surrounding suburbs, detailed the company's efforts to prevent residential customers from subsidizing grid upgrades for data centers. Bonner explained that connecting large data centers often necessitates "significant" investments in the transmission system, which utilities typically recover through rate hikes. To address this, PECO has implemented transmission security agreements since late 2025, mandating data center developers to provide a 10-year letter of credit. This financial safeguard ensures PECO can recover infrastructure costs even if data centers are not built or consume less electricity than projected, effectively functioning as a "take-or-pay" contract. The utility aims to avoid situations where investments are made but the promised energy demand doesn't materialize, leaving ratepayers to cover the costs. PECO has already signed at least two such agreements for planned data centers in East Whiteland (Chester County) and Falls Township (Bucks County). This initiative comes as the Pennsylvania Public Utility Commission is also advancing measures aimed at protecting ratepayers from potential electricity bill increases driven by the growing demand from AI data centers.