An industry group and a data center developer are objecting to NIPSCO's attempt to create a lightly regulated spinoff that would be a first-of-its-kind approach nationally to funding data centers.
The Clean Grid Alliance, a renewable energy nonprofit group, and Takanock Beckham, a Michigan-based data center developer, are objecting to a proposed settlement between NIPSCO and large industrial users.
Other utilities have sought permission from state regulators to impose special levies to fund new electric capacity for megaload data centers such as the $11 billion Amazon Web Services data center in New Carlisle. NIPSCO is looking to create a subsidiary that would negotiate rates directly with data center customers rather than have to seek state approval, which is required since utilities are monopolies not reined in by market competition.
NIPSCO said it's looking to protect existing customers from the cost and risk of bringing new electric capacity online to serve data centers, which are being built around the country to support online services like email, photo services, e-commerce, streaming, GPS and especially the growing use of artificial intelligence.
NIPSCO has submitted a proposed order to the Indiana Utility Regulatory Commission to allow it to create a separate company to finance major data centers, collections of computer servers that can consume more power than even the hulking integrated steel mills along the Lake Michigan lakeshore.
The Clean Grid Alliance and Takanock objected, saying the state should maintain its regulatory jurisdiction.
"GenCo has no prior experience in energy planning, procurement or development, nor does it have any employees or financial resources of its own to facilitate its plan to serve as the sole provider of generating resources for future megaload customers that decide to locate in NIPSCO’s territory," the Clean Grid Alliance and Takanock argued in their filing. "NIPSCO, in turn, supports this request by alleging that its formation of GenCo and the IURC’s declination of jurisdiction in this proceeding are necessary to attract developers of data centers and other potential customers seeking over 100 MW of firm capacity utility service, while simultaneously admitting that there are already several megaload customers in line for service."
Industry observers believe that more than $30 billion worth of data centers will be built in Northwest Indiana in the coming years. NIPSCO said a new model was needed to ensure speed to market and be competitive for investments that can run into the hundreds of millions or billions of dollars.
The Clean Grid Alliance and Takanock contended in their filing that there was not enough justification to reduce state regulatory oversight, saying NIPSCO has failed to provide enough information about how GenCo would operate.
"GenCo’s request represents a significant departure from prior IURC practices regarding service to megaload customers. GenCo admits it explored no already established regulatory solutions for serving megaload customers, nor can it point to similar proposals from utilities in other states," the Clean Grid Alliance and Takanock argued in their filing. "Instead, GenCo chose to present a bare-bones proposal regarding its operations, financials and the intertwined relationship between itself and NIPSCO. GenCo repeatedly stated that it discarded options to provide megaload service through a tariff offering — such as previously approved by this commission for Indiana Michigan Power Company, or via wholesale market access approved for Duke Energy Indiana, or via tweaking NIPSCO’s own Rate 531 — because it believed that the GenCo strategy was 'best for our customers in Indiana and for our company.'"
So far, NIPSCO has been the only utility in Indiana to propose creating a subsidiary to finance electric capacity to fund data center development.
"Petitioner and NIPSCO did not explain how NIPSCO’s megaload needs were different than the interests of other Indiana utilities or why the GenCo strategy was a better fit to serve NIPSCO’s customers than other available constructs," the Clean Grid Alliance and Takanock argued in their filing. "Meanwhile, NIPSCO is already directly serving data center customers and Intervenor, DX Hammond, via a special contract which the Commission approved as in the public interest."
Several parties like LaPorte County and the Indiana Office of the Utility Counselor have objected, raising concerns such as that there was not enough transparency and that the proposal would mainly benefit shareholders.
"GenCo repeatedly claimed that concerns raised by the OUCC and intervenors were inappropriate to address in this case, and would be addressed in future proceedings, presumably once the commission had already declined jurisdiction over GenCo. At that point, however, 'the toothpaste will be out of the tube' regarding these concerns. Such deflection further supports the conclusion that GenCo’s true purpose is to create a windfall for shareholders of GenCo’s and NIPSCO’s common corporate parent NiSource," the Clean Grid Alliance and Takanock argued in their filing.
They asserted that the GenCo settlement was not in the public interest and should not be approved.
"NIPSCO will retain earnings on its traditionally regulated retail monopoly, while GenCo, exempt from both regulation and competition, over-earns on new investment for megaload customers," they said in the filing. "Given the unprecedented nature of the proceeding and the breadth of the scope of the requested relief, the commission must scrutinize this proposal carefully, consider impacts that will reach beyond this proceeding and exercise care in its determination."
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