NIPSCO got the green light from state regulators to create a first-of-its-kind subsidiary called GenCo that would be able to negotiate directly with data centers at a "pivotal" time when data center projects are flooding in and electricity demand is skyrocketing.
The Merrillville-based gas and electric utility currently provides 2,300 MW of electricity to its entire customer base at times of peak demand. It's looking to build another 2,300 MW of electric generation at the R.M. Schahfer Generating Station in Wheatfield to keep up with data center demand and projects it could need up to 8,000 MW in production capacity to keep up with data centers, collections of computer servers that support online functions like social media use that are in especially high demand because of the increased use of artificial intelligence.
“This is an important step forward to position Northern Indiana at the center of a fast-growing, economically essential industry,” NiSource President and CEO Lloyd Yates said in a company statement after the Indiana Utility Regulatory Commission issued an order Wednesday approving the GenCo plan. “The order reflects confidence in our ability to deliver safe, reliable and affordable energy solutions for our communities. It gives us the tools we need to grow responsibly while ensuring that every decision we make keeps customers front and center.”
NIPSCO President and Chief Operating Officer Vince Parisi said on Wednesday that the GenCo ruling provides the utility with "the core base" needed to serve new data centers. The utility has received multiple data center proposals.
"We've had interest from just about every segment of the market when it comes to a desire to be in Northwest Indiana," Parisi said. "It's a great opportunity for growth in Northwest Indiana. It's going to bring significant new generation to our system, which is going to help with reliability and it's certainly going to help on the economic development growth side to bring a thriving industry into the area."
Jones Lang LaSalle, a Chicago-based real estate firm, estimates $30 billion worth of data center projects are coming to the Region based on land deals that have already been reached. Data center projects are planned in Hammond, Merrillville, Hobart and Michigan City.
"There are multiple factors," Parisi said. "The location is fantastic. Our system is built in a way that's able to handle large-load customers. We're in very close proximity to one of the largest markets in the country. There's a fairly significant fiber buildout that's already in place. There are multiple upstream natural gas transmission pipes that cross our system. It's built out well from that perspective. There's an abundance of water in Northwest Indiana due to the Great Lake, Lake Michigan. Indiana, in general, is very receptive to bringing in large-load customers and economic development generally. It's a receptive market for it."
Citizens Action Coalition Program Director Ben Inskeep said that NIPSCO's electric bills have been skyrocketing and that the spinoff would benefit shareholders rather than the public.
"We are disappointed by the IURC's decision to approve a new regulatory structure not authorized by the General Assembly that expands NIPSCO's monopoly power and diminishes regulatory oversight related to risky and energy-guzzling data centers and the costly new and polluting power plants to serve them," Inskeep said. "NIPSCO's residential customers are struggling to afford the highest electric bills in the state, which have increased $77 per month over the past two years based on 1,000 kWh of usage. This unbalanced decision fails to adequately protect ratepayers and mitigate this dire affordability crisis, while giving NIPSCO an opportunity to reap massive, unregulated profits from data centers."
NIPSCO's GenCo will benefit ratepayers by bringing in more large-load customers onto the system while having the data centers, instead of the existing customer base, shoulder the cost of capacity construction, Parisi said.
"I think our approach to it has intrigued a lot of data centers and large-load customers, given the unique nature of the approach," he said.
The utility forecasts a need for at least 2,600 MW in new electric production capacity, but could end up having to nearly quadruple its capacity.
"We thought that was an amount we could really see going forward," Parisi said. "With long lead times for construction and time for construction, the workforce you need for all of that, it's going to take time to develop these projects. We can't speculate and don't know if we'll get to the 8,000 MW number or not. We thought that was a possibility, but we'll see how this develops over time. We have to move through this deliberately. Each of these contracts has to be heavily negotiated with each party. We'll only move forward if we are confident we can meet the timeframe to build capacity to meet the customers' needs. We'll have to look at these one at a time."
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