NIPSCO is asking the state to approve a settlement it negotiated with large industrial customers that will allow the utility to create a subsidiary called GenCo that would provide the capacity and service future data centers would need.
The Merrillville-based gas and electric utility wants to spin off a separate company to provide power to data centers, huge clusters of computer servers that can consume more energy than steel mills. The proposal is a first of its kind nationally at a time when data centers are being constructed all over the country to support online activities, especially the rising use of energy-intensive artificial intelligence.
GenCo would negotiate rates directly with large data center operators instead of going through the traditional public hearing process to get the Indiana Utility Regulatory Commission to set a rate. NIPSCO said separating data centers from its existing customer base would protect existing customers from the cost of developing new data centers and the financial risk if a project were to fall through or a data center were to go out of business.
LaPorte County, data center developers, trade groups and consumer advocates have filed objections to the plan, saying there's no reason to switch to a lightly regulated model when the IURC already has approved special tariffs for data center projects like the $11 billion Amazon Web Services data center under construction in New Carlisle.
NIPSCO filed a petition with the IURC urging the state to dismiss the objections and accept the plan it negotiated with its industrial customers. NIPSCO noted that the Office of the Utility Consumer Counselor, the state agency that advocates on behalf of the public, does not object to the settlement agreement.
NIPSCO expects a ruling from the IURC by the end of the third quarter, spokesman Eric Hardgrove said.
"We remain focused on serving future northern Indiana customers with speed and flexibility, protecting existing customers and maintaining NIPSCO’s financial integrity," Hardgrove said. "We appreciate the input from stakeholders and the proposed orders submitted, which we believe provide the Commission with a balanced framework to advance GenCo’s mission."
NIPSCO submitted a proposed final order after reaching a settlement with NIPSCO Industrial Group, which includes large customers like U.S. Steel and Cleveland-Cliffs that typically intervene in NIPSCO rate cases. The utility is asking for leeway to be competitive for massive data center projects at a time when about $30 billion worth of data center development is projected to flood into Northwest Indiana in the coming years and NIPSCO will have to compete for projects that could result in a significant amount of future revenue.
"There is no question that this is a time in which unique customers are demanding unique solutions. As noted by LaPorte County, data centers are being developed by some of the 'largest companies in the world,'" NIPSCO said in the filing. "The unprecedented technological development brought about by data centers, and other megaload customers, has created an immense need for new generation resources to be placed in service. As LaPorte County further notes, these circumstances have led to a 'growing national market for electricity service that pits regional utilities against each other.'"
The utility said it's seeking a novel solution to a potential unprecedented surge in the demand for power. The U.S. Department of Energy projects data centers will go from consuming 4.4% of the nation's power in 2023 to 12% in 2030.
"Navigating this sea-change creates substantial risk for both public utilities and their existing retail customers," NIPSCO said in its filing. "The GenCo structure was created to allow NIPSCO to more readily serve new megaload customers with three objectives front of mind: protecting existing customers by isolating risks to GenCo; serving new megaload customers by meeting their unique demands, so that Northwest Indiana does not lose out on this economic development opportunity due to regulatory obstacles; and maintaining NIPSCO’s financial integrity."
The utility said it has refined and improved its GenCo proposal it originally brought to regulators, saying it took into account objections that had been raised.
"The opposing non-settling parties ignore that the settlement agreement provides exactly what they have argued is in the public interest," NIPSCO argued in its filing. "CAC, for example, previously recommended firewalling new megaload customers from other retail customers. This is exactly what the GenCo structure offers and is one reason it is in the public interest. The structure benefits NIPSCO, NIPSCO’s customers and the state, precisely because it protects existing customers from the cost allocation and cost recovery of generation procured to serve megaload customers by having GenCo, rather than NIPSCO, procure these assets. Although this is what CAC previously advocated for, it now retreats from this position."
NIPSCO says GenCo should have flexibility in negotiations with data center developers.
"The very nature of special contracts is that they are special," the utility said in its filing. "Each one should be presented individually in a docketed case so that the commission can review its terms and determine whether it should be approved."
© Copyright 2025, nwitimes.com, Munster, IN