HOBART — Jennifer Williams has recently started babysitting and selling her kids’ old clothes online. The Hobart mother said her family needs the extra income after their electric bill spiked from around $200 a month to $380. The increase came after NIPSCO, the utility provider in much of northern Indiana, received approval in June to raise electric rates to pay for $2.8 billion in upgrades.
Now, Williams worries her bill will only climb higher.
Hobart recently rezoned 168 acres for a massive, electricityguzzling data center that could be built directly across the street from her subdivision. That could lead NIPSCO to increase rates to pay for any new infrastructure required to service the center, Williams speculated. “My NIPSCO bill is for my home, not for a data center” she said. “I don’t want to foot the bill for something that I don’t even want across the street from my house.”
‘IT’S JUST SHOCKING’
Hoosiers across the state share the same concern as at least five massive new data centers are online or under construction, creating an unprecedented demand for electricity. The facilities are owned by tech behemoths like Meta, Google, Microsoft and Amazon.
Over 25 more have been proposed for development, according to the Citizens Action Coalition, a consumer advocacy group. The massive, windowless warehouses store thousands of computer servers to operate artificial intelligence, store online data or run streaming services like Netflix.
Just the data centers being built for artificial intelligence in northern Indiana are projected to use more electricity by 2030 than every home in the entire state combined, according to a forecast by Indiana Michigan Power, which services the Fort Wayne and South Bend areas.
“It is just shocking the amount of energy that these data centers are going to require in Indiana, and we’re hellbent on moving forward to build, build, build at any cost,” said Kerwin Olson, executive director of the Citizen Action Coalition. Every utility in the nation with a data center in its service area is grappling right now with how to prov ide enough electricity while keeping consumer rates from skyrocketing, according to John Parsons, deputy director for research at MIT’s Center for Energy and Environmental Policy Research.
Now, Indiana’s NIPSCO has developed a first-of-its-kind strategy that company leaders say will shield residents like Hobart mother Williams from paying any costs associated with data centers — while also speeding up the time it takes to supply them power.
But consumer advocacy groups and even some data center developers assert the utility’s untested approach only keeps ratepayers in the dark and creates significant risks for customers.
‘INHERENT DANGER’
The Indiana Utility Regulatory Commission in September voted to approve NIPSCO’s request to create a nearly unregulated subsidiary called NIPSCO Generation LLC (GenCo).
The spinoff will own, build and manage electric generation to serve data centers in its service area, which includes a massive, 480-acre Microsoft facility coming to the city of La Porte.
GenCo will also be able to negotiate deals directly with data center developers and other electricity-intense customers, dubbed “megaloads.”
But unlike any other utility in Indiana, the subsidiary can do it all without public scrutiny or virtually any regulatory oversight from the utility commission.
Vincent Parisi, NIPSCO’s president and COO, told the regulatory board that data centers want to come online as fast as possible. GenCo’s ability to build new electric capacity outside normal regulatory procedures will expedite the process, he said, and attract data centers to build in northern Indiana.
At the same time, the subsidiary will take on and isolate the economic risks involved with building new power plants and infrastructure to protect regular NIPSCO customers, Parisi asserted.
But the strategy will do little to shield regular ratepayers, argued Olson with the Citizens Action Coalition. That’s because NIPSCO is still ultimately providing electricity to data centers.
GenCo will build and operate the data centers’ power plants. NISPCO will then sign an agreement to purchase that power from GenCo and then supply it back to data centers through special contracts, explained Olson.
“This broad claim that NIPSCO customers are protected from any of these costs can’t possibly be true when it’s NIPSCO serving those data centers, not GenCo,” he said.
At the same time, the utility commission has divested itself of the authority to review GenCo’s finances or records to determine how its operating or whether it’s producing enough power to meet its purchase agreement with NIPSCO. That creates a major risk for the utility and its customers, argued Michael Gorman, who represents industry groups in northern Indiana.
The details of the special contracts between NIPSCO and data centers also won’t be made public unless advocacy groups or customers petition to see them, making it difficult to know what risks the facilities might present to residential customers, noted Olson.
Add it all up, and NIPSCO’s plan to shield customers will only lead to backroom deals that keep the public and state officials in the dark about how GenCo is operating, argued Parsons with MIT’s center for energy research.
“This isn’t assuring that public authorities know what’s going on, and I think there’s some inherent danger for rate payers when you do that,” he said. “The best way to guarantee fairness is to actually bring everything into the light and to scrutinize it.”
Williams, the Hobart resident whose NIPSCO bill recently spiked, said she worries that lack of oversight could lead to an even higher electric rate for her family.
“Transparency is a huge thing, and NIPSCO is not being very transparent,” she said.
TRIAL AND ERROR
Whether NIPSCO’s plan actually protects customers remains to be seen until GenCo signs a power purchase agreement and enters into a contract with a data center.
Meanwhile, Indiana Michigan Power (I&M) has taken a different approach to shield ratepayers that both advocacy groups and state officials say will keep electricity costs down while creating even more regulatory oversight.
The utility inked deals with Amazon Web Services, Google and Microsoft to provide power to three megaload facilities that in total represent a $14 billion investment. The agreements came after the state utility commission in February approved a settlement between I&M and the companies.
The agreement requires the tech giants to sign a 12-year power contract, ensuring the companies continue to operate and pay the utility on a longterm basis.
The facilities must also pay a minimum yearly amount for electricity, regardless of how much power they use. Ben Inskeep, program director for Citizens Action Coalition, estimated the minimum payment would be around $332 million a year for each center.
During the first year of the contract, some data centers will be required to pay 24 times their maximum expected electric bill. That upfront investment acts as collateral to ensure the facilities have the required funds to meet their financial obligations to the utility.
Data centers that close before the contract expires are required to pay hefty exit fees. A 1,000-megawatt facility, for example, would be on the hook for more than $1 billion. That ensures the utility recoups the money it spent to build out infrastructure from the companies, not residential customers.
The Citizens Action Coalition helped negotiate the settlement between I&M and the tech companies. Olson said it’s the kind of consumer-protection agreement they hoped would be adopted statewide.
But that didn’t happen after Indiana lawmakers approved a new regulatory scheme this year that still leaves consumers on the hook to pay significant portions of the cost to service data centers, he asserted.
House Enrolled Act 1007 creates a fast-track for utilities to build new power plants and infrastructure to generate electricity for data centers and other megaload customers. The law requires those customers to pay 80% of a utility’s project costs to provide them electricity.
Still, that leaves utilities on the hook to pay 20% for projects that often reach into the billions of dollars, noted Olson, and could require electric companies to raise rates to cover those costs.