NIPSCO is looking to establish a spinoff company called GenCo to help build capacity for data centers and other large users.
The Merrillville-based electric and gas utility filed a petition with the Indiana Utility Regulatory Commission to create the GenCo subsidiary to help add more capacity for data centers expected to come to Northwest Indiana in the coming years.
GenCo, short for NIPSCO Generation LLC, would not serve retail customers the way NIPSCO does. Instead, it would enter into contracts to provide more electric capacity to NIPSCO so it could serve large-load customers.
"Our teams are working to evaluate this buildout, which could provide benefits to our existing system customers, enhance our communities and provide compelling investment opportunities for our shareholders," NiSource President and CEO Lloyd Yates said in the most recent conference call with shareholders.
NIPSCO is currently working on a framework to accommodate mega load customers, spokeswoman Jessica Cantarelli said. It's looking to create a subsidiary that could finance, develop, build and operate new electric capacity that comes along to power the new data centers.
The utility said it's looking to protect its customers from the risk that comes with building a significant amount of new electric generation at a much faster pace than normal. The U.S. Department of Energy estimates that data centers go from accounting for 4.4% of power use in 2023 to as much as 12% in 2028 and that a single data center consumes as much as 50 times more power than a comparable commercial building.
"This application is intended to protect NIPSCO’s existing customer base, preserve its ability to serve potential megaload customers with speed and flexibility and maintain its financial integrity," Cantarelli said. "NIPSCO continues to negotiate with financially and technically qualified counterparties regarding the development of mega load projects that would provide benefits to stakeholders across the Northwest Indiana region."
Jones Lang LaSalle, a Chicago-based global real estate firm, estimates that data center operators have already acquired 3,000 acres of land in Northwest Indiana and could build $30 billion worth of data center projects in the Region.
NIPSCO would have to build more electric capacity for the facilities, which are banks of computer servers that use huge quantities of energy to store data for uses like AI chatbots. The utility has been investigating how to bring more capacity online to meet the growing demand at a time when it is retiring its coal-fired electric generation.
"NIPSCO is committed to transparency and operating within Indiana’s regulatory structure, while flexibly delivering energy solutions in a changing energy landscape," Cantarelli said. "NIPSCO will continue to work closely with the IURC and other stakeholders throughout this process."
Data center developers coming to Northwest Indiana have faced delays from NIPSCO, but that's been a common problem nationwide, JLL Executive Managing Director Andy Cvengros said.
Many of the data center projects will be three to five years off due to delays in delivering new capacity.
"NIPSCO is on par with other utilities," Cvengros said. "Utilities everywhere are having to do larger loads, which will take a couple of years to complete. Utilities are having to develop solutions to meet that capacity gap."
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