Will Data Centers Mean Higher Power Costs in Wyoming?

As Wyoming and Cheyenne specifically experience a boom in data center builds, a common concern arises whether the additional energy demand from data centers will result in higher power prices for Wyoming residents. At least two local experts don’t believe that will be the case — at least not directly.

“I don’t see a scenario where residential or commercial customers are asked to pay higher rates for the capital investments or energy procured to serve data centers,” says Anthony Ornelas, who heads up the Wyoming Office of the Consumer Advocate (OCA).

The Wyoming Office of Consumer Advocate is an independent division within the Wyoming Public Service Commission created by an act of the Wyoming Legislature in March 2003. The OCA provides expert witnesses and testimony for the Wyoming Public Service Commission on behalf of all Wyoming ratepayers.

John Jenks works with the Wyoming Energy Authority to advocate, facilitate, and advance Wyoming’s energy economy. His organization was tasked with examining the issue of large electrical loads and their impact on existing ratepayers during this legislative interim. That effort brought together all the state’s public and investor-owned utilities, rural cooperatives, and consumer advocates, such as AARP, to determine ways to protect consumers. He points out that recent increases in power bills aren’t nearly as much the result of data centers as they are utilities’ need to replace aging infrastructure, permitting delays, transmission constraints, and inflation.

More importantly, he says the Wyoming Legislature’s foresight in passing statute 37-3-116 in 2019 does well to keep existing customers from paying costs brought on by new large electrical load customers. In short, the bill states that new customers who take service under a negotiated contract rate, such as data centers, shall not obligate existing customers for any utility investments, direct, indirect, or reasonably assigned costs related to the new customer.

“The two overarching themes of our working group are to drive energy-driven economic development in Wyoming, and two, make sure rate payers are protected and will continue to be protected,” said Jenks. “We feel pretty comfortable Wyoming is leading the nation with the statute passed eight years ago that essentially says existing ratepayers cannot be on the hook for large loads in Wyoming. We feel pretty strongly; there are ratepayer protections for Wyoming.”

Ornelas notes that, while Cheyenne seems to be taking the bulk of the data center development, it is also the service area that might offer the most protection from the increase of utility costs for existing customers. He says, in 2015, Cheyenne Light, Fuel and Power (CLFP) worked with his office to discuss a new project request, which would add demand equal to a quarter of the homes in the Cheyenne area to one that would scale to well in excess of the Cheyenne area service territory.

The company was Microsoft, and the project was the first of what would become a number of data centers in Laramie County. The goal of CLFP was to write a tariff that would protect existing customers, in the event the utility acquired or sourced new power generation or transmission, and would also prevent Microsoft from leaving the area. Such a scenario would force CLFP to pass along those stranded costs to customers in its market. The resulting tariff has achieved that goal and remains in effect.

“Black Hills Energy worked closely with our community partners—including Cheyenne LEADS, city and state government, regulatory bodies, and others—to ensure that our values and goals aligned when planning for data center development,” said Kaeci Daniels, Black Hills Energy, Wyoming regulatory manager, in a statement to AARP Wyoming. “This approach helped us establish our Large Power Contract Service (LPCS), a first-of-its-kind tariff implemented in 2016 that allows us to provide market and renewable energy options to data centers without impacting retail rates.”

During a meeting in Cheyenne on October 9, power companies and co-ops serving Wyoming met to discuss their efforts to protect existing residential customers from the impact of large power requests for new projects, such as data centers. While the companies are at various stages of getting their own tariffs and schedules approved and have different thresholds for the power required, there appears to be a shared priority of keeping residential customers shielded from paying for increased power generation or transmission required for such projects.

“One place we have an agreement is the number one goal has to be to insulate existing customers,” Ornelas said.

Ornelas and Jenks agree that the majority of power companies in the state should insulate existing customers from large load additions. Jenks pointed out that the Public Service Commission will review the ways utility companies handle this task in October and November. He said there may be recommendations from the PSC to strengthen those efforts, if needed.

Jenks adds that the data centers may actually be a net positive for residential consumers, pointing out the upgrades needed to substations and transmission aren’t borne by the residential user, but by the data center, per the tariff they are working under.

“When a data center comes in, they pay a lot of improvements to power, roads, water, and sewer for example,” he said. “At one time they were water hogs. That has completely changed. Most of the new data centers are closed loop and don’t use a lot of water at all.”

Data centers may have an indirect impact on power costs. Ornelas says he wonders whether the hyper-growth in electrical demand, coupled with the retirement of coal-powered plants, will lead to an eventual increase in natural gas prices.

“Until nuclear and other advancing technologies are proven, natural gas takes the place of coal because it is scalable,” Ornelas says. “The more natural gas everyone is demanding will cause a price impact, especially when we have things like a heat dome over the South or a cold snap in another part of the country and everyone needs natural gas at the same time.”