Template model legislation called the Equitable Escalation of Electricity Demand Act (EEEDA) has been put together as a way for states to ensure the that the entities most responsible for the anticipated rapid growth in electricity demand pay the true costs and not shift additional burdensome costs from escalating demand onto ratepayers.
“The technology industry plans to accelerate the construction and utilization of electronic data centers and artificial intelligence projects, which require tremendous amounts of electricity,” EEEDA states. “And federal and policies are incentivizing and mandating the widespread adoption of electric vehicles (herein after, EVs). These are the primary reasons grid operators project an imminent rapid increase in overall electricity demand, which will require large investments in power production and grid infrastructure. Present electricity generation is insufficient to safely meet projected demand. The cost of technologies that demand large increases in domestic power, like electric vehicles, should they achieve widespread adoption, and large data centers, should be borne by those who benefit directly from the new power supply, not ratepayers in general. The added cost should not be socialized.”
For example, the U.S. Department of Energy (DOE) projects there to be 33 million EVs on the road by 2030, up from roughly just 3.3 million right now. To support those 33 million EVs, DOE estimates there will need to be 28 million charging ports available to support them, which will require a massive infusion of tax dollars to purchase, install, and maintain. The National Center for Energy Analytics estimates that the cost of building out the infrastructure to move to a fully electric-powered fleet in the United States could fall between $2 to $4 trillion.
To combat this socializing of costs and to ensure there is the ability to provide sufficient additional power, EEEDA would place a fee on all new EV and plug-in hybrid electric vehicle (PHEV) “charging stations connected to the electric grid and all new electric or plug in hybrid electric vehicles sold or licensed to operate in [that particular state].” This fee would be “separate and apart from any fee levied on EV or PHEV’s for infrastructure construction and maintenance, and rather is dedicated to the construction of new dispatchable power supplies to meet expected demand, without socializing the cost across all ratepayers.”
“Dispatchable” power sources are those that can adjust to the electric grid on demand, such as a natural gas turbine, a coal plant, a hydroelectric dam, or a nuclear plant. Non-dispatchable power sources, such as solar and wind, cannot be turned on or off in order to meet demand and are highly intermittent, meaning they are not continually available 24 hours a day because of factors that cannot be controlled (like cloud cover, daylight, wind speed, air density, etc.) and are therefore unreliable.
Regarding new data centers requiring dispatchable power sources, EEEDA would make them “responsible for its provision, either by contracting directly with the local utility for the construction of dispatchable power with the approval for new power sources having to go through the usual regulatory process undertaken by the commission, except for the price which will be negotiated between the utility and the source of the new demand, with safeguards so any cost overruns are not borne by ratepayers in general. Any excess power from the dedicated dispatchable source can be sold onto the broader grid at wholesale rates, with the profits of those sales spilt between the utility and the demanding source, per their contract.”
Further, “if any state, or political subdivision thereof, provides economic incentives for the construction, opening, or operations of a new data center, they shall enter into a memorandum of understanding or other similar instrument…such that failure or refusal to meet the terms of the aforementioned memorandum of understanding, the state’s public service commission or similar regulatory agency is authorized to notify the relevant state and local agencies to commence proceedings to recoup the current cash value of the economic incentives from the parent company of the data center.”
State legislators should protect common ratepayers from bearing the financial burden of the anticipated strain imposed on the electric grid by new data centers and EVs by passing the Equitable Escalation of Electricity Demand Act or something similar in language and substance.
The following is the full text of the Equitable Escalation of Electricity Demand Act:
The Equitable Escalation of Electricity Demand Act
The legislature of [name of state] finds that:
- Artificial Intelligence (AI) as commonly understood, is becoming increasingly integrated into everyday life and across multiple sectors – if not every sector – of the American economy;
- AI is currently placing strains on current power grids and its demand is expected to increase;
- The Environmental Protection Agency’s rules released in 2024 aim to drastically increase the purchase and use of electric and plug-in hybrid electric vehicles;
- electric grid operators project a rapid increase in American electricity demand, up 4.7% between 2023 and 2028, caused by growth in data centers and electric vehicles,
- rapid growth of electricity demand without sufficient baseload generation in place to meet the demand jeopardizes reliability and affordability and will cause interruptions of service, often when needed most, during the hottest or coldest months;
- 230 coal plants, which produced 20% of American electricity in 2022, are being targeted for closure by activist groups, state and federal regulators, and utilities, with dozens across the nation slated for closure in the next three years;
- the North American Electric Reliability Corp. (NERC), the Regional Transmission Organizations (RTOs) MISO, and PMJ have warned that large swathes of the United States face elevated risks of electricity shortfalls now and in the future;
- restricting the supply of electricity without immediate substitutes jeopardizes reliability and affordability and will cause interruptions of service, often when needed most, during the hottest or coldest months;
- America’s coal and natural gas plants should not be recklessly decommissioned or regulated out of existence, they should be kept online (readily available) to meet the projected rapid increase in electricity demand caused by new data centers and electric vehicles;
- the [name of state public utilities commission] must prioritize retaining and adding dispatchable, on-demand baseload power to meet the anticipated increase in demand; and
- newly built data centers should be the first to have their power curtailed in the event that new dispatchable power is not added to the grid and electricity blackouts or brownouts occur.
- Those benefitting directly from new dispatchable power supplies, like EV and PHEV users and data centers, should have to cover the cost of the additional demand they are placing on the electric grid.
SECTION 1. Definitions
As used in this section:
(a) “Dispatchable” or on demand power means a source of electricity that is readily available for use on demand and can be dispatched upon request of a power grid operator, or one that can have its power output adjusted according to market needs, except for routine maintenance or repairs;
(b) “Reliable” means a source of electricity that is not subject to intermittent availability, has a performance standard of 80% or greater and only falls below that level during routine maintenance or repairs;
(c) “Electric generation facility” means a facility that uses water, coal, natural gas, or nuclear to generate reliable or dispatchable electricity for provision to customers;
(d) “Firm power” includes dispatchable, reliable power generation, as well as battery storage in excess of 24 hours. Firm power does not include power that is not dispatchable.
(e) “data center” means a physical location and/or facility that stores computing machines and their related hardware equipment.
(f) “Economic incentives” means state grants, cash grants, tax exemptions, tax refunds, tax credits, state funds, and other state incentives under chapter [X] or administered by the state’s, or political subdivision thereof, economic development agency.
(g) “Electric Vehicle” means a vehicle that uses electricity stored in a rechargeable battery and an electric motor instead of a gasoline or other carbon-based fuel tank and internal combustion engine.
(h) “Plug In Hybrid Electric Vehicle” means any vehicle that uses a combination of gasoline or other carbon-based fuel and electric generation or storage; they have a battery, an electric motor, a gasoline or other carbon-based fuel tank, and an internal combustion engine.
SECTION 2. Protecting Electricity Users Reliability and Availability
- Electric and Plug In Hybrid Electric Vehicles
(1) To cover the cost to provide sufficient additional dispatchable power, a fee of X (Fill In) shall be placed on all new Electric Vehicle (EV) and Plug In Hybrid Electric Vehicle (PHEV) charging stations connected to the electric grid and all new electric or plug in hybrid electric vehicles sold or licensed to operate in [the State]. The fee is separate and apart from any fee levied on EV or PHEV’s for infrastructure construction and maintenance, and rather is dedicated to the construction of new dispatchable power supplies to meet expected demand, without socializing the cost across all ratepayers.
(2) For charging stations installed and owned by the state, a fee shall be assessed to users of the charging station. The fee should be deposited in the appropriate state segregated fund designated for electrical grid maintenance and/or upgrade. A receipt should be provided to the consumer noting the amount of the fee and its purpose.
- Data Centers
(1) New data centers requiring dispatchable power will be responsible for its provision, either by contracting directly with the local utility for the construction of dispatchable power with the approval for new power sources having to go through the usual regulatory process undertaken by the commission, except for the price which will be negotiated between the utility and the source of the new demand, with safeguards so any cost overruns are not borne by ratepayers in general. Any excess power from the dedicated dispatchable source can be sold onto the broader grid at wholesale rates, with the profits of those sales spilt between the utility and the demanding source, per their contract.
(2) If any state, or political subdivision thereof, provides economic incentives for the construction, opening, or operations of a new data center, they shall enter into a memorandum of understanding or other similar instrument regarding (B)(1) such that failure or refusal to meet the terms of the aforementioned memorandum of understanding, the state’s public service commission or similar regulatory agency is authorized to notify the relevant state and local agencies to commence proceedings to recoup the current cash value of the economic incentives from the parent company of the data center.
(3) If new data centers requiring dispatchable power cannot come to an agreement with the local utility to construct new dispatchable power, they may submit their own plan to the commission for how they will develop and deliver that power. Any dispatchable power source they construct and maintain will have to comply with the same environmental, safety, and health regulations utilities operate under, and any excess power generated by the new source, if connected to the grid, can be sold to a contracting utility at an agreed upon price.
SECTION 3. Severability
Each section, paragraph, and portion of each paragraph of this Act is severable. If one or more sections, paragraphs, or portions of one or more paragraphs of this Act are held invalid on their face or as applied to particular facts, then the remaining portions and applications of the Act shall be given full effect to the greatest extent practicable.
SECTION 4. Applicability and Effective Date
Heartland Impact can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Cameron Sholty, at csholty@heartlandimpact.org or 312/377-4000.
