Regulator Approves AEP Ohio’s Landmark Data Center Tariff

The Public Utilities Commission of Ohio (PUCO) has approved a landmark tariff structure requiring large new data center customers to pay for a minimum of 85% of their subscribed electricity usage—regardless of actual consumption—for up to 12 years. The measure marks a pivotal step in Ohio’s efforts to address surging demand from hyperscale data centers and protect other ratepayers from the cost of grid expansion.

In a July 9 order, the regulatory commission approved a stipulation backed by AEP Ohio, PUCO staff, the Ohio Consumers’ Counsel, the Ohio Energy Group, the Ohio Manufacturers’ Association Energy Group, and Industrial Energy Users-Ohio. Regulators said the framework ensures that the costs of expanding and reinforcing the system are “appropriately” borne by those customers who are responsible for incurring them, rather than shifted to the utility’s broader customer base. The order also outlines a phased process to lift AEP Ohio’s moratorium on new service agreements in Central Ohio, allowing stalled data center development to resume under the new tariff structure.

“Today’s order represents a well-balanced package that safeguards non-data center customers on an industrial and residential level while establishing a dependable and reasonable environment for data centers to continue to thrive within Ohio,” said PUCO Chair Jenifer French on Wednesday.

The Context: Two Competing Settlements, One Pivotal Order

The order culminates a regulatory saga that began in March 2023, when AEP Ohio imposed a moratorium on new data center service agreements in Central Ohio while halting the execution of agreements to move forward with serving that load. At the time, AEP said the moratorium was necessary to allow it to study the impact those requests would have on its power delivery system. Its key aim was to ensure the grid could reliably serve the new and existing load.

In May 14, 2024, AEP Ohio filed an application with PUCO to establish new tariff rules for data center customers in response to what it said was a dramatic and accelerating shift in electricity demand driven by the rapid growth of hyperscale data centers in Central Ohio.

As POWER reported, in direct testimony, AEP Ohio Vice President of Customer Experience Lisa Kelso suggested data center load in central Ohio has grown from 100 MW in 2020 to around 600 MW in 2024. But, while AEP Ohio has so far been meeting that demand with signed agreements, the company projects data center loads will rapidly accelerate to reach 5 GW in Central Ohio by 2030. However, “AEP Ohio has received inquiries and preliminary requests for service from over 50 customers at over 90 sites totaling more than 30,000 MW,” she noted. As AEP officials claimed, compounding the challenge is that the region lacks local generation and is heavily reliant on transmission imports, which has prompted concerns that serving the explosive growth may require major new high-voltage infrastructure—both expensive and slow to build.

The utility also crucially argued that data center customers are unique in scale and complexity and could require massive and often sudden load additions, putting substantial pressure on existing transmission and distribution infrastructure. And, because their energy usage can vary significantly from contracted levels, they also pose significant financial risk to the grid if infrastructure is built to meet projected demand that ultimately does not materialize, the company said.

By October 2024, the case had splintered into two competing visions. On Oct. 10, a coalition of data center operators and affiliated groups—Microsoft, Amazon Data Services, Google, Sidecat (Meta), Constellation Energy, Enchanted Rock, Interstate Gas Supply, the Ohio Blockchain Council, and others—filed a “Customer and Supplier Stipulation.”

That proposal emphasized flexibility, market mechanisms, and the avoidance of what coalition members called “arbitrary” terms that could chill investment. It essentially laid out a competing tariff framework shaped by what the coalition described as “lengthy, serious, arm’s-length bargaining” among experienced market participants. And as crucially, it noted the signatory parties agreed the tariff should apply broadly to electricity-intensive customers rather than being limited to specific industries. Ultimately, it urged PUCO to adopt terms that would allow transparency, minimize risk, and better reflect how data center projects are sited, financed, and constructed. The coalition also called for a commission-ordered investigation into alternative solutions to transmission constraints—including storage, surplus interconnections, and grid-enhancing technologies—arguing these could offer faster relief than long lead-time upgrades.

In response, AEP Ohio filed its own stipulation on Oct. 23, co-signed by PUCO staff, the Ohio Consumers’ Counsel, the Ohio Energy Group, Walmart, and Ohio Partners for Affordable Energy. The utility-backed agreement incorporated stricter provisions: a requirement that large data centers pay for at least 85% of subscribed load, provide financial assurances, and be subject to penalties if projects are canceled. The stipulation also laid the groundwork to lift a data center moratorium AEP Ohio had instituted in March 2023.

PUCO Picks Structured Cost Model for Large-Load Grid Integration

After extensive discovery and more than a dozen parties filing testimony, PUCO held evidentiary hearings in December 2024 and January 2025, as well as a public hearing in Columbus on Jan. 3, 2025. In its final order on July 9, PUCO determined the AEP Ohio-backed proposal more effectively aligned cost causation principles with the realities of grid investment. The commission noted that the framework would ensure infrastructure costs are “appropriately” borne by those incurring them, and not shifted to other ratepayers.

“The Commission recognized that AEP Ohio is faced with unprecedented load growth that requires it to construct significant electric transmission infrastructure to serve data center customers in its territory,” PUCO said on Wednesday. “In its order, the Commission noted the settlement safeguards other non-data center customers from cost-shifting risks of underused investments made to serve Ohio’s growing data center industry.”

PUCO’s order adopts AEP Ohio’s proposed tariff structure, which requires large new data center customers—those with loads above 25 MW—to pay for at least 85% of their subscribed monthly capacity for up to 12 years, regardless of actual consumption. The tariff includes a four-year ramp-up period, exit fees for early termination, and financial assurance requirements to reduce exposure to failed projects. A sliding scale, however, offers more flexible terms to smaller operators, and existing facilities are grandfathered unless they expand capacity beyond 25 MW.

The order also outlines a process to lift AEP Ohio’s moratorium on new data center agreements, allowing stalled projects to proceed under the new rules. Regulators said the framework ensures infrastructure investments are aligned with real, durable load growth, preventing speculative development from shifting upgrade costs onto AEP Ohio’s 1.5 million customers.

Is Ohio a Model for Other States?

On Thursday, the Data Center Coalition (DCC), which intervened in the proceeding, criticized PUCO’s ruling. In a statement sent to POWER, Lucas Fykes, DCC’s director of energy policy, expressed deep disappointment with the decision to adopt AEP Ohio’s proposed settlement agreement.

“The decision is a stark departure from solutions enacted in other key data center markets and, more consequentially, is a deviation from the long-established, sound ratemaking principles that have carried both Ohio and the nation through periods of electricity demand growth and flat demand,” he wrote.

Fykes told POWER that DCC worked collaboratively with a broad cross-section of stakeholders “to offer the PUCO a thoughtful and viable alternative solution that protects customers and supports continued economic growth in Ohio. We continue to maintain that no one customer type or industry should be singled out for disparate rate treatment by the utility,” he said. He underscored: “The data center industry is committed to paying its full cost of service. DCC will continue to advocate for evidence-based solutions in Ohio and across the country that support data center development and advance an affordable and reliable electricity grid for all customers.”

In a statement, AEP Ohio celebrated the order. “We are glad the PUCO agrees that it is critical to align data centers’ demand for energy with the infrastructure costs needed to support their growth in Ohio,” said Marc Reitter, AEP Ohio president and chief operating officer. “This infrastructure will support Ohio’s growing tech sector and help secure America’s data storage and processing facilities here in the U.S.” Reitter also noted AEP is “looking forward to ending the moratorium and continuing to support development of more data centers in our service territory.”

While the new tariff may provide more certainty for infrastructure planning, questions remain about how quickly new projects can proceed, the long-term impact on data center investment, and whether similar measures will be adopted in other high-growth regions. As Ohio’s data center boom continues, industry stakeholders will closely watch how effectively the new rules balance reliability, affordability, and economic growth.

One reason is that PUCO’s decision could set a notable precedent as other states grapple with how to balance AI-driven power demand and their emerging infrastructure needs with customer costs. Similar regulatory frameworks have emerged in multiple states.

In January 2025, Georgia’s Public Service Commission unanimously approved a rule allowing Georgia Power to apply special terms and conditions to new customers with loads exceeding 100 MW. Under the new rule, large-load users (like hyperscale data centers) are required to cover not only site-specific infrastructure costs, but also the upstream generation, transmission, and distribution upgrades necessary to serve their demand. “This protects Georgia Power’s residential and other commercial/industrial customers,” the commission said in a statement. However, to mitigate risks, the rule extends the allowable contract length for customers from 5 to 15 years and allows the utility to impose minimum billing requirements. “This helps ensure any new high-usage customers do not shut down and leave the state before paying for new infrastructure built specifically to handle the needs of their businesses,” it said.

In tandem, Texas on June 20 enacted perhaps the most comprehensive legislation with Senate Bill 6, which requires large load customers exceeding 75 MW to contribute to interconnection costs, mandates remote disconnection capabilities during emergencies, and establishes uniform interconnection standards. Unlike Ohio’s tariff, which focuses on rate design and financial assurances, SB 6 addresses the full lifecycle of large-load grid integration, including emergency protocols, transmission cost allocation, and net metering rules for co-located generation.

As lawyers from Bracewell LLP explained, “While the new law [SB 6] is intended to streamline the interconnection process for large loads, and thereby decrease interconnection waiting times, it also imposes new requirements and hurdles that will affect how developers of large loads design and implement their projects.” The law reflects a more expansive strategy to rein in stranded costs and reliability risks from uncoordinated large-load growth, while opening avenues for new reliability services that monetize load flexibility, the law firm said.

As experts note, the Ohio case is particularly significant because it emerged from a collaborative process involving multiple stakeholders, including consumer advocates and industry groups, and provides a comprehensive framework. That approach is under evaluation in several states—including South Carolina, Utah, Minnesota, Illinois, and New Jersey—which are also considering or have implemented targeted tariffs, cost-allocation mechanisms, or regulatory requirements for large-load customers, particularly data centers.

In April, notably, the Pennsylvania Public Utility Commission convened hearings and legislative proposals in multiple jurisdictions seeking to prevent data centers from imposing “staggering” costs on ordinary consumers. Wisconsin’s We Energies in March 2025 proposed comparable tariffs requiring customers with loads of at least 500 MW to shoulder the costs of new resources built to meet their demand. And, in California, Senate Bill 57 advanced this week in a state Assembly committee. The bill requires the Public Utilities Commission to establish a special tariff to protect ratepayers from transmission costs associated with supplying large load customers like data centers. Advocates claim it is designed to ensure that grid investments for data centers are fully recovered from those customers, not ordinary ratepayers.

Finally, at the federal level, the Federal Energy Regulatory Commission (FERC) has initiated proceedings to address data center co-location issues, particularly how much these facilities should pay for transmission infrastructure when they connect directly to power plants rather than the broader grid. In a notable recent development, Talen Energy restructured its contract with Amazon Web Services after FERC rejected a behind-the-meter model at the Susquehanna nuclear plant, opting instead to serve AWS as a grid-connected retail provider to ensure full cost transparency and avoid shifting transmission charges to other ratepayers.

—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).

Editor’s Note: POWER is continuing to report on how affected parties, including data center operators, intend to respond and whether challenges or appeals may follow.