Utility Regulators Charge PGE with Evading Law on Data Center Costs

Portland General Electric (PGE), Oregon’s largest electrical utility, is under scrutiny for a plan that may shift the burden of data center costs onto residential customers. This proposal contradicts a recent law that mandates data centers to cover their own infrastructure costs.

Regulatory Context: The POWER Act

This summer, Oregon enacted the POWER Act, which requires the state’s utilities to create a separate rate class for data centers. The goal is to prevent residential and other customers from subsidizing the high costs associated with the energy infrastructure needed for these facilities. However, PGE’s recent proposal suggests that, after an initial three-year period, costs beyond this time may revert to residential customers.

Key Players and Responses

• Bob Jenks, executive director of the Citizens’ Utility Board, criticized PGE’s approach as a “twisted logic,” asserting that direct costs should be assigned to data centers.
• Drew Hanson, a spokesperson for PGE, claims that their plan ensures all customers make a fair contribution to system costs.
• The Oregon Public Utilities Commission (PUC) is expected to rule on PGE’s plan by the end of April 2024.

Data Center Impact on Oregon’s Energy System

Oregon currently ranks as the fifth largest data center market in the U.S. Major companies, including Amazon, Apple, and Google, have established significant operations in areas like Hillsboro and The Dalles. According to research from the Sightline Institute, from 2013 to 2023, overall electricity consumption in Oregon increased by over 20%, primarily driven by data centers.

PGE’s Proposed Plan Details

PGE’s strategy entails using a system called the “Peak Growth Modifier” to allocate costs related to new infrastructure investments. For the initial three years, costs will primarily fall on data centers. After this period, the financial burden will shift to include all customers, based on historical usage and peak demand.

Residential Customers and Energy Demand

Residential customers have played a significant role in demand growth on PGE’s system, although their consumption has increased by only 1% annually over the past decade. In contrast, demand from industrial users has surged by nearly 70% during the same timeframe. This discrepancy raises questions about the fairness of PGE’s proposed cost-sharing approach.

Specific Projects and Cost Implications

For instance, the Hillsboro Reliability Project, designed to expand capacity to meet high-tech and data center demands, has been estimated to cost around $210 million. While data centers would cover most of the costs for the first three years, residential customers would face significant contributions over the following decades.

Conclusion and Future Considerations

The ongoing debate over PGE’s cost allocation strategies underscores the complexities of integrating large data centers into existing energy infrastructures. As stakeholders await the PUC’s decision, the implementation of the POWER Act may set a precedent for how utility costs are managed in Oregon.