MONTGOMERY, Ala. – The Alabama Public Service Commission is looking for input about how it should review Alabama Power Company’s contracts with data centers moving forward.
At its meeting on Tuesday, the PSC – the board tasked with regulating Alabama’s utilities – voted unanimously to develop procedures and standards it will use to review large load data center contracts.
The proceeding will involve a public comment period and an opportunity for Alabama Power to respond to questions. The PSC will then make a final determination and adopt an official procedure.
The move comes in light of a new law reining in economic incentives for data centers heightened public interest in the construction of such facilities nationally. As the use of artificial intelligence continues to grow, the country will only need more massive facilities that store electronic data critical to online consumption.
“The AI centers, the data centers is the main conversation in the state of Alabama, and if you’ve not paid attention in the last three months, I don’t know where you’ve been because that’s just about in every single news story that there is,” Commissioner Jeremy Oden said. “I think we do need to address that situation and make sure that everything goes correctly in the AI centers.”
Why now?
The Alabama Legislature, recognizing the growing demand for the facilities, adopted legislation about data centers earlier this year.
In addition to a bill reducing tax abatements for data centers, the Legislature passed Senate Bill 270 by Sen. Lance Bell, R-Riverside, which requires data centers, not their neighbors, to pay for the additional electricity they’ll require. The bill also establishes that data centers are only in the public’s interest if they also “promote positive benefits” to other customers.
Lowering the cost for other customers, increasing the efficiency of the power system and contributing to economic growth in the community where a data center is located are examples of positive benefits laid out in the bill.
It’s up to the PSC to determine exactly how it will weigh that public interest standard before the law goes into effect on Oct. 1.
Per the definition provided in SB 270, facilities qualify as large load data centers if they need 150 megawatts or more of electricity and operate on one piece of land.
PSC President Cynthia Almond said that the new law mirrors some existing procedures but does put into place new criteria for the board to consider.
“These are complicated contracts, these are big data centers, so we’re trying to make sure that we’re doing all that we’re supposed to do as required under the law,” Almonds said. “This is the process we’re setting up to figure out how to do that. We’ll come back and decide and vote on it later.”
How does the PSC regulate data centers now?
Because data centers are a somewhat new phenomenon, the order dictating how the PSC regulates electric contracts doesn’t have any provisions about such energy-intensive facilities.
Data centers currently fall under the rate flexible contract rate docket – rate FCR – like all commercial and industrial customers with accounts of at least 1 megawatt. The rate FCR also has a tight turnaround time of 10 days, which commissioners said might not be enough to review such large contracts.
The PSC already evaluates whether rate FCR contracts meet the public interest standard, but there are no specifics for data centers.
Because of the size and scale of 21st century data centers, the FCR isn’t cutting it anymore, said Chief Administrative Law Judge Luke Bentley.
“The original FCR was approved by the commission in the late ’90s… In the late ’90s, there were no data centers, not of this scale,” Bentley said. “The projects are bigger, the contracts are more complicated. The commission staff needs more time to review those contracts.”
What the PSC proposed
In the order establishing the generic proceeding, the board put out its recommendation for how it might evaluate data center contracts in the future.
The PSC proposed a list of documents for Alabama Power to lay out the positive benefits to the surrounding community. The proposal also requires Alabama Power to submit a redacted version of any data center contracts for the public to view and recommends that the attorney general’s office be involved as “the representative of the using and consuming public.”
The PSC asked for help from interested parties for specific criteria and methodologies it can use in the contract review process to prove things like positive benefits and the recovery of incremental costs.
Because data centers have become a polarizing issue, the order includes a reminder about what it is and is not capable of doing.
“To facilitate efficiency, the public is encouraged to refrain from submitting comments outside of the scope of these statutes or the Commission’s authority,” the order reads. “For instance, Alabama law does not grant the Commission jurisdiction over data center siting or environmental regulation.”
What’s next
The PSC will evaluate any large load data center contracts Alabama Power brings to the board between now and the adoption of the new procedures under rate FCR. The order requests that Alabama Power agrees to allow more time for review, extending the period from 10 days to 45 days. It also asks that the utility share all relevant filings with the attorney general.
View the full order here.
Alabamians have 30 calendar days, or until Aug. 6, to offer their suggestions. Alabama Power and other interested parties will have 15 days to respond to those comments with a deadline of Aug. 21.
All comments filed as part of the proceeding will be available to the public.
After the comment period, the PSC’s legal division will assign an administrative judge to oversee the proceeding and make recommendations to the PSC about adopting a new process.
Bentley said on Tuesday that he hopes that recommendation will come before the PSC for a final vote in September.