Testimony Before the Ohio Select Committee on Data Centers

fairness for the Ohio families who depend on affordable and reliable utility service. In short, Ohio can thread the needle.

Ohio households should not be asked to subsidize speculative infrastructure investments for extraordinary private load growth. At the same time, Ohio should avoid unnecessarily discouraging investment or creating uncertainty for businesses seeking to locate here.

The goal should be simple: Pro-growth, but disciplined on affordability, accountability, and cost allocation.

Consumer Protection Must Remain Central

As policymakers evaluate the opportunities and challenges associated with unprecedented electric demand growth, one principle should remain constant: Ohio households should not bear the costs or risks associated with extraordinary new private demand.

That principle is not unique to Ohio. Across the country, policymakers from different political perspectives increasingly recognize that electricity affordability must remain central as the nation responds to major infrastructure expansion and rising demand.

The concept of a raatepayer protection pledge-that existing utility consumers should be protected as policymakers respond to changing energy demands-is fundamentally about fairness.

Ohio consumers support economic growth. But they also expect that growth will occur in a way that protects affordability and system reliability.

That means:

• Costs should follow cost causation;
• Existing consumers should not absorb speculative investment risks;
• Reliability obligations should be fairly allocated; and
• Utilities should maintain affordability as a central planning objective.

Consumer protection is not inconsistent with economic development. Rather, strong consumer protections create the public confidence necessary to support responsible long-term growth.

Why Data Centers Are Different

Data centers are not traditional industrial customers.

Ohio's industrial development has often brought substantial permanent employment, broad local economic activity, and relatively predictable electricity demand. Modern data centers are different. They can involve:

• Extraordinary electricity demand;
• Significant water requirements;
• New substations and transmission investments;
• Substantial infrastructure needs.

At the same time, many data centers create comparatively limited long-term permanent employment once construction is complete. This distinction matters. Construction jobs are meaningful and valuable. Capital investment is meaningful and valuable. But policymakers should also ask:

What remains after construction ends?

Communities often experience long-term infrastructure burdens while seeing comparatively fewer permanent jobs than traditional industrial facilities. This does not mean Ohio should reject investment. It means Ohio should carefully evaluate:

• The long-term public benefit;
• Cost allocation;
• Consumer protections;
• Risk exposure.

As data-center demand increasingly reaches hundreds-or potentially thousands-of megawatts, Ohio faces questions of unprecedented scale. And those questions deserve careful answers before costs become embedded into residential bills.

PJM Has Recognized an Important State Role

The challenges associated with extraordinary load growth from data centers are not unique to Ohio. Across the region, utilities, regulators, policymakers, and regional grid operators are grappling with how to responsibly integrate unprecedented electric demand from data centers while maintaining affordability and reliability.

Importantly, regional discussions increasingly recognize that states must continue to play a leading role in protecting consumers. Regional markets facilitate coordination. But states remain responsible for:

• Utility regulation;
• Consumer protection;
• Retail affordability;
• Resource planning; and
• Cost allocation affecting residential consumers.

Questions such as Who pays? Who bears the risk? How should extraordinary load from data centers be treated? What happens if data center growth projections are wrong? These are fundamentally state policy questions.

PJM cannot answer those questions alone - and Ohio should not defer to regional markets to resolve affordability concerns experienced by Ohio households. That recognition has been reflected more broadly in statements from governors across multiple states expressing concern regarding affordability, resource adequacy, and state authority as electric demand grows.

There is increasing recognition nationally that economic growth must not come at the expense of residential affordability. Ohio has an opportunity to lead by developing a thoughtful framework that welcomes investment while protecting consumers.

Ohio and PUCO Have Already Taken Important Steps

Importantly, Ohio is not beginning this conversation from scratch. The Public Utilities Commission of Ohio, policymakers, consumer advocates, utilities, and stakeholders have already begun addressing many of these concerns. OCC appreciates those efforts.

In recent proceedings, the PUCO has recognized that data center electric demand presents distinct cost-allocation and reliability issues requiring tailored approaches. For example, the PUCO is exploring concepts involving separate treatment for extraordinary new load from data centers, including discussions surrounding distinct procurement approaches or structures that recognize the unique risks associated with data centers.

Likewise, the Commission has approved or directed utilities to pursue specialized data-center tariff frameworks intended to better align costs and commitments associated with extraordinary new demand. These efforts reflect an important principle. Ratemaking may need to be adjusted for data centers whose electric demand may rival that of entire communities.

Growing Alignment Around Consumer Protection Principles

Importantly, many of the concerns raised today are not being raised by OCC alone.

Across recent proceedings, there has been growing alignment among regulators, consumer advocates, policymakers, and stakeholders around several core principles:

• Extraordinary new loads from data centers require thoughtful planning;
• Cost causation should remain central;
• Residential consumers should be protected from cost shifting;
• Reliability for existing consumers must remain paramount; and
• Utility planning should be grounded in demonstrated-not speculative-need.

OCC appreciates the thoughtful engagement by the PUCO on these emerging issues.

Reasonable parties may disagree about implementation details. But recent PUCO actions demonstrate growing recognition that regulatory framework may require adaptation when addressing the unprecedented load expected from data centers.

In several proceedings, the PUCO and OCC have shared common concerns regarding:

• Protecting residential consumers from stranded costs;
• Ensuring cost responsibility is appropriately assigned;
• Developing tariff structures responsive to extraordinary data center load growth; and
• Preserving affordability and reliability for existing consumers.

This alignment is encouraging. It reflects a broader understanding that Ohio need not choose between welcoming investment and protecting consumers. Rather, Ohio can pursue growth in a manner that is fair, transparent, and sustainable for existing consumers.

Cost Causation Must Remain the Guiding Principle

Ohio utility regulation has long recognized an important principle: Costs should generally follow cost causation. Customers should bear the costs they impose on the system. That principle becomes increasingly important when addressing extraordinary new electric demand from data centers.

Data centers may require:

• New substations;
• Distribution upgrades;
• Transmission expansion;
• Additional reserve margins;
• Reliability backstop investments; and
• Potentially new generation resources.

Where investments are built primarily to serve extraordinary new load, the extraordinary customer should bear the extraordinary cost. Residential consumers should not subsidize speculative utility investments tied to private development.

Ohio households are already facing increasing utility costs. Consumers are paying more for transmission, distribution infrastructure, and wholesale market pressures. Many Ohioans-particularly seniors, families with children, and residents on fixed incomes-are struggling to manage monthly utility bills.

Against that backdrop, policymakers should proceed carefully before embedding additional risks into residential rates.

Legislative Efforts Already Underway in Ohio

Importantly, the General Assembly has already begun thoughtful work addressing many of these same concerns. OCC appreciates the many legislative efforts underway at the House and Senate that seek to preserve Ohio's competitiveness while protecting consumers from undue cost exposure and address various aspects of data centers, including water use, taxation, interconnection, non-disclosure agreements, studies and local land use.

For example, Senators Mark Romanchuk and Paula Hicks-Hudson, through draft legislation known as "the Electricity Forecast Integrity Act, have advanced efforts intended to strengthen utility load forecasting and improve scrutiny of utility assumptions regarding projected demand growth. These efforts are especially important in the context of data centers. Major infrastructure investments should be supported by demonstrated need-not speculation. As Ohio experiences extraordinary interest in large-load development, forecasting assumptions become increasingly consequential for residential affordability.

Likewise, Representatives David Thomas and Tristan Rader, through HB 706, have advanced bipartisan proposals addressing electric service arrangements for extraordinary new data-center load. These efforts reflect several important principles that warrant serious consideration, including:

• Long-term customer commitments;
• Financial assurances associated with extraordinary infrastructure investment;
• Stranded-cost protections;
• Clearer cost allocation; and
• Safeguards designed to reduce cost shifting to residential consumers.

These efforts appropriately recognize that Ohio does not face a binary choice between economic growth and consumer protection. Ohio can welcome investment while ensuring growth occurs in a way that protects affordability, reliability, and fairness for existing consumers.

Bring Your Own New Generation and Credible Supply Planning

OCC recommends consideration of a Bring Your Own New Generation ("BYONG") or credible supply planning framework for extraordinary new data center electric demand.

This does not necessarily mean data centers must operate independently of the grid. Rather, it means large-load data center customers should demonstrate a credible plan for how incremental demand will be served.

That may include:

• Long-term power purchase agreements;
• Dedicated generation;
• Storage investments;
• Firm supply commitments; and
• Meaningful demand flexibility.

The objective is simple. Extraordinary new demand from data centers should not undermine reliability or affordability for existing consumers. Any BYONG framework should also be meaningful.

If a facility claims dedicated supply while relying heavily on the grid during peak periods, consumers may still bear significant reliability costs. The question should always be: Does the proposal meaningfully reduce consumer exposure to cost and reliability risk?

Advanced Transmission Technologies Should be Part of the Conversation

As Ohio considers how best to manage increasing electric demand from data centers, policymakers should encourage consideration of Advanced Transmission Technologies ("ATTs") to help maximize use of existing grid infrastructure. These technologies, may, in some circumstances, help improve system efficiency, reduce congestion and increase transfer capability without immediately requiring more expensive infrastructure expansion.

Put simply Ohio should optimize before it overbuilds. Before residential consumers are asked to finance significant new infrastructure to serve data centers, utilities and planners should evaluate whether cost-effective technologies can maximize the use of the system already in place.

OCC appreciates that the General Assembly has already recognized the importance of this issue through HB 15. It includes a study requirement regarding advanced transmission technologies and opportunities to improve grid efficiency. As Ohio experiences growing demand from data centers, this work may prove increasingly important to maintaining affordability and reliability for consumers.

Separate Procurement and Reliability Obligations

Ohio should also consider whether extraordinary new load from data centers warrants distinct procurement or reliability treatment. Massive, concentrated load growth from data centers may materially alter wholesale market outcomes and reliability needs. Accordingly, policymakers should explore:

• Incremental procurement approaches;
• Separate reliability obligations;
• Tailored auction mechanisms; and
• Other structures responsive to extraordinary new data center demand.

Put simply, residential consumers should not provide free reliability insurance for extraordinary private development.

Some have raised concerns that differentiated tariff structures represent preferential treatment or unnecessary market intervention. OCC respectfully disagrees. Thoughtfully designed tariffs applicable to data centers are not preferential treatment. Rather, they reflect longstanding ratemaking principles recognizing material differences among customer classes and aligning costs with cost causation.

Water and Infrastructure

Water consumption is increasingly one of the most significant concerns associated with data centers. Some facilities require substantial cooling resources, particularly as computing intensity increases.

Communities should have transparency regarding:

• Projected water use;
• Wastewater implications;
• Infrastructure expansion needs; and
• Long-term local system impacts.

Existing residential water consumers should not subsidize industrial-scale expansion. Where upgrades are necessary to support extraordinary demand, cost responsibility should remain appropriately assigned. Water planning and electric planning are increasingly interconnected in the context of large-load development from data centers.

Forecasting Must Be Grounded in Demonstrated Need

Forecasting has become increasingly important as utilities justify new infrastructure investments.

Utilities are increasingly citing projected data-center growth to support planning assumptions. But announced projects are not the same as operational facilities. Forecasting should be evidence-based and milestone-driven. Utilities should rely on demonstrated indicators such as:

• Executed service agreements;
• Site acquisition;
• Construction milestones;
• Equipment procurement; and
• Verified energization schedules.

Utilities should not rely on speculative announcements to justify premature investments later borne by residential consumers. That is why OCC appreciates legislative efforts aimed at strengthening independent scrutiny of utility forecasting assumptions. Infrastructure investments should reflect demonstrated need. Not speculation.

Legislative Recommendations

In light of these considerations, OCC respectfully recommends that the General Assembly consider legislation to:

1. Protect Residential Consumers from Cost Shifting

Clarify that infrastructure costs attributable to extraordinary new load from data centers should not be socialized across residential consumers.

Utilities should demonstrate cost causation before recovering investments through rates.

2. Build Upon Emerging Large-Load Data Center Tariff Frameworks

Support state-wide tariff structures that include:

• Long-term customer commitments;
• Minimum billing obligations;
• Financial assurances;
• Exit fees where appropriate; and
• Protections against stranded costs.

If utilities invest billions based on projected load growth, Ohio households should not be left holding the bag if projections change.

3. Establish a BYONG or Credible Supply Planning Framework

Require extraordinary new data center load to demonstrate a credible path for serving incremental demand without undermining reliability or affordability for existing consumers.

4. Explore Separate Procurement or Reliability Structures

Support examination of incremental procurement, separate auctions, or distinct reliability obligations for extraordinary new data center electric demand. Residential consumers should not absorb disproportionate costs associated with concentrated private development.

5. Strengthen Forecasting Oversight

Build upon existing legislative efforts to improve utility forecasting through:

• Independent validation;
• Milestone-based forecasting;
• Greater transparency; and
• Stronger scrutiny of speculative large-load assumptions.

6. Preserve Ohio's Competitiveness While Protecting Consumers

Ohio should continue welcoming investment while ensuring affordability and reliability remain central to policy decisions. These goals are not mutually exclusive.

Conclusion

Ohio has an opportunity to lead. We can welcome innovation. We can support economic development. We can compete for investment in a rapidly evolving digital economy.

But growth must occur responsibly. The core principle should remain simple: Ohio households should not subsidize speculative infrastructure or bear undue affordability and reliability risks associated with extraordinary private load growth.

OCC appreciates the bipartisan attention already being devoted to these issues. We appreciate the constructive engagement already occurring among the General Assembly, the PUCO, utilities, consumer advocates, local governments, developers, and community stakeholders.

Ohio does not face a choice between economic development and consumer protection. We can do both. We can welcome growth while protecting affordability. We can support innovation while preserving reliability. And we can ensure that Ohio families benefit from Ohio's future-not simply finance it.

Thank you for the opportunity to testify. I would be happy to answer any questions the Committee may have.