Chicago’s Biggest Electricity Company Inks Deals to Keep Data Centers From Boosting Energy Bills
(Bloomberg) -- Chicago’s biggest electricity company, Commonwealth Edison Co., is taking steps to prevent the data center boom backing the rise of artificial intelligence from raising energy bills for consumers.
The unit of Exelon Corp., which supplies more than 4 million consumers in Chicago and northern Illinois, will require users to provide financial commitments for large-scale projects, ComEd said in a statement on Tuesday. The company has already struck deals with eight firms, preventing existing businesses and households from paying for more than $2 billion in transmission costs over the next decade.
Concerns are mounting over who will cover the cost to power data centers, with energy bills for American consumers on the rise. As AI drives up the need for more electricity, everyone from hyperscalers to real estate firms and speculators have flooded grid operators’ queues with requests for power.
That’s fueling concerns average citizens will end up paying for what utility executives call “phantom data centers” — simply put, projects that have entered the electricity connection queue but that may never be built. At a recent power auction, data centers added $6.5 billion in costs to the largest US grid operator, PJM interconnection LLC, which covers ComEd’s area.
The agreements allow ComEd to “better ensure that the customers who impose very large demands on the system are paying their fair share,” Chief Executive Officer Gil Quiniones said in the statement.
The new policy includes requiring a “firm financial commitment” from developers of projects of at least 50 megawatts, ComEd said. The large-load customers will also need to provide a letter of credit for 10 years of transmission service revenues.
“We understand the challenge of meeting rapidly growing digital demands while keeping power costs affordable,” said Adrian Anderson, senior vice president of global energy for Equinix, a ComEd client. “Northern Illinois remains a key market for continued growth, which is why we’re proud to partner with ComEd on this initiative.”
ComEd presented the deal to 11 of its customers, with three declining to move forward. The eight clients that agreed to the new terms are seeking a combined load of more than 6.5 gigawatts of electricity, roughly equals to the output of six nuclear reactors.
ComEd has previously sought tariff amendments from the state regulator that include higher deposits for data centers. That would allow the company to shield clients for bearing the cost of projects that don’t materialize, the so-called phantom data centers.
Large-scale projects not only require on-site costs like engineering surveys and an increase in transmission at the location, but also an increase in transmission equipment throughout the company’s footprint.
The new approach “reduces speculative projects, which will also help ensure that ComEd makes the right levels of investment needed to serve new large loads while upholding system reliability,” the company said in the statement.
US utilities have been under pressure to make sure the homes and small businesses they serve aren’t paying for the power grid buildout required by massive data centers. Regulators in Ohio last year approved a settlement proposed by American Electric Power Co. that requires big customers like data centers to pay for at least 85% of the energy they say they need each month even if they use less.
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