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Data Center Tariffs Push Utilities Toward Long-Term Commitments

If you want to understand how utilities are going to handle AI, you need to start with rate design. That’s where a lot of the real decisions are getting made. We just dug deep into 25 new data center tariffs across 19 states. A few years ago, this category didn’t really exist. With a ton of speculative development, there’s a lot of uncertainty around how data center demand shows up and whether it sticks around. Utilities don’t want to build out a bunch of infrastructure and then get stranded. So we're seeing similar design choices that require longer-term commitments, fairly high minimum demand charges, and significant financial guarantees. Interestingly, flexibility is not showing up yet. Grid stress is often concentrated in a relatively small number of hours each year. And outside of those windows, there’s often quite a bit of capacity available. So in theory, large loads like data centers could be incentivized to reduce demand to create more headroom on the system. There's lots of debate over how data centers could deploy this flexibility (batteries, on-site gas, turning down compute), but it's 100% possible. But when you look at these tariffs, that idea just isn’t really built in. Utilities are doing a lot to lock in reliable demand and protect against downside. But so far there isn't much thought about how to actually coordinate that load with the needs of the grid. We pulled all of this together in a free report at Latitude Media.