Why Should Delaware Care?
Delawareans have already seen energy prices rise, partially because of the growing electricity demands from large-scale data centers in the region. A higher electricity rate for data centers could limit the amount of energy data centers pull from the grid in the future.
Data centers in Delaware will soon have to pay more for electricity than other industrial businesses as a result of steps that state regulators say will slow rising energy prices.
The Delaware Public Service Commission, the state body charged with regulating utility services, voted Wednesday to stop “large-load consumers,” such as energy-hungry data centers, from connecting to the electric grid until the commission can create a new “tariff” for them.
Delmarva Power is now in charge of figuring out what that new fee will be, and the Public Service Commission will decide whether to approve it.
This decision follows turbulence in Delaware’s energy markets that emerged last winter with spiking residential electricity bills. At the time, Delmarva Power attributed the bill increases to surges in electricity demand.
Six months later, Starwood Digital Ventures, a developer backed by private-equity, submitted plans to New Castle County to build a data center near Delaware City that would consume an additional 1.2 gigawatts per hour from the grid – or enough energy to power nearly 1 million homes, according to estimates from experts in the field.
While smaller data centers already exist in Delaware, Starwood’s project is the latest in an ongoing boom for the industry. It is propelled by tech companies that need bigger, more energy-intensive data centers to power new artificial intelligence applications, like ChatGPT, Google Gemini and Microsoft Copilot.
Is a higher rate needed?
The Delaware City data center would purchase power from utilities on a PJM regional electric grid that has already experienced price increases. Those were due, in part, to data center construction across multiple states, including Virginia, Maryland, Pennsylvania and Ohio.
Beyond demand, electricity rates also include the price of the infrastructure needed to bring electricity to the consumer, like power lines and transformers.
The cost of that infrastructure is typically spread among all consumers, because in the past, those infrastructure upgrades benefitted everyone, said Eliza Martin, legal fellow at Harvard University’s Electricity Law Initiative, an independent policy organization based at Harvard Law School.
But now, utility companies may need to pay for infrastructure that is only used to power hyperscale data centers, Martin said.
Martin co-authored a paper that revealed different ways that utility companies “are forcing ratepayers to fund discounted rates for data centers.”
At Wednesday’s meeting, Delaware Public Service Commission Attorney Kate Workman cited a Synapse Energy Economics study, commissioned by the Sierra Club, that found that data centers will cause residential bills to increase by 10% in the near term and 4% in the long term.
“[That] is a huge increase when consumers are already struggling to afford the increased cost of power,” Workman said.
Delmarva to decide new rate
Different electricity users already pay different prices for electricity. In Delaware, residential customers pay 18.15 cents per kilowatt hour, commercial customers pay 12.45 cents and industrial customers pay 8.82 cents.
Typically, local utility companies like Delmarva negotiate rates with the different “rate classes,” or types of consumers, and the Public Service Commission approves or denies those rates.
But at Wednesday’s meeting, Workman and the state’s Division of the Public Advocate, which negotiates power rates on behalf of residential and small commercial consumers, argued that this new rate should be deliberated in public workshops that the Public Service Commission staff would conduct.
“This type of tariff is so new, so controversial and so multifaceted that we want to give the public the ability to give us their concerns so that we can possibly address them,” Workman said.
Delmarva’s attorney, Brian Jordan, argued that Delmarva has the expertise to determine the rate on their own, and anyone from the public could oppose it if they felt it was unfair.
The Public Service Commission did not vote at its Wednesday meeting on how potential workshops would be conducted. Its next meeting will be held on Oct. 15 at 1 p.m. The public can comment in person and virtually.