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a good 30 minute podcast on how data centers impacted electric bills in Ohio.

Ratepayers ( residential customers ) subsidize the cost of infrastructure
for these data centers. The podcast investigates how the giant, big-money
backers and owners of these DC's are getting subsidized by all of the ratepayers
in the region. It sounds like Ohio is starting to wise up, and demand that the DC's
pony up more money for the cost of buildout, but ratepayers will always end
up with higher bills, as the cost is spread out to everybody, unlike any of
the profits ( assuming there will be any ).

Just my opinion, but it will be interesting to see how electric power is
prioritized during either summer heat waves, or winter cold snaps in areas that have
a concentration of DC's, like the Ohio area featured in the podcast. My bet would
be that the DC's get treated more favorably than the citizens in the area.
This could be a tailwind for residential solar, which could help residents insulate
themselves from rolling black outs and peak power pricing, but they'd probably
need to not have their local solar grid connected. Google search says the overwhelming
majority are grid-connected, though.

I'm glad that a locally proposed DC was shot down in my area. It took the citizens
of that county Raising Cain to get it shut down. The local political "representatives"
were pushing hard to rush the project thru.

https://www.npr.org/2025/12/19/nx-s1-5649814/ai-da...

I'm glad that a locally proposed DC was shot down in my area. It took the citizens
of that county Raising Cain to get it shut down. The local political "representatives"
were pushing hard to rush the project thru.

DTE successfully rammed through their DC in Saline. The pols make soothing noises.

Michigan Public Service Commission approves DTE contract for Saline Township data center project

MPSC Chair Dan Scripps said. "If ultimately this is a bubble, if this is all overblown and the load doesn’t materialize, that again even in that worst case scenario, customers are still protected.”

https://www.wxyz.com/news/data-centers/michigan-pu...

Scripps brings up a good point. If utilities build the generating capacity to serve the DCs, and it's a bubble, most of the DCs are aborted, and the utility companies end up with surplus generating capacity, like automakers that now have surplus EV production capacity, who pays the cost for the underutilized power plants?

The scenario of residential areas being blacked out, to give the DCs priority for power, crossed my mind too.

Steve

"Scripps brings up a good point. If utilities build the generating capacity to serve the DCs, and it's a bubble, most of the DCs are aborted, and the utility companies end up with surplus generating capacity, like automakers that now have surplus EV production capacity, who pays the cost for the underutilized power plants?"

The ratepayer is the bag holder, the buck stops at their mailbox, every month, without
fail, lol.

It sure feels like the costs associated with just plain living are going up for
Americans. It is a certainty that electric rates are going up. In the podcast I
linked to, mention is made of the need to build more generation, likely to be natural
gas powered. So that will raise the cost of NG, and many people heat with NG furnaces, so heating costs will rise. Food costs have already risen, and as a little extra
"bonus", taxpayers get to gift the American farmers a $12B bailout, on top of paying
more for food. The national debt is accelerating at the same time, so at some
point in time, foreigners are going to want a higher interest rate for their
Treasury purchases, which will drive up the cost of debt for American consumers and
businesses.

Seems like everything is lined up to take even more money out of the American
citizen, and it's accelerating.

All is well though, Tariffs are going to solve all of our problems, and
inflation is under control. The Art Of The Deal playing out before our eyes /sarcasm

the need to build more generation, likely to be natural gas powered. So that will raise the cost of NG,

People made it clear, in the summer of 24, that the mission is to increase the use of hydrocarbon fuels under the banner of "energy dominance". Since then, vehicle fuel economy standards have been relaxed, the EPA tried to shut down the "Energy Star" efficient appliance program, wind and solar generation projects have been scaled back, or cancelled.

Steve...long big oil

Rather than figure out who the losers are, it's more profitable to decide who the winners will be. The electric utilities are protected against loss.

Jeff

MPSC Chair Dan Scripps said. "If ultimately this is a bubble, if this is all overblown and the load doesn’t materialize, that again even in that worst case scenario, customers are still protected.”

I don’t know the details of the deal, but how are customers protected?

Is he saying they’re building data centers, contracting for electric power without the power company building any accompanying infrastructure? No new power lines, trunk lines, transformer stations? No guarantees that the data centers will pay for it whether or not it is in use?

That would be a wildly unusual contract, and one that I doubt most any bank or investor putting the money up for such a center would agree to, because not only would the investment lose 100% of its equity (worst case) but they’d also be on the hook for subsequent downstream costs initially borne by the power company in the understanding that the power would be used.

And let’s pretend that the data center is a raging success. It the power they consume going to require any new investment *at all* by the power provider? If the provider is sitting at 80% today, maybe not. If they’re closer to full out, then they’re going to have to do something to have some overhead room in case of unusual weather or other situations.

(Yes, I know data centers pledge that they will “cut back” if needed, which I will believe when the Tooth Fairy visits and tells me it’s true.)

And let’s pretend that the data center is a raging success. It the power they consume going to require any new investment *at all* by the power provider? If the provider is sitting at 80% today, maybe not. If they’re closer to full out, then they’re going to have to do something to have some overhead room in case of unusual weather or other situations.

There are flox of red flags on this project: DTE, the electric utility in metro Detroit, wanted to jam the approvals for the project through, without any public hearings. The state AG is irate about it, because, when she demanded to know the details of the project, she was given an extensively redacted copy of the contract. The project site is out in the boonies, so, even if DTE had the extra generation capacity, (I expect they will buy power from Ontario Hydro), the infrastructure to get the power to the site would need to be built. Of course the site is in a rural township, so it doesn't have many votes in Lansing. What about cooling water?

Meanwhile, Meta was trying to push through a data center near Howell, another rural township in Michigan, but now has withdrawn it's rezoning request.

Developer pulls rezoning request for proposed AI data center in Howell Township
Officials estimated the project could generate between $20 million and $30 million in annual tax revenue

https://www.clickondetroit.com/news/local/2025/12/...

Steve

Officials estimated the project could generate between $20 million and $30 million in annual tax revenue
_______________________________________________________________

If it was me building the data center, it would be owned by an off-shore company which structured its support so as to have the data center break even (or at a slight loss).

Jeff

Is he saying they’re building data centers, contracting for electric power without the power company building any accompanying infrastructure? No new power lines, trunk lines, transformer stations? No guarantees that the data centers will pay for it whether or not it is in use?

Apparently, yes. Crazy, right? But that's because this isn't merely a contract - it's a fancy way of letting Oracle issue debt without issuing debt.

There's a copy of the MPSC Order in the article linked above. While not a copy of the contract, the terms of the contract are summarized in the discussion. Essentially, the customer is on the hook for the entire cost of building all of the infrastructure, whether they use the electricity or not. They are required to pay every year for 80% of the capacity of the infrastructure (ie. they've got a minimum payment that uses up 80% of what the infrastructure could generate, whether they buy or use the electricity or not), which covers both operational costs and the amortization of the infrastructure investment. If they default, they have a termination fee of all of the infrastructure investment that has not yet been paid off - ballooning upfront. The termination fee is backstopped by both a guaranty by the parent company (ie. the limited liability SPE can't shield the parent company, which is Oracle) and a letter of credit that can be called if the customer and the parent both default.

It is indeed a very unusual contract - but that's what happens in bubbles. People race to build infrastructures (whether it's railroads or data centers) and agree to all kinds of unlikely terms so they can move fast. Terms which end up being really, really bad for them if the tide goes out.

This actually is just debt. It's just a different flavor of what the Big Tech Companies have been doing with their SPE's to issue not-debt debt to build data centers. Since Oracle (and Google and MSFT and all the others) wants to keep their balance sheet nice and pretty, they don't issue corporate debt to finance the building of data centers. They create a SPE and have it go out and borrow the money, secured by the Big Tech Company's lease agreement to pay rent for X years. I haven't seen any articles going into the weeds on those leases, but I imagine they have terms similar to this contract: guarantees by the parent company and security in case of default.

Again, if you're worried about this stuff blowing up, all of this very much rhymes with the subprime mortage crisis. Instead of homeowners getting mortgages from banks (that end up financing the construction of the homes) which then spread the risk around with credit default swaps, you have the Big Tech Companies creating these SPE's to borrow massive amounts of money (that end up financing the construction of the data centers), the risk of which is spread around with guarantees and other security (like the letter of credit given to MSPC).

So if the bubble blows up, the financial impact spreads throughout the entire financial system - just like with the subprime mortgage crisis. Because it's not just the damage when the rent/electric bill doesn't get paid (analogue to mortgage payments and the mortgages going bad), it's all the damage to the counterparties that have sliced and diced that risk and hold it on their balance sheets as well (analogue to all the credit default swaps that spread the counterparty risk throughout the financial system).

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