LANSING — Michigan regulators on Thursday adopted landmark standards for the booming data center industry with a plan they say tries to protect residents from subsidizing the industry’s hefty energy use.
In a 3-0 vote, the Michigan Public Service Commission adopted a rate structure that requires data centers and other energy-intensive industries in Consumers Energy’s territory to sign long-term power contracts with steep penalties for exiting early.
The order also requires Consumers to show that data centers will shoulder all costs to build transmission lines, substations and other infrastructure before adding them to the grid.
Commission Chair Dan Scripps called it a “balanced approach” that shows Michigan is “open for business from data centers and other large load customers, while also leveraging those potential benefits of the growth … in a way that’s good for all customers.”
The deal disappointed some environmentalists, who had pushed for explicit requirements that data center power come from renewable sources. Michigan utilities are legally required to achieve 100% clean energy by 2040. They must detail how they plan to meet that requirement in filings next year.
“While the order includes important consumer protection terms, the commission missed an opportunity to emphasize the importance of the state’s climate goals,” said Daniel Abrams, an attorney with the Environmental Law and Policy Center.
The rate structure applies to customers whose energy use exceeds 100 megawatts. Data centers are among very few industries that demand that much power. Often, they demand an order of magnitude more.
Consumers serves 1.9 million customers across much of the Lower Peninsula. Company spokesperson Matt Johnson said officials are still reviewing Thursday’s order and “its impact on all stakeholders.
“Consumers Energy intends to work hard to continue to attract new businesses, including data centers, to Michigan, in a way that benefits everyone and fuels the state’s economic development,” he added.
The deal comes amid an uncertain time for the data industry, which is growing fast because of artificial intelligence. Much more energy is needed to power the transformation, but many industry analysts fear rising AI stocks are a bubble and demand for the technology won’t materialize, leaving utilities and ratepayers to pick up the infrastructure tab for failed projects.
Hoping to avoid such an outcome, Consumers in February proposed special regulations that would lock data centers into 15-year contracts that guarantee consistent electricity use and require payments even if a facility ceases or downsizes operations mid-contract.
The commission’s decision Thursday approves much of that request, with some significant modifications.
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