AEP Ohio's 180-day rule puts supplier-failure risk on data centers, and Duke's tariff case is next

In AEP Ohio's territory, a data center that buys power from a competitive supplier now carries the cost if that supplier fails. Ohio regulators confirmed that on Sept. 30, when they refused to revisit the rule. The next tests are a Duke Energy Ohio data center tariff case, with comments due next Thursday, Oct. 22, and pending cases at AES Ohio and FirstEnergy.

The Public Utilities Commission of Ohio denied rehearing requests from Google, the Retail Energy Supply Association and Interstate Gas Supply in Case No. 26-113-EL-ATA, leaving in place interim rules it approved on Aug. 5.

Under the tariff language quoted in the entry, a data center that switches or returns to AEP Ohio's standard service offer, "either voluntarily or involuntarily," "must provide the Company no less than 180 days' advance written notice prior to returning to the SSO." A new data center that wants to start on default service must give the same notice. AEP Ohio then runs a separate procurement for that load, and the customer pays its full cost.

A data center that comes back without notice gets no soft landing. AEP Ohio will "obtain collateral or security to ensure full payment from the Customer and procure the necessary energy through PJM spot market purchases" until the separate procurement can be held, and the data center alone pays the full cost, including AEP Ohio's administrative costs. "The Company shall not take on any obligation to procure capacity on behalf of the load returning to SSO service," the tariff says.

The word "involuntarily" is what matters for procurement. A supplier default is not the customer's choice, but under the rule it lands the customer on spot-priced power and a collateral call, with no utility capacity behind it. The commission did not dispute the concern. It acknowledged the risk of a supplier default raised by Google and still ruled that "any temporary stay associated with the Interim Relief is far outweighed by the prospect of ratepayers having to bear the costs for an energy demand that they did not create."

For developers and their lenders, the practical effect is that a supplier's credit becomes part of the data center's own risk. A campus that once could treat default service as a backstop now has to treat it as a 180-day procurement, which puts more weight on the supplier contract and on what happens if the supplier cannot perform.

Choosing default service has a cost as well. IGS and RESA argued the 180-day notice amounts to a minimum stay. The commission accepted the effect but found that "on balance, the alternative of unfair cost shifts to customers outweighed the industry-specific inconvenience of a de facto minimum stay for data center customers in AEP Ohio's service territory." Either way, a data center's choice between a supplier and default service is now harder to reverse in AEP Ohio's territory.

Google had argued that AEP Ohio's Aug. 28 compliance tariff left unresolved who procures capacity for returning load, which entity holds PJM load-serving entity status for it, and whether the collateral requirement was new. The commission said the changes "do not introduce any new concepts" and that AEP Ohio had carried collateral over from its existing data center tariff.

Two practical pieces are still to come. AEP Ohio told the commission it is working with an auction consultant to design the separate procurement, which it will file for review. That design will shape what a returning data center pays. And the long-term rules sit in a second phase of the case that the commission declined to schedule until a federal process on large-load capacity is complete, finding that "any premature determination of Phase II's parameters could contradict or interfere with the final federal framework." It encouraged Google to raise its concerns there, and said that until then "nothing precludes parties from discussing pathways forward, including formulating alternative proposals."

That leaves the interim rule in force for as long as the federal work takes. The commission described it as "a pragmatic approach to an ongoing, dynamic issue across the country," limited to AEP Ohio's data center tariff.

The commission also rejected Google's call for a statewide approach, writing that "to initiate a statewide solution now would be counterintuitive to the developing regulatory framework." It pointed instead to pending data center tariff cases for Duke Energy Ohio (Case No. 26-755-EL-ATA), AES Ohio (Case Nos. 25-958-EL-AIR et al.) and FirstEnergy (Case No. 26-697-EL-ATA).

For a developer comparing Ohio sites, that means the terms for falling back on default service may differ by utility territory, and they are being set case by case.

Duke's case comes first on the calendar. Duke filed its application on July 27. According to PUCO's docket, a Sept. 18 entry from the administrative law judge set comments for Oct. 22, with reply comments and motions to intervene due Nov. 12. The commission's AEP Ohio ruling gives parties in those cases a clear view of how it weighs supplier and customer arguments against what it called cost shifts to other ratepayers.

What to watch, in order: Duke comments next Thursday, Oct. 22, Duke replies and interventions on Nov. 12, AEP Ohio's filing of its procurement design, and the entry that will set the scope of Phase II.