Across the REC service territory, few issues are generating more questions, or more concern, than the rapid growth of data centers and the amount of electricity they require. Since January of this year, REC has energized 900 megawatts of new data center substation capacity. The amount of electricity requested to serve data centers planning to locate in our area is unprecedented for our Cooperative and much of the electric utility industry.
REC members are right to ask what this growth could mean for electric rates, reliability and the infrastructure required to serve these facilities. Members also deserve a clear explanation of REC's role and the actions we have taken.
As a regulated electric cooperative in Virginia, REC is required to provide service to all members, whether residential or business, within our territory. Our responsibility is to carefully plan for and provide that service while maintaining the safety, reliability and financial strength of the Cooperative. When a data center requests electric service, we determine what infrastructure, system improvements, power supply arrangements and financial commitments are required to serve that request safely and reliably.
Data centers can bring investment and revenue to communities that choose to permit them. They also raise legitimate questions about their potential impacts and costs. Each community decides what development or growth it wants. Our role is to explain what powering that growth will require and then manage our responsibilities as the electric service provider carefully and transparently.
Members should stay informed of proposed developments and opportunities for public input by following their county's planning commission and board of supervisors proceedings. When a project, whether a data center or something else, such as a manufacturing facility, residential subdivision or distribution center, requires rezoning, permits or other local approvals, information about the process is generally made available by the locality. Certain electric infrastructure and rate matters may also require or invite public input by state regulatory agencies, including the Virginia State Corporation Commission (SCC).
“These safeguards establish a comprehensive structure for serving data centers ... they cannot, however, insulate members from every change in the broader regional energy market.”
REC has spent several years preparing for this growth and establishing appropriate requirements for members with very large energy needs. Our approach addresses the infrastructure required to serve them, how their electricity is purchased, the rates they pay and the financial commitments they must make.
Data center members pay upfront for the REC distribution infrastructure constructed specifically to serve them. This may include dedicated substations, electric lines and other system improvements. Existing members are not financing facilities built solely because of a data center's demand.
Their wholesale power supply is also kept separate. REC purchases electricity for the homes, farms and businesses traditionally served by the Cooperative through Old Dominion Electric Cooperative (ODEC), a generation and transmission cooperative owned by REC and 10 other electric cooperatives. To serve data centers, REC created Hyperscale Energy Services (HES), which separately procures the significant amounts of electricity they require through the PJM Interconnection LLC (PJM) wholesale energy market. Data center members pay for all the electricity that is purchased to meet their needs, including absorbing fluctuations in market prices.
These large-power members must also provide financial assurances for their commitments. Those protections may include upfront infrastructure payments, collateral and obligations established through their service agreements. The rates they pay are set by a specialized Large Power–Dedicated Facilities rate schedule approved by the SCC. Under that rate schedule, data center members must make ongoing payments based on the infrastructure installed to serve them, regardless of their actual energy consumption. This is another important safeguard REC has put in place to protect the Cooperative and its members from future financial risk.
Taken together, these safeguards establish a comprehensive structure for serving data centers. They are designed to prevent homes, farms and other businesses from subsidizing the direct costs and financial risks associated with serving data centers. They cannot, however, insulate members from every change in the broader regional energy market.
Reliability presents a broader challenge. REC and the utilities it relies on for transmission service carefully study every large-power request and determine what infrastructure is required to serve it safely and reliably. But Virginia's electric system is part of the larger PJM grid, which serves all or portions of 13 states and the District of Columbia.
PJM has acknowledged that demand is growing faster than new generation and transmission resources are being added. Power-plant retirements, transmission constraints and increasing energy needs in recent years have all contributed to this supply-demand mismatch. As a result, PJM is taking several steps aimed at ensuring the reliability of the grid.
Members have asked whether data center growth will lead to blackouts. PJM is responsible for balancing electricity supply and demand across the regional grid and PJM is the body that would direct rolling blackouts as a last resort. PJM is proposing changes to its emergency procedures that would require data centers to be curtailed first. Data centers typically have backup generators they can lean on in times of grid stress.
REC's role in grid emergencies is to comply with regional and/or state requirements, and to communicate clearly with members when emergency conditions arise.
We want to be clear about what REC can and cannot do. We can establish strong electric requirements for data centers, carefully plan the electric system we operate and adapt as conditions change. We cannot control every condition affecting the regional grid, and no utility can guarantee that broader energy costs will not change.
Virginia's energy landscape is changing quickly. REC will continue carefully evaluating every large-power request and keeping our members informed. Our responsibility is to provide safe, reliable service while protecting the financial strength of the Cooperative our members built and own. That responsibility will continue to guide every decision we make. We will continue to address different aspects of this complex and evolving topic in future columns, including the many ways REC is working to provide service while protecting the Cooperative and its members.
Learn More
Learn more about REC's approach to data centers and protecting reliability and affordability for all members at: myrec.coop/planning-responsibly-growing-energy-needs
