House Passes the Ratepayer Protection Act, 417-3: Data Centers Pay for Their Upgrades, if Each State Decides They Should

The sponsor’s press release says the bill “requires that large energy load data centers be responsible for the costs of all new energy infrastructure necessary to serve them” ^[6]. The bill itself requires something narrower: that each state utility commission consider whether to do that ^[1]. The House passed it on Wednesday, September 16, by a vote of 417-3 ^[4]. Both descriptions are in the record. Which one turns out right will be settled state by state, not in Washington.

What H.R. 9340 actually does

The Ratepayer Protection Act, H.R. 9340, from Reps. Gabe Evans (R-Colo.) and Kathy Castor (D-Fla.), amends Section 111(d) of the Public Utility Regulatory Policies Act of 1978, known as PURPA, by adding a paragraph (22) on large-load customers ^[1]. PURPA is the law Congress uses to hand states ratemaking standards to weigh ^[3]. Under Section 111(d), a state commission, or a utility no state regulates, has to consider a federal standard and decide whether and how to apply it under state law ^[3].

The new standard has two parts ^[1]:

• Cost recovery. A rate for a large-load customer “shall be designed to recover from the large-load customer the full, incremental cost of any generation, transmission, or distribution upgrade necessary to serve the load,” including when that customer ends its contract or stops buying power.
• Money up front. Before building any such upgrade, the utility “shall require the large-load customer provide to the electric utility financial assurances or contributions to cover the cost.”

A large-load customer is a non-residential consumer that, on or after enactment, requests or signs a contract for facilities that use electricity primarily to run information technology, data storage and computation, and that have “in the aggregate, a peak electric demand of 100 megawatts or more at a single site or campus” ^[1]. The aggregation language matters: a developer cannot get under the line by splitting a campus into buildings of 60 MW each.

The vote was lopsided across both parties. Republicans voted 210-0, Democrats 206-3 and the one independent voted yes; 12 members did not vote ^[4]. The three no votes were Democrats: Reps. Lee of Pennsylvania, Ramirez of Illinois and Tlaib of Michigan ^[4]. The House took it up under suspension of the rules, which takes a two-thirds vote ^[4,5].

Who the bill leaves out

The bill as introduced on June 18 covered any non-residential customer with 100 MW or more at a site ^[2]. The Energy and Commerce Committee rewrote it to cover only data centers before ordering it reported 52-0 on July 20 ^[3]. The committee report says there was “general agreement” that a data center focus answers public concern about bills ^[3]. A 100 MW steel mill, chip fab or hydrogen plant is now outside the federal standard. The report adds that states remain free to go lower, or to write standards “that capture all new large loads of a certain size” ^[3].

The definition also looks forward only. It applies to customers who request or enter into contracts after enactment ^[1], and the committee states that it does not intend the bill to require altering “existing contracts or other agreements between electric utilities and customers” ^[3]. Every data center contract already signed stays where it is.

What it would do to cost and timing

If enacted, the clock runs like this: within one year, each state commission must begin considering the standard or set a hearing date; within two years, it must finish and make a determination ^[1]. Nothing in the bill tells a state what that determination has to be. The Congressional Budget Office put it plainly in its cost estimate: “commissions may adopt or reject federal standards for ratemaking under current law” ^[3]. CBO scored no federal budget effect and called the cost to commissions “small” ^[3].

Then comes the exemption that may matter more than the standard. The clock does not apply in a state that, before enactment, has implemented the standard “(or a comparable standard),” has held a proceeding to consider one, or whose legislature has voted on one ^[1]. The bill does not define comparable. Several states this column has covered have already done something in this territory. Oregon’s commission put data centers in their own rate schedule in July as reported here, and Wisconsin’s set collateral rules for We Energies’ very large customers that same week. Whether either counts would be a question for those states. The practical reach of H.R. 9340 is the states that have not yet opened a large-load docket at all.

For a developer, the substantive change in an adopting state is the second prong. Upfront “financial assurances or contributions” ^[1] is the collateral fight that has run through state dockets all year, and the bill does not say how much, in what form, or for how long.

Where the sides stand

Supporters in the debate described the bill differently. Castor said on the floor that “This bill will require those data centers to cover all the costs” and called it “an important first step,” while also saying “It is not enough” ^[5]. Energy and Commerce Chairman Brett Guthrie (R-Ky.) said it “encourages States to protect our neighbors” while “protecting existing State authorities” ^[5]. The Evans release, a few paragraphs below its “requires,” says the bill preserves state flexibility “by requiring regulators to consider the large-load standard without mandating one specific rate structure” ^[6].

Ranking member Frank Pallone Jr. (D-N.J.) voted for it and spent most of his time on its limits. He said the bill “does not go far enough to ensure that Big Tech and other data center owners fully pay for the energy use and demand that they create,” stressed that states must only “consider” the standard, and noted that “It does not change how wholesale generation or transmission costs are allocated at the Federal level” ^[5]. That last point is the FERC side of the ledger, where most transmission costs are actually assigned.

Majority Leader Steve Scalise (R-La.) tied the bill to the administration’s Ratepayer Protection Pledge, which the committee report describes as an effort to keep data center buildout from raising residential bills ^[3], and said: “We are not fully codifying that” ^[5]. Rep. Troy Balderson (R-Ohio) said the bill “codifies the principles” of the pledge and pointed to steps Ohio has already taken ^[5]. Rep. Rob Wittman (R-Va.) said Virginia hosts about 13 percent of the world’s data centers ^[5].

The record this piece draws on has no published position from data center developers, utility trade groups or state regulators on the bill. The committee did hear from Arizona Corporation Commission Chairman Nick Myers, a Duke Energy planning executive and NARUC’s executive director at hearings it lists as related ^[3].

What I’m watching

The Senate. Evans’s office says Sen. Jon Husted (R-Ohio) is leading the companion bill ^[6]; no Senate vote had been scheduled as of publication.

The states with nothing on the books. If this becomes law, those are the commissions that would have to open a docket within a year, and their first orders will show whether “consider” turns into a rate.