It’s been a busy few weeks for the Michigan Public Service Commission (MPSC). Late on Halloween, electric utility DTE filed an application seeking expedited, ex parte approval of a contract with a data center requesting 1.4 gigawatt (GW) of electricity, in a deal which had been announced by Governor Whitmer’s office the day before. This electricity demand, equivalent to over a million homes, would increase the utility’s load by 25%. With its ex parte filing, DTE is seeking direct approval from the commission without an opportunity for advocates like UCS to intervene.

Less than a week later, the MPSC issued an order in a docket filed by another major utility, Consumers Energy, seeking changes to the terms and conditions which apply to data centers and other large loads. As I discussed in my last blog, UCS intervened in the case with a coalition of clean energy organizations that recommended several ways that data centers could support Michigan’s efforts to provide reliable, clean, and affordable electricity.

While the MPSC agreed broadly with our analysis and showed progress on cost protections, major gaps remain to ensure grid reliability and meeting clean energy requirements. Nevertheless, the details in the MPSC’s order give UCS and other advocates several potential avenues to pursue in future cases, including the current DTE filing.

In this blog, I’ll pull out some key points from both cases and share some next steps we’ll be working on as we continue to fight for reliable, clean, and affordable electricity for all Michiganders.

In February, Consumers Energy filed an application to establish new requirements for data centers, including:

• Significant load changes must be coordinated with the utility.
• Contracts must be at least 15 years and include minimum billing amounts.
• Large loads must pay for any infrastructure upgrades they trigger.
• Upfront fees will be charged to increase transparency and discourage speculative projects.

While these measures support affordability for all utility customers, they also benefit the company’s bottom line. Consumers Energy is an investor-owned, for-profit utility that earns a guaranteed profit on capital investments, so the company is highly motivated to attract data centers which will require spending on new infrastructure. And the proposed requirements protect shareholder profits, in addition to protecting other customers.

In testimony and briefs, our Michigan coalition argued that these terms did not go far enough, advocating for three additional measures to support affordability, reliability, and emissions reductions:

• Data centers should bring their own clean energy.
• The interconnection process should be reformed to prioritize data centers that provide load flexibility and on-site clean energy.
• Utilities should regularly report on whether data centers are fulfilling the above requirements.

For more details on our recommendations and the rationale behind each, check out my last blog on Michigan’s data center debate.

After considering testimony, exhibits, cross-examination, and briefs from over a dozen parties to the case, the MPSC issued a final order on November 6.

The order generally approved Consumers Energy’s requested terms, with some added reporting requirements based in part on our recommendations. Affordability was handled through new requirements addressing cost allocation in future filings. In a major disappointment, the commission failed to take up clean energy requirements or interconnection reform.

Cost allocation determines whether the specific rate that data centers pay for electricity covers all their costs, or if some of those costs will be shifted to other customers. The order explains: “A core tenet of ratemaking is that customers are responsible for the costs they impose on the system and the costs required to serve them. Residential, commercial, and other industrial customers should not have to pay for investments driven solely by large load additions.”

After describing a business-as-usual scenario where data center costs are shifted to residential customers, the commission succinctly summarizes: “This is unacceptable.”

To address this, the MPSC ruled that cost allocation be handled in a traditional rate case, with new requirements added for large loads like data centers. Specifically, Consumers Energy will need to include six different proposed rate structures ranging from keeping the status quo to establishing new rates specific to large loads. This will allow intervenors and the commission to evaluate the impact of data centers on all customers, with the requirement that Consumers “provide a summary exhibit comparing the impacts of these six cost allocation and rate design proposals on all customer classes on a side-by-side basis.”

Then, before each data center is connected, Consumers Energy must file a detailed application demonstrating that “costs caused by the interconnecting large load customer to be served under this tariff are not being paid for by other customers.” Any special contracts addressing specific generation and interconnection needs must also be filed with the commission and supported with the same level of detail.

Together, these requirements are directly relevant to DTE’s filing, as I will explain below.

While acknowledging that a hypothetical large load customer “is potentially orders of magnitude larger than any customer currently taking service,” the MPSC’s order does not recognize the paradigm-shifting impact this will have on the utility’s ability to meet its renewable energy obligations. Instead, the order simply noted that several future proceedings may be relevant: clean energy plans, renewable energy plans, integrated resource plans, voluntary green pricing tariff cases, and rate cases.

While it deferred decisions on cost allocation to future proceedings, the MPSC did provide detailed guidance on how to handle it. Without similar details on how utilities should manage their clean energy requirements, there is a risk that this critical issue will never be adequately addressed. If utilities and the commission continually punt on clean energy requirements, it will eventually be too late to build enough renewables, resulting in missed targets, increased costs (as federal incentives for renewables expire, among other factors), and stalled progress on addressing climate change.

Finally, the commissioners ruled that while they support load flexibility, they don’t see a need to reform the interconnection process to prioritize flexible or clean-energy-backed loads. They pointed to the April 2023 interconnection rule update as “recent,” overlooking that it predated the surge in hyperscale data centers. UCS and our partners in Michigan are developing a strategy for raising this issue with the MPSC again, especially as others around the US are evaluating interconnection reform which would account for load flexibility and on-site energy.

Now the big question—what does all of this mean for the proposed 1.4 GW data center in DTE’s territory? First, a quick summary of what DTE is asking for: Oracle is seeking to build a 1.4 GW data center to be used by OpenAI (the maker of ChatGPT) as part of its Stargate project. The new data center would be connected to DTE’s system in December 2026, with the full 1.4 GW online within one year.

This single facility would increase DTE’s load by roughly 25 percent, causing the utility to fall short of resource adequacy requirements. To address that shortfall, DTE proposes building 1.4 GW of batteries, paid for by Oracle. The batteries would be spread around the utility’s service territory, mostly at existing solar and wind energy sites.

The first decision the commission will need to make in this case is whether to grant ex parte approval. In an ex parte proceeding, the MPSC would consider only the information filed by the utility in making a ruling, which Michigan law allows when utilities make changes that will not increase the cost of service to other customers. Consumers Energy had sought the same type of approval for its filing, but the commission ultimately ordered a contested case after a petition by UCS and others, finding that “the electric load of new data centers presents unique and significant cost implications, and the development of an evidentiary record […] is prudent and reasonable.” We believe the same is true here.

Another concern with DTE’s application is the breakneck pace: the heavily redacted contract stipulates that the MPSC approve the application by December 5, just 35 days after filing. That is not nearly enough time for the commission to evaluate the full impacts of DTE’s application, which involves hundreds of millions in investment and the addition of the largest single customer to ever connect to the grid in Michigan.

As we’ve petitioned, the MPSC should convert DTE’s proceeding to a contested case, just like Consumers Energy’s case, and establish a more reasonable schedule, giving time to fully examine the potential impacts to cost, reliability, and clean energy obligations.

In proposing contract terms similar to Consumers Energy, DTE asserts that other customers would be protected from covering any costs related to the data center. But connecting the facility to the grid is expected to cost $500 million in infrastructure upgrades—most of which will be spread across all ratepayers. DTE claims its contract terms will offset this by diluting other costs.  

Thanks to the MPSC’s ruling in the Consumers Energy case, we know that this cost protection is necessary and exactly what information is needed to confirm it. Yet DTE’s application provides nowhere near the level of detail needed to make that determination.

While DTE gives some details of how the batteries would address a capacity shortfall caused by the data center, there is no discussion of where the energy will come from. Similar to the MPSC’s order in the Consumers’ case, DTE seeks to defer the issue to a future proceeding: “The resources necessary to meet the Company’s long-term energy and capacity needs will be determined in the Company’s 2026 IRP filing.” In other words: we’ll figure that out later.

This includes clean energy requirements: DTE doesn’t anticipate this project causing a shortfall until 2033, so doesn’t intend to update its renewable energy plan until it’s required to do so next December. But these plans take close to a year for approval, meaning that DTE wouldn’t have an updated renewable plan until late 2027 when the Stargate project is nearly complete, leaving less than five years to bring new solar and wind projects online prior to the projected shortfall. Given that the wait to get new generators connected to the grid is three to four years (as we pointed out in the Consumers Energy case), this is cutting it close. Adding further urgency, DTE is in “advanced discussions” with another 3 GW new data center load.

When it comes to flexibility, DTE’s proposal to use batteries might indicate support for this tool for integrating data centers with the grid, but the details tell a different story: there’s no discussion of load flexibility, non-wires alternatives, or virtual power plants—which can all be used to leverage and increase the value of batteries. Further, the batteries won’t be installed near the data center where they could be used to balance its demand on the local grid, reducing costs; instead, they’ll be spread throughout DTE’s territory, wherever they can be interconnected for the lowest cost.

This approach is penny-wise and pound-foolish: with careful planning, some portion of the hundreds of millions of dollars being spent on batteries could reduce the $500 million in costs other ratepayers will bear to interconnect the data center. Further, other options, such as using the batteries in a virtual power plant arrangement, could address the inevitable energy shortfalls and reliability challenges from the massive new load. None of these solutions were considered in DTE’s application.

The immediate next step in the DTE case is a public hearing on December 3, where the MPSC will seek input directly from the public about the data center proposal. UCS is asking our Michigan-based members to participate and request that the commission convert this important proceeding to a contested case where it can be given the proper scrutiny. Those who are not able to attend the hearing can comment directly on the docket.

As we look to the future, there are several other conclusions we can draw from these two cases. First, the MPSC is rightfully concerned about the risk of cost shifting and seeks abundant detail from utilities on how it will be prevented; details which are lacking in DTE’s application.

Second, when it comes to new data centers, Michigan’s major utilities and the MPSC have yet to give clean energy requirements the attention they deserve. Guidance is needed from the MPSC that confronts the scale and urgency of the challenge. Similar to how it is addressing cost shifting, the MPSC should issue detailed requirements for assessing the impacts of large loads on clean energy obligations in utilities’ integrated resource and renewable energy plans. Further requirements should ensure that the utilities include specific details of how each new data center will comply as it seeks interconnection approval.

Finally, the MPSC must recognize the need to reform the load interconnection process to account for load flexibility and its potential to support grid reliability and affordability.

Hyperscale data centers are forcing a step-change in how the grid is planned and operated, and Michigan’s utility regulators are right to be concerned about cost shifting. But the same care and concern must also be applied to clean energy requirements and interconnection reform to ensure that data centers support a clean, reliable, and affordable grid for all Michiganders.