Environmental groups argue Consumers Energy’s data center requirements fail to protect customers

As Michigan Lawmakers work to court data centers through tax incentives, Consumers Energy, one of the state’s largest energy providers, is seeking to tweak its rate requirements for businesses using large amounts of energy over time, citing increasing requests for service from these types of facilities. 

Earlier this year, Consumers sent an application to the Michigan Public Service Commission proposing several provisions to protect ratepayers from facing increased costs as a result of the heavy energy demand brought by data centers. 

Among those proposals are a 15-year minimum contract term, minimum billing and an exit fee requirement.

“Without the Company’s proposed protections, other customers would pay for the incremental costs to serve a data center or other large load customer if that customer exits service before sufficient revenue is generated to offset costs,” Consumers wrote in its brief to the Public Service Commission.

While the company has modified its proposal to consider feedback from several stakeholders, members of the Union of Concerned Scientists and the Environmental Law and Policy Center and Vote Solar argue Consumers could go further. 

In addition to focusing on financial and contract terms, the three groups said Consumers’ plan should further consider the increased demand for energy these data centers will bring, and how clean energy resources factor into its plan to bring on new energy generation to meet that need. 

“Consumers Energy’s proposal fails to fully recognize the paradigm shift that new data center loads represent, and their initial brief only engages a narrow subset of the concerns raised. A clear directive from the Commission is critical to ensure a proactive approach to new data centers that supports an affordable, clean energy future for Michigan,” Lee Shaver, a senior energy analyst at the Union of Concerned Scientists said in a statement.

In a brief of their own, the groups offered several recommendations they say would better protect ratepayers and support Michigan’s transition to clean energy. 

Those recommendations include requiring large load customers to provide a clean energy sourcing plan as part of the process of connecting to the grid alongside regular reporting on clean energy and usage; ensuring these customers have access to voluntary green pricing, which allows customers to specify that a specific amount of their power comes from renewable energy sources; and establishing a data center specific rate to keep costs from shifting to other customers. 

“Many tech companies building data centers in Consumers Energy’s territory have ambitious clean energy goals. With the right incentives and guardrails, they could help advance the region’s clean energy transition. This case gives the MPSC its best chance to act now and avoid falling behind. If it waits, Consumers risks triggering rushed clean energy procurements, higher costs and greater risks for customers,” Saad Siddique, an economist and analyst with the Environmental Law and Policy Center said in a statement. 

Members of the Michigan Environmental Council, Natural Resources Defense Council, Sierra Club, and Citizens Utility Board of Michigan also asked the Public Service Commission to ensure Consumer’s modified rate structure complies with Michigan’s requirement that energy companies provide electricity from 100% clean energy sources by 2040. 

They also argued that service agreements between Consumers Energy and data center customers should include a plan for meeting the benchmarks building up to the 100% clean energy standard, through a combination of resources supplied by the data center, long-term contracts for renewable resources and/or participation in voluntary green pricing.

In an email, Consumers Energy Media Relations Specialist Brian Wheeler said the proposed changes for large load customers does not address or change its future electric supply plans.

“Consumers Energy continues to follow our long-term energy supply plan to both serve new data centers and achieve net-zero carbon emissions by 2040. We welcome feedback from the Michigan Public Service Commission and stakeholders as we responsibly plan to meet the energy needs of our growing state,” Wheeler said.