Lawmakers don’t want ratepayers saddled with data center costs

A draft bill to protect power customers from paying for data center costs advanced Wednesday with a unanimous vote — but with criticism from NorthWestern Energy, the state’s largest public utility.

Sen. Daniel Zolnikov, chairman of the Energy and Technology Interim Committee, said the draft still needs work and input from more people.

The bill outlines the Montana Public Service Commission’s responsibilities for regulating a public utility serving “large loads.”

On a voice vote, all Republicans and Democrats on the committee agreed to move forward with the legislation, which Zolnikov said is an attempt to address one of the public’s biggest concerns with data centers.

Zolnikov, a Billings Republican, said that concern is if a utility builds infrastructure to serve a data center, but the data center backs out, the utility will force other customers to pay for the infrastructure.

“This bill clearly states that the cost shift cannot occur onto residential customers,” Zolnikov said.

Currently, he said, the bias in the bill is in favor of the consumer, but he said it’s a good foundation, and legislators can work through the language.

Zolnikov said the goal is to place risk on the appropriate parties.

“If there’s going to be buildout, there has to be the risk on the entity building out, which would be the utility, and the entity that’d be using it, which would probably be the large load, or the data center,” Zolnikov said.

Data centers top of mind in Montana

NorthWestern Energy has previously said it’s in conversation with at least 11 data center developers.

Wednesday, a NorthWestern official said the utility does not want to lose out on economic opportunities from data centers.

But members of the public are fighting data centers in at least a couple of communities in Montana.

Power affordability and transparency are concerns, and lawmakers and members of the public said the proposal from the committee offers the state and the 2027 Montana Legislature a chance to plan ahead.

“Montana is in a unique position to be able to do this really before some of these largest new data centers and loads come online,” said Derek Goldman, with the NW Energy Coalition.

The draft legislation says without “clear statutory and regulatory direction,” data centers pose a threat to the grid and to electricity rates.

Bill outlines PSC’s role, monopoly utility pushes back

The Public Service Commission regulates utilities in Montana, and the draft legislation outlines how the PSC will handle new retail customers with demand of at least 5 megawatts a month.

The draft bill states the PSC will:

• Ensure new service won’t harm other customers,
• Create a new customer class for large loads separate from other industrial customers,
• Set terms that prevent the cost shifting from the new retail customer, or data center, to other customers, and
• Require reasonable financial guarantees that cover risks, including if the new large customer ceases operations.

The draft includes other provisions, and it states that nothing in the legislation “prohibits the commission from requiring additional protections to ensure that the public utility’s other customers are not adversely impacted over the long term.”

NorthWestern Energy associate general counsel Mike Green said the utility isn’t opposed to the protections in the bill, but he said some of the language isn’t realistic, such as preventing any cost shifting.

“Every time a customer comes on or off the system, there’s harm to someone,” Green said.

He said NorthWestern Energy agrees the PSC should be making decisions about how to handle large loads, and the utility already has a proposal pending with the agency for how to do so.

“We’d like to be able to … participate in serving large loads that benefit all of our communities and all of our customers,” Green said.

Conservation watchdog, industrial parties support draft

Anne Hedges, with the Montana Environmental Information Center, said the proposal NorthWestern has pending before the PSC puts the utility itself in the driver’s seat when it comes to many decisions on data centers.

In contrast, Hedges said, the draft bill aims to put the PSC in control, and “love them or hate them,” the PSC is the right entity to do the job.

Sarah Clerget, with the Large Customer Group, said the bill has “a great foundation” for some of the state’s largest employers. The Large Customer Group includes refineries, cement plants and other industrial and manufacturing parties, and Clerget said the bill still needs work, but it has support from the group.

Zolnikov said the bill is meant to address one scenario for serving data centers — it covers power the PSC has oversight of that’s tied to large loads. It doesn’t intend to address other scenarios, such as a data center building its own power supply.

Sen. Gayle Lammers, a Hardin Republican, said Montana is in “last place” dealing with data centers because data centers already have been running in other states, so it has the benefit of learning from them.

But Lammers also said Hardin already is facing a related challenge, where a cryptomining facility has basically been left vacant, and the generation station laid off all its workers.

He said the company isn’t bankrupt, but the community is trying to figure out how to move forward, and he wonders what happens if it goes bankrupt. He said he worries about who will pick up the tab.

“Is it going to fall on the citizens of a little town like Hardin?” Lammers said.

Rep. Bob Carter, a Missoula Democrat, made the motion for the committee proceed with the bill for the 2027 Legislature, which kicks off in January and is expected to take up other legislation related to data centers.