Ohio's transmission spending surged. Consumers got the bill

COLUMBUS, Ohio-- Ohio utilities have asked to spend more than $1.6 billion on high-voltage infrastructure to connect new data centers to our electric grid.And the rules governing transmission rates could mean all Ohioans pay for it.Those costs enter a transmission system built on assumptions from another era: that new infrastructure benefits everyone, that its costs should be widely shared and that utilities can be trusted to spend only what is necessary.“This practice has been going on for 100 years,” said Mike Jacobs, who studies electricity markets for the Union of Concerned Scientists. “What’s different is we rarely ever had a customer who individually moved the needle.”Hyperscale data centers move the needle. A single facility can use as much electricity as a midsized city. Connecting one can mean miles of bigger power lines, new substations and hundreds of millions of dollars in construction.All that spending is flowing through a system built before customers this large existed, and few checks exist to police what gets built.For many local transmission projects, the Federal Energy Regulatory Commission has no requirement that utilities seek competing bids, nor does it review costs unless someone objects.Instead, the system trusts utilities to spend wisely.But utilities make money when they build. They recover the cost of a project from customers, then earn a regulated profit on top of it. Build more, earn more.For years, critics from across the political spectrum have warned about what that incentive can produce when there is little oversight. The free-market R Street Institute says it produces “a severe lack of economic discipline,” with utilities “overspending on less efficient transmission projects while underinvesting in newer, more efficient technologies.”That warning came in May 2022. Six months later, ChatGPT launched.Now, American utilities are embarking on a historic construction boom. PowerLines estimates planned capital spending could top $1.4 trillion through 2030, as artificial intelligence and data centers create enormous new demands on the grid.The Ohio Consumers’ Counsel, the state office representing residential customers, warned the stakes will only grow.It said, “With the increasingly exponential growth in artificial intelligence and large load data center development, the magnitude of harm to Ohio consumers associated with the lack of regulatory oversight will likely increase dramatically.”How the billing brokeFor most of the electric grid’s history, sharing transmission costs made sense.Think about highways. You help pay for Interstate 80 even if it doesn’t run through your town because you’re paying for a network that moves people and goods across Ohio.Transmission lines are the electric grid’s highways. They carry huge amounts of electricity over long distances, connect communities to power plants and help keep the larger system reliable.Large hyperscalers can’t plug into smaller distribution lines that serve homes and most businesses. Jacobs said they would melt the wires. They need their own high-voltage lines and substations, built just for them. It’s like one company needing its own highway.The regional grid operator PJM manages transmission upgrades for Ohio and 12 other states, but it doesn’t determine everything that gets built. Individual utilities also submit local plans, called supplemental projects. If PJM’s plan is the interstate system, these are more like a loop around the outside of a city.In 2024, Ohio utilities submitted $1.9 billion in supplemental projects, and $1.3 billion of that appears to be for upgrades related to data centers. The requests are hard to miss. In 2025, Duke Energy told PJM it needed to spend $36.2 million because “a new customer has requested transmission service near Trenton in Butler County.” The customer’s demand was expected to grow from 15 megawatts in 2025 to 500 megawatts by 2028.In 2026, AEP proposed $156 million in transmission work for 800 megawatts “of new demand near Piketon.”Nothing in law says a company can’t pay for that transmission work itself, but Jacobs found that tends to be the exception, not the rule. He examined 130 transmission projects across all of PJM in 2024 and found six with private funding.“This is a clear case of the public unknowingly subsidizing private companies’ profits,” Jacobs said.Little scrutiny, billions in spendingOhio utilities planned more than $16.4 billion in transmission projects from 2017 through 2025. Nearly $10.8 billion, or about two-thirds, were supplemental projects, according to the Office of the Ohio Consumers’ Counsel.Ohio Consumers CouncilPJM reviews local transmission projects, but not to decide whether they’re worth the money.“PJM’s role is to evaluate these projects to ensure they do not cause reliability problems on the regional grid,” PJM spokesman Jeffrey Shields said. “The cost allocation is controlled by FERC.”This is where things get complicated. In 2011, FERC put some regional projects out to bid instead of automatically giving the work to the local utility. But that competitive requirement didn’t apply to local supplemental projects.Those projects fall into a regulatory gap.PJM assumes state regulators are watching local projects. But the Public Utilities Commission of Ohio doesn’t review whether many of them are needed or worth the cost. The OCC filed a complaint with FERC in 2023 but says no action has been taken: “As OCC’s complaint seeking relief for consumers languishes, Ohio transmission utilities have spent billions of dollars for local transmission and supplemental projects that no regulatory authority has reviewed for necessity, prudency, or cost-effectiveness.”Meanwhile, more spending has moved into this lightly watched category. Spending on PJM supplemental projects grew 26-fold between 2009 and 2023, according to the nonprofit RMI. Local projects made up 9% of transmission investment from 2005 through 2013, but it jumped to 73% from 2014 to 2021. The OCC found similar numbers for Ohio. It estimated that two-thirds of the transmission projects Ohioans have been billed for since 2017 were supplemental. That lack of competition comes at a price.R Street estimated that expanding competitive bidding could cut transmission costs by 20% to 30%, based on past competitive projects in the United States and similar programs in other countries.Can’t data centers build their own power?There would seem to be an obvious solution to the fight over who should pay to connect data centers to the electric grid: Don’t connect them.Increasingly, technology companies are exploring “behind the meter” power plants alongside their data centers, allowing projects to begin operating without waiting years for utilities and grid operators to deliver the enormous amounts of electricity they need.But there’s a price for that speed.Jigar Shah, an energy entrepreneur and former director of the U.S. Department of Energy’s Loan Programs Office, pointed to an off-grid power arrangement involving Chevron and Microsoft that he estimated would cost $150 per megawatt-hour.By comparison, Shah said, power in PJM averaged about $60 per megawatt-hour.“They are paying almost three times more for off-grid,” Shah said.Part of the reason is that an isolated data center has to build for things the larger electric grid normally handles.A data center needs electricity around the clock. If its power plant goes down, another source has to be ready. That can mean building backup generators, extra generating capacity and other redundant equipment that may sit idle much of the time.The larger grid needs backups, too. But it can spread them across millions of customers and thousands of power plants over a vast region.An isolated data center can’t.That’s why Shah sees behind-the-meter generation less as an escape from the grid than a bridge to it. It can get a data center running while the transmission system catches up, but he said most technology companies ultimately want a grid connection.Investors he speaks with regularly are extremely skeptical of projects that plan to remain permanently “islanded.”A pledge with no teethIn March, the major tech companies signed Trump’s Ratepayer Protection Pledge, promising to pay for the electricity and infrastructure their data centers require.The White House described the promise in sweeping terms, saying data centers would “cover every dollar of the infrastructure that delivers” their electricity.But Jacobs said a pledge without penalties isn’t the same as changing federal law. And even then, deciding what data centers should pay isn’t simple.Consider a new substation built to serve a data center in New Albany, northeast of Columbus. It may be needed today because of that one customer, but it could eventually serve new homes across a growing part of central Ohio. So how much of that substation belongs on the data center’s bill?Make the data center pay for everything, and residents get infrastructure they never paid for. Spread the cost too broadly, and everyone subsidizes a billion-dollar company.Ohio’s fix hits a wallLast year, Ohio regulators approved rules requiring large data centers in AEP’s territory to make firm financial commitments before AEP builds infrastructure for them. The rules were meant to stop AEP’s other customers from getting stuck with the bill if a project falls through, but the plan has been controversial. The Ohio Manufacturers’ Association Energy Group took it to the Ohio Supreme Court, arguing AEP is protecting some customers by unfairly shifting costs onto others. The group called it a “flagrant and unlawful effort to discriminate against certain customers based on their end use of energy rather than the cost to serve them.”Efforts to take these protections statewide ran into the same resistance.Rep. Tristan Rader, a Lakewood Democrat, and Rep. Dave Thomas, an Ashtabula County Republican, worked on legislation to apply AEP’s approach across Ohio. They got pushback, especially for touching how transmission projects are handled.“It was nearly universal pushback,” Rader said. “Nobody wanted that in there. It was the bridge too far.”Consumer advocates have proposed another fix. OCC asked federal regulators to create an independent transmission monitor—a watchdog whose job would be to question whether local projects are truly needed, or whether there’s a cheaper way to build them.Rader believes the resistance comes down to money.“I think data centers know that is where the costs are, and they don’t want to pay for those,” he said. But leaving the system as it stands “is going to make Ohio a less competitive place both to live and to work.”