Protections for Existing Customers: The Michigan Commission's Issue Brief on Data Centers and Other Large Loads

The Michigan Public Service Commission prepared this issue brief, dated November 6, 2025, "to aid the public's understanding of certain matters before the Commission." The matter is one electric utility's rate for businesses with high-energy uses, and the brief's heading marks it as "applicable to data centers and other large loads." The order it explains, the brief says, "clarifies the terms and conditions under which data centers and other new very large load customers take service" and adds protections "to help ensure" the utility's existing electric customers "do not end up paying for costs related to serving these new large loads."

The brief is not the order. It is "not intended to modify, supplement, or be a substitute for the Commission's orders," and "The Commission's orders are the official action of the Commission." Parts of the brief follow, not the whole.

What the Utility Asked For

The utility applied to amend one of its rates, a rate "available to businesses with high-energy uses over extended periods of time." Its application, the brief says, focuses on ensuring that the utility's other customers, residential customers among them, "will not be negatively impacted" if the utility "makes investments to serve a large load customer and that large load customer ends or reduces operations before the costs of those investments have been recuperated."

The utility asked for authority to require longer contract terms, to assess penalties for exiting a contract early, to collect collateral at the outset of the contract to protect from default, to set a minimum monthly billing demand, to limit how far large load customers can reduce their contracted capacity, and to establish annual reporting requirements. The parties contested many issues, the brief says, among them whether the new requirements should apply "to only data centers or to all large load customers over a certain threshold," and what that threshold should be.

What the Commission Decided

The changes "will apply to all new customers with a load of 100 megawatts (MW) or more, including both data centers and other very large industrial customers." They will also apply to customers with a common owner of several sites in the utility's territory, when the sites' aggregated load is 100 MW or more and each site's load is 20 MW or more. The utility "may create a new rate class for data centers in the future," but the brief says that decision "would typically take place in a rate case." To "ensure that existing customers are protected," the commission decided it was prudent to address the proposed changes "now rather than waiting."

The contract "will have a minimum initial term of 15 years." The commission approved a minimum billing demand at 80% of the contracted capacity. The brief explains that "even if a facility does not use the amount of energy expected for a particular month, they will still have a required minimum payment equal to 80% of what they originally said they would use." The exit fee, "the penalty for exiting a contract before the end of the contract term," will be "the minimum billing demand times the number of months left on the contract."

A minimum bill and an exit fee of this shape move the risk of a load that falls short from the utility's other customers to the campus. For whoever finances the campus, the minimum payment is due whatever the campus uses that month.

On financial security, the commission set the default collateral at 50% of the minimum billing demand times the months remaining on the contract term, "in the form of cash or a letter of credit." The utility can seek a higher or lower amount, or another form, by presenting evidence "on the prudency of its preferred collateral," and the commission "will have authority to approve or reject the proposed collateral amount and form if it differs from the default." The utility also has discretion to allow "a one-time capacity reduction of up to 10% for any given large load customer without Commission approval." Beyond that, reductions "would require the payment of a proportional share of the exit fee."

Collateral sized on the months remaining is largest when the contract is new. That is when a campus has the least to show for itself.

The commission also requires the utility to "file at least six cost allocation and rate design proposals which are outlined in the order." Before each large load customer takes service, the utility must "demonstrate that costs caused by the large load customers on this tariff are not being paid for by other customers who are not on this tariff," and detail the additional generation and other resources that will serve the new customer and "how the customer will cover the costs of those resources."

What the Commission Does Not Decide

The commission's jurisdiction over data centers, the brief says, is limited to the electricity and natural gas rates a data center customer is charged and the terms that govern the services of regulated utilities. It "does not have authority to authorize the construction of data centers, approve the siting of data centers, or issue permits or make determinations related to water use."

Many of the issues raised in this case, the brief says, "will be addressed in other dockets." Many intervenors asked whether the utility can meet the state's renewable and clean energy standards while also serving new data center load, and the commission "will review many of these issues in future" cases of the utility. Its upcoming long-term resource plans, the brief says, "will likely explore how to meet the load growth expected from new data centers."

The decision does not apply to the state's other utilities. It "applies to only a specific tariff (Rate GPD)" of the one utility. Decisions on data center or large load tariffs with other Michigan utilities "will be reviewed as part of applications filed by other utilities that come before the Commission."