Ohio Sets New Precedent: AEP’s Power Rules Shift Data Center Cost Burden
It took more than a year, but as of mid-July, a final ruling has been issued that will reshape how new data centers access power in central Ohio, specifically within the service territory of American Electric Power (AEP). The decision imposes a significantly more stringent set of requirements on how data centers pay for power infrastructure. However, the ruling also brings a key benefit: AEP will now lift the moratorium on new data center construction that has been in place since March 2023.
Marc Reitter, AEP Ohio President and Chief Operating Officer had this to say:
We are glad the PUCO agrees that it is critical to align data centers’ demand for energy with the infrastructure costs needed to support their growth in Ohio. This infrastructure will support Ohio’s growing tech sector and help secure America’s data storage and processing facilities here in the U.S. I am grateful for the collaboration of all the parties involved in this filing, which ultimately brings clarity and certainty for infrastructure planning. We are looking forward to ending the moratorium and continuing to support development of more data centers in our service territory.
Regulatory Reckoning: AEP, PUCO, and the Fight Over Who Pays for Data Center Growth
In March 2024, AEP filed a challenge with the Federal Energy Regulatory Commission (FERC), arguing that the proposed collocation of an Amazon data center with the Susquehanna Nuclear Power Plant would impose an unfair burden on consumer ratepayers. At the same time, AEP signaled it would soon introduce new tariffs governing data center interconnection projects across Ohio, Indiana, and West Virginia.
True to that warning, in May 2024, AEP submitted a proposal to the Public Utilities Commission of Ohio (PUCO) seeking to establish a new tariff category for data centers and crypto mining facilities. AEP Ohio President Reitter described the move as a proactive measure to improve long-term planning and ensure that new grid services could be delivered on a realistic timeline.
By November, the Data Center Coalition (DCC), representing hyperscale stakeholders including Google, Amazon, Microsoft, and Meta, formally pushed back. The group argued that AEP’s proposal unfairly singled out data centers and broke with established utility precedent. In a strongly worded response, they warned the policy would discourage investment and push development toward states with more predictable and equitable power frameworks.
In response, the Coalition offered a compromise: a more flexible, broadly applicable load-based tariff structure. However, when PUCO issued its final ruling on July 9, 2025, none of the Coalition’s suggested reforms were adopted. Instead, the commission sided with AEP, approving the utility’s original plan.
Under the new framework, only new data centers with peak power demands exceeding 25 megawatts will be affected; existing facilities are grandfathered in under previous rules.
AEP’s urgency stems from the scale and speed of demand growth. The utility saw data center load increase from roughly 100 MW in 2020 to 600 MW by 2024 and now forecasts demand could surge to 5 GW by 2030. It has received interconnection requests totaling more than 30 GW, far beyond what its existing infrastructure can support.
Historically, grid upgrade costs were often socialized across rate classes, meaning residential and small business customers absorbed the financial impact. AEP’s new tariff is designed to halt that trend, ensuring that data center developers fully fund the infrastructure required to support their projects.
Inside the New Rules: How Ohio’s Tariff Reshapes Data Center Development
At its core, the new AEP Ohio tariff aims to curb speculative development by enforcing stricter financial commitments from large data center operators. Over the past few years, utilities have grown increasingly concerned about projects reserving massive capacity only to underutilize (or cancel) those interconnections, putting undue pressure on planning timelines and infrastructure budgets.
Effective July 9, 2025, PUCO approved a specialized tariff for new data centers with peak loads of 25 megawatts or greater in AEP Ohio’s service territory. The new requirements are designed to ensure cost accountability and more accurate forecasting of grid capacity needs. Key provisions include:
-
Minimum Usage Commitments: Data centers must pay monthly for at least 85% of their contracted capacity, regardless of actual energy use.
-
Long-Term Commitment Structure: The agreement spans up to 12 years—comprising a 4-year ramp-up period followed by an 8-year minimum commitment. During the ramp-up, payments are based on a gradually increasing percentage of the contracted load:
-
Year 1: 50%
-
Year 2: 65%
-
Year 3: 80%
-
Year 4: 90%
-
-
Financial Assurances: Operators must provide collateral, demonstrate financial viability, and submit to AEP’s due diligence before agreements go into effect.
-
Exit Penalties: If a developer exits after the 8-year commitment but before the full 12 years, they may terminate the contract with three years’ notice—or pay an exit fee equivalent to three years of energy usage to end it immediately.
The complete PUCO ruling and AEP contract language are publicly available here and here.
While the ruling drew strong opposition from the Data Center Coalition, it earned backing from the Ohio Consumers’ Counsel, PUCO staff, and major industrial and retail stakeholders including Walmart and the Ohio Energy Group. These groups emphasized that residential and small business customers should not be forced to subsidize the infrastructure needed by hyperscale operators. PUCO characterized the decision as a balancing act: supporting economic growth while protecting ratepayer interests and maintaining grid reliability.
A New Cost Paradigm: Will Other Regions Follow Ohio’s Lead?
While the ruling currently applies only to AEP’s Ohio service territory, it’s difficult to view this as anything less than a bellwether moment. Across the country, communities weighing new data center construction are increasingly grappling with the same fundamental questions: How do we ensure sufficient power generation? And who should pay for it?
With AI workloads driving unprecedented demand for compute and energy this issue is no longer theoretical. The AEP-PUCO ruling offers a concrete framework that other utilities and regulatory bodies may soon look to replicate. At least within this region, one message is clear: the cost of scaling infrastructure to support massive new data center projects will no longer be absorbed by the broader ratepayer base. It now falls squarely on the hyperscale developers who need it.
Though PUCO may yet face rehearing requests or legal challenges, the industry would be wise to operate under the assumption that this model is here to stay...and likely to spread. The ruling reflects a growing awareness among regulators: while attracting digital infrastructure is a critical economic priority, it must not come at the expense of rate equity for residential and small business customers.
This moment marks a deeper shift in the public discourse. The tension between growth and cost accountability is now front and center, moving beyond typical local pushback or NIMBYism into a broader debate about how power infrastructure is financed in the age of AI.
About the Author
David Chernicoff
Voices of the Industry
