Xcel Proposes Texas Tariff to Make Data Centers Pay Grid Costs

Xcel Energy has asked the Public Utility Commission of Texas (PUCT) to approve a new large-load tariff to ensure that data centers and other major electricity users cover the costs of the infrastructure required to serve them.

The proposal comes as electricity demand from large customers grows, with Xcel saying the tariff is designed to protect existing residential and business customers from having these costs shifted onto their bills.

Under the proposed tariff, large customers would be responsible for incremental costs associated with electric transmission, substations, interconnection upgrades, and new generation required for their projects.

The plan also includes several financial safeguards. Data centers and other large electricity users would generally have to commit for at least 15 years, backed by financial security if projects are delayed, reduced in size, or abandoned.

Customers would also face minimum monthly payments toward infrastructure built and made available to serve them, even if their electricity consumption increased gradually.

If a customer ends service early, termination charges would be designed to recover costs associated with project-specific infrastructure and reduce the risk of stranded costs being passed to other customers, according to Xcel.

"We know many of our customers are concerned about the scale of electricity needed to serve larger data center customers," said Brad Baldridge, interim president of Xcel Energy -Texas, New Mexico. "These rules make sure data centers and other large customers pay for the power they use and any necessary infrastructure so that it's planned and built responsibly."

Xcel said payments for incremental infrastructure could also support grid investments that improve reliability. The company said additional electricity sales from larger customers could spread existing fixed grid costs across a larger customer base, potentially helping keep bills lower over time.

The proposed tariff requires approval from the PUCT before taking effect. Xcel said it has advanced similar large-load tariffs in other states and expects to file one with New Mexico regulators.