In July 2025 the Public Utilities Commission of Ohio (PUCO) approved a tariff that makes large new data centers served by AEP Ohio pay for at least 85% of the power capacity they reserve, whether or not they use it, for up to 12 years. The aim is to stop other customers from covering the cost of grid equipment that sits idle.
This post explains what that rule says, why Ohio wrote it, how a second order in August 2026 added an exit rule, and what is still unknown. It is written for readers who are not utility specialists, so the terms are explained as they come up.
Key numbers at a glance
- Order date: PUCO final order on AEP Ohio's data center tariff, 9 July 2025 (reported by Power Magazine).
- Minimum payment: 85% of subscribed monthly capacity, billed whether or not it is used (Power Magazine, describing the PUCO order).
- Maximum term: up to 12 years, including a four year ramp up period (Power Magazine).
- Size threshold: new customers with loads above 25 MW; existing facilities grandfathered unless they grow beyond 25 MW (Power Magazine).
- Central Ohio data center load: about 100 MW in 2020, about 600 MW in 2024, projected 5 GW by 2030 (figures reported by Power Magazine from the case record).
- Queue before the order: more than 50 customers at more than 90 sites, over 30,000 MW (30 GW) of inquiries and preliminary requests, per AEP Ohio testimony as reported by Power Magazine.
- Moratorium: AEP Ohio paused new data center service agreements in Central Ohio from March 2023 (Power Magazine).
- Second order: 5 August 2026, requiring 180 days' notice before a data center returns to default service (Spectrum News).
- Context, national: US data centers used about 4.4% of US electricity in 2023, with a projected 6.7% to 12% by 2028 (US Department of Energy summary of a Lawrence Berkeley National Laboratory report, announced 20 December 2024).
Why a utility regulator got involved
A data center is a large customer that wants a very large, steady supply of electricity. Before it can switch on, a utility often has to build or upgrade substations, transmission lines and sometimes generation. That equipment costs money, and a regulated utility normally recovers its costs from customers through rates. The question regulators face is simple to say and hard to answer: if a data center asks for a large amount of capacity and then uses less than it asked for, or leaves, who pays for what was built?
Ohio faced that question early. According to Power Magazine's account of the case record, Central Ohio data center load was roughly 100 MW in 2020 and roughly 600 MW in 2024, and AEP Ohio projected about 5 GW by 2030. A megawatt (MW) is one million watts, and a gigawatt (GW) is one thousand megawatts. For a sense of scale, the same coverage reports that AEP Ohio had received inquiries and preliminary requests from more than 50 customers at more than 90 sites, adding up to more than 30,000 MW. That is many times the load then connected, and it includes requests that may be duplicates or speculative.
This is the heart of the issue. A queue of requests is not the same as demand that will really arrive. A developer can ask several utilities for power at once and build only where it gets power first. If the utility builds for every request, ratepayers could be left with equipment sized for projects that never appear. If it builds for none, it blocks local economic development. AEP Ohio chose a middle path in 2023, according to Power Magazine: it stopped signing new data center service agreements in Central Ohio while the tariff was worked out.
What the tariff actually requires
A tariff, in this context, is the published set of rates and rules a utility uses to bill a class of customers. It has legal force once the regulator approves it.
The PUCO order, as described by Power Magazine, sets several terms for new data center customers above 25 MW:
- A minimum demand charge of 85% of subscribed capacity. If a data center reserves 100 MW, it pays for at least 85 MW every month, even in months when it draws less. This is sometimes called a take or pay structure, because the customer pays whether or not it takes the power.
- A contract term of up to 12 years. Longer commitments give the utility time to recover the cost of the equipment it builds.
- A four year ramp up period. Data centers rarely reach full load on day one, because racks and servers are installed in phases. The ramp period recognises that, so the minimum does not apply at the full level on the first day.
- Exit fees for early termination, and financial assurance to reduce the exposure to failed projects. Power Magazine does not give a dollar amount for the exit fees, so this post does not either.
- Smaller operators receive more flexible terms on a sliding scale, and existing facilities are grandfathered unless they expand by more than 25 MW over contracted capacity.
The reasoning is straightforward. If a customer has promised to pay for most of its reserved capacity for a decade or more, the utility can finance the equipment with less risk, and other customers are less likely to be asked to cover a shortfall.
Who agreed, who objected
The tariff came from a settlement, which is a negotiated agreement among parties to a regulatory case that the commission then reviews. The case record described by Power Magazine shows a contest between two proposals. It reports that a data center coalition filed a competing proposal on 10 October 2024, and AEP Ohio filed its own stipulation on 23 October 2024. Evidentiary hearings followed in December 2024 and January 2025, with a public hearing in Columbus on 3 January 2025.
The Data Center Coalition objected after the order. Power Magazine quotes its representative, Lucas Fykes, as saying that no one customer type or industry should be singled out for different rate treatment. The commission, in its public statements, described the package differently. Power Magazine quotes PUCO Chair Jenifer French as calling it a well balanced package that safeguards non data center customers, and the commission said the settlement protects other customers from cost shifting risks.
AEP Ohio's president, Marc Reitter, said in the same coverage that the company looked forward to ending the moratorium and continuing to support data center development. The order itself sets out a phased process for lifting the moratorium in Central Ohio, although the published coverage gives no end date.
Both positions are worth understanding. Data center developers argue that a rule aimed at one industry is unfair, and that they bring investment and jobs. Consumer advocates and the commission argue that a customer asking for so much capacity at once is unlike a typical business and creates a risk that other customers should not carry. Neither side disputes that the equipment has to be paid for. The disagreement is about who carries the risk if the load does not show up.
The August 2026 follow up: leaving default service
A second order shows how this area keeps developing. On 5 August 2026, PUCO issued an order requiring AEP Ohio to protect other customers from the energy cost of data centers, according to Spectrum News. It deals with a different risk.
In Ohio, customers can choose their own energy supplier. Customers that do not choose are served by the local utility under a default arrangement called the Standard Service Offer (SSO), for which distribution utilities hold wholesale auctions. The worry is that a large customer could buy power on its own, then return to default service at short notice if its supplier arrangement ended, leaving the utility to buy a lot of extra power quickly and possibly at a high price, with the cost landing on everyone else on default service.
The order, as Spectrum News reports it, does three things. Data centers must give AEP Ohio 180 days' notice before returning to default service. After receiving notice, AEP Ohio will buy the energy through separate auctions or spot market purchases. And the entire cost is assigned to the data center, so it does not affect other customers on the default rate. PUCO Chair French said the order builds on earlier work to create separate rate classes for data centers and on commitments under what she called the Ratepayer Protection Pledge. The public coverage does not set out the terms of that pledge, so it is not described further here.
How this fits the national picture
Ohio is one of several states that have written special rules for very large customers. The Power Magazine timeline, for example, lists Georgia's regulator approving a large load rule for loads above 100 MW in January 2025, a Wisconsin utility proposing tariffs for loads of at least 500 MW in March 2025, and Texas enacting a law covering loads above 75 MW. Different states chose different thresholds, term lengths and tools, so a developer cannot assume the same rules apply from one state to the next. For the Texas approach, see the separate post on how Texas connects data centers, and for the federal angle see FERC large load interconnection rules.
The national numbers explain why regulators are acting now. The US Department of Energy, summarising a Lawrence Berkeley National Laboratory report released on 20 December 2024, said data centers used about 4.4% of total US electricity in 2023, up from 58 TWh in 2014 to 176 TWh in 2023. A terawatt hour (TWh) is one billion kilowatt hours. The same report projects 6.7% to 12% of US electricity by 2028, an increase of 325 to 580 TWh. That is a wide range, and the width itself tells you how uncertain the forecast is. The US Energy Information Administration, in a June 2025 analysis based on its Annual Energy Outlook 2025, estimated that computing accounted for about 8% of commercial sector electricity in 2024 and could reach 20% by 2050. Its reference case did not assume a rapid expansion of AI, so it is one scenario, not a forecast of what will happen.
For a longer look at how forecasts differ, see AI data centre electricity demand forecasts compared and who pays for AI data centre power.
How the minimum changes developer behaviour
The four year ramp period is central to how the minimum works. As Power Magazine describes it, the structure recognises that load grows in steps. In practice the commercial question for a developer is how closely its building schedule matches the capacity it reserves. Reserve too much too early and you pay for power you do not use. Reserve too little and you may not get the rest when you want it, because the queue is crowded. That is a real business trade off, and it is the reason the tariff changes behaviour: it makes a speculative request cost money.
The same logic explains exit fees. If a developer cancels in year three, the utility may already have spent money on a substation. An exit fee, plus financial assurance such as a deposit or guarantee, gives the utility a way to recover that spending without asking other customers. The public coverage of the order does not give the size of the fees, so they are not estimated here.
For readers who buy cloud services rather than build data centers, the practical takeaway is indirect. Rules like these raise the cost and the commitment needed to reserve power, which can influence where capacity gets built and how fast. They are one of several factors, along with equipment lead times and chip supply, that shape how much AI capacity is available and where.
What the tariff does not settle
It is easy to read too much into one order. A few limits are worth stating.
First, a minimum bill protects the utility from paying for idle equipment. It does not guarantee that power is available quickly. A developer still waits for equipment such as transformers, and the time to build can be long. See how long it takes to build an AI data center.
Second, the tariff covers cost responsibility for the customers it applies to. It does not by itself say anything about where power is generated, which fuel is used, or how much new generation Ohio needs.
Third, the queue figures come from testimony and are requests, not commitments. The published coverage gives no post order queue number, so it is not known how many requests survived once developers faced an 85% minimum.
Fourth, the order may still be tested. The published coverage does not say whether any court challenge is pending, which should be checked against the PUCO docket for the case. Treat this post as a snapshot dated 19 October 2026.
What is firm and what is uncertain
Firm, based on the cited sources: PUCO issued its final order on 9 July 2025 with an 85% minimum and a term of up to 12 years for new customers above 25 MW; the moratorium began in March 2023; a second order on 5 August 2026 requires 180 days' notice before a data center returns to default service.
Reported but not independently verified here: the Central Ohio load figures and the 30 GW queue, which come from AEP Ohio's testimony as relayed by one trade publication. The dollar amount of exit fees was not found. The end date of the moratorium was not found. Whether any appeal is pending was not confirmed.
What to watch next
- How many data centers sign agreements under the tariff, and how much capacity AEP Ohio reports in its queue after the order.
- Whether other Ohio utilities adopt similar terms.
- Whether developers shift projects to states with different terms, and whether regulators elsewhere copy the 85% and 12 year pattern or choose different numbers.
- How the August 2026 return to default service rule is applied in practice.
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Quick check
What does an 85% minimum demand charge mean in plain terms?
If a data center reserves 100 MW of capacity, it pays for at least 85 MW each month, even if it uses less. The charge keeps the cost of idle equipment from falling on other customers.
Does the tariff apply to every data center in Ohio?
No. As reported, it applies to new customers above 25 MW served by AEP Ohio. Existing facilities are grandfathered unless they expand by more than 25 MW over contracted capacity.
What did the August 2026 order add?
It requires data centers to give AEP Ohio 180 days' notice before returning to default service, with the full cost of the replacement energy assigned to the data center.
Sources
- Power Magazine, Regulator approves AEP Ohio's landmark data center tariff
- Spectrum News, PUCO orders AEP Ohio to set protections for Ohioans against data center energy costs, 5 August 2026
- US Department of Energy, report on data center electricity demand, 20 December 2024
- US Energy Information Administration, Today in Energy, 25 June 2025
Last reviewed: 19 October 2026.
