Who pays for AI data centre power? PPAs, tariffs and capacity prices

AI data centres pay for electricity in four main ways: long contracts with generators, special utility tariffs for very large customers, shares of grid capacity costs, and flexibility deals that trade lower use at peak for faster connection. Regulators are now deciding how much of the cost falls on the data centre and how much on other customers.

This post explains each mechanism in plain words, with figures current as of 19 October 2026. Each number is labelled by who said it and when. It is not investment advice, and it does not predict anyone's electricity bill.

Key numbers at a glance

• BloombergNEF via pv magazine, 20 February 2026: 55.9 GW of corporate clean energy PPAs signed worldwide in 2025, down 10 percent from 2024 (analyst data).
• BloombergNEF via pv magazine: Meta, Amazon, Google and Microsoft together accounted for 49 percent of 2025 activity (analyst data).
• BloombergNEF via pv magazine: unique US companies signing corporate PPAs fell from 68 in 2024 to 33 in 2025 (analyst data).
• PJM, 17 December 2025: 2027/2028 capacity auction cleared at the $333.44 per MW-day cap; total cleared value $16.4 billion; supply 6,623 MW short of the reliability requirement (grid operator).
• PJM, same release: nearly 5,100 MW of a 5,250 MW rise in forecast peak load is from data centres (grid operator).
• PJM, 14 July 2026: 2028/2029 auction cleared at the $325 per MW-day cap, $16.4 billion in total, 6,831 MW short of the reliability requirement; PJM estimates $554.72 without the cap (grid operator).
• Virginia SCC final order, 25 November 2025: new GS-5 class for customers of 25 MW or more from 1 January 2027, paying at least 85 percent of contracted transmission and distribution demand and 60 percent of generation demand (regulator order, reported by Annandale Today).
• AEP Ohio tariff, PUCO order of 9 July 2025: loads above 25 MW pay for at least 85 percent of subscribed capacity for up to 12 years, including a four year ramp (regulator order, reported by POWER Magazine).
• DOE directive to FERC, 23 October 2025: proposed rule for loads above 20 MW, final rule requested by 30 April 2026 (federal directive, via a Kirkland law firm alert).
• FERC, 18 June 2026: show-cause orders to the six regional grid operators on large load rules (reported by law firms).
• Texas Senate Bill 6: standards for loads of 75 MW or more by default, initial study fee of at least $100,000 (state law).
• EIA, 6 October 2026: wholesale prices forecast at $52 per MWh in 2026, up 11 percent, with PJM up 41 percent (government forecast).
• Google, 4 August 2025: first demand response agreements covering machine learning workloads, with Indiana Michigan Power and the Tennessee Valley Authority (company statement).

Way one: the power purchase agreement

A power purchase agreement, or PPA, is a long contract between a buyer and a generator. The buyer commits to pay for output at agreed terms, often for 10 to 25 years, and the generator uses that promised income to finance the plant.

Two kinds matter here. A physical or retail style PPA delivers power through the grid to the buyer. A virtual PPA, as a general matter, is a financial contract that settles against the market price, so the buyer gets the clean energy credit and a price hedge without the electrons arriving at its own site. Company announcements often describe deal terms without saying which type applies, so individual deals are not labelled by type here.

BloombergNEF's figures, as reported by pv magazine on 20 February 2026, show how large the technology buyers are. Corporate clean energy PPAs signed in 2025 totalled 55.9 GW across 712 deals, down 10 percent on 2024 but the second highest year on record. Meta, Amazon, Google and Microsoft accounted for 49 percent. The Americas region signed 32.1 GW, including 29.5 GW in the United States. Europe, the Middle East and Africa signed 17 GW, down 13 percent, and Asia Pacific 6.9 GW, down 35 percent. BloombergNEF's causes include policy uncertainty, changes to US energy tax credits, negative power prices in some regions and doubts over carbon accounting standards.

Note a striking detail. The number of unique US companies signing corporate PPAs fell by 51 percent, from 68 to 33. So the market is bigger in gigawatts but concentrated in fewer buyers. Seven of the top ten developers offered firm products such as solar plus storage or nuclear, and what BloombergNEF calls baseload-like products reached 5.2 GW. The definition counts contracts longer than one year and excludes gas with carbon capture and standalone battery storage.

The nuclear deals in the companion nuclear post are PPAs of this kind. Almost none of them publish a price. Talen's release of 11 June 2025 for its 1.92 GW Amazon deal, for example, gives no price or formula. So whenever you see a headline saying a PPA is worth some billions, check whether the source states a price. Often it does not.

Way two: special tariffs for very large customers

A tariff is the published price list a utility charges. For ordinary customers, the cost of building new poles, wires and plants is spread across everyone. Regulators worry that a few giant customers could cause expensive grid builds, then leave, with other customers stuck paying.

The answer in several places is a large load tariff. AEP Ohio's is one of the best documented. The Public Utilities Commission of Ohio issued its order on 9 July 2025. According to POWER Magazine's report the next day, new data centre customers with loads above 25 MW must pay for at least 85 percent of their subscribed monthly capacity whatever they actually use, for up to 12 years, including a four year ramp up. There are financial assurance requirements and exit fees for early termination, though the report does not state amounts. Smaller operators get a sliding scale, and existing facilities are grandfathered unless they expand beyond 25 MW. The order also set out a phased way to lift a moratorium on new data centre service agreements in central Ohio that had begun in March 2023.

The Data Center Coalition criticised the decision as a departure from established rate-making principles. The design logic is simple: a minimum bill makes sure a customer pays even if it never reaches the planned load, which is the point.

Virginia has taken a similar route. Annandale Today reported on 26 November 2025 that the State Corporation Commission's final order in Dominion Energy's biennial review, issued on 25 November, created a new rate class called GS-5 for customers demanding 25 MW or more, effective 1 January 2027. Customers in that class must pay a minimum of 85 percent of their contracted distribution and transmission demand and 60 percent of their generation demand. The same report gives the typical residential bill increase from that rate case as $11.24 in 2026 and $2.36 in 2027, which it says is 51.2 percent lower than Dominion requested. Those increases cover the whole rate case, not data centres alone.

Virginia then went a step further on wires. The Virginia Mercury, as republished by WTOP on 5 August 2026, reported that the commission ordered Dominion to develop a policy to directly assign transmission infrastructure costs to data centres and other large users. Direct assignment means a specific customer pays for a specific line or substation built to serve it, rather than the cost being shared across the customer base. The report said it was not clear when the commission would rule on that new tariff. The two Virginia orders show the two levers states are using: a minimum bill so reserved capacity is paid for, and direct assignment so new wires are paid for by the customer that needs them.

Way three: capacity prices on the wholesale market

In regions with organised wholesale markets, generators are paid to be available at peak through a capacity auction. PJM's auction for the 2027/2028 delivery year, announced on 17 December 2025, secured 134,479 MW of unforced capacity, which means output adjusted for how reliably a resource performs at times of high stress. The price landed at the cap of $333.44 per MW-day, up 1.3 percent on the previous auction. The cleared supply times that price comes to $16.4 billion, though PJM notes not all load pays the clearing price because of self-supply and bilateral contracts.

This was the first auction in which the whole region, including areas that plan their own supply, fell short of its reliability requirement, by 6,623 MW. PJM still reported a reserve margin of 14.8 percent against a 20 percent target and listed mitigating factors. PJM's executive said the auction left no doubt that data centre demand far outstrips new supply. Its own statement ties nearly 5,100 MW of the 5,250 MW rise in forecast peak load to data centres.

Capacity costs are one part of a bill. PJM's release says wholesale capacity accounts for a fraction of wholesale costs, and wholesale costs make up a portion of retail bills. The US Energy Information Administration's October 2026 outlook forecasts average US wholesale prices of $52 per MWh in 2026, 11 percent above 2025, which it attributes mainly to extreme weather, with PJM prices expected to rise 41 percent. So not all of the PJM rise is data centres, and the EIA outlook does not split out the data centre share.

You may see claims that data centres added a specific number of billions to consumer costs. Those figures are attributed to PJM's independent market monitor; check the monitor's own reports before relying on any single number.

The next auction kept the pressure on. PJM's release of 14 July 2026 says its 2028/2029 auction, covering 1 June 2028 to 31 May 2029, again cleared at the cap, this time $325 per MW-day, 2.5 percent below the previous cap. That was the third auction in a row under a price collar, a cap and floor that PJM set with the governors of its 13 states and FERC. Cleared supply came to 138,318 MW, plus 10,864 MW from areas that arrange their own capacity, and the total was 6,831 MW short of the reliability requirement. The value again came to $16.4 billion. PJM estimates the price would have been $554.72 per MW-day without the collar, so the cap is holding bills below what the market alone would have set. Only 525 MW of new generation and uprates cleared, and PJM says the trend of large data centre loads being added to the forecast continued.

PJM's response points straight back to who pays. The same release lists a planned Reliability Backstop Procurement for the near-term shortfall, with costs allocated consistent with state preferences, and a Connect and Manage framework that would let large loads such as data centres connect but operate flexibly when needed. Since 9 June 2026 PJM has also been matching large load customers with generators for bilateral contracts, often 10 years or more, so a data centre can pay directly for new supply rather than relying on the shared auction.

Way four: paying with flexibility

Another route is to be a gentler customer. If a data centre agrees to cut use during peak hours, a utility can connect it sooner, because the grid is sized for peak.

Google's blog post of 4 August 2025 announced demand response agreements with Indiana Michigan Power, covering a planned Fort Wayne data centre, and with the Tennessee Valley Authority. It describes them as the first time Google is applying demand response to machine learning workloads, building on a trial with the Omaha Public Power District in which Google reduced machine learning power use during three grid events. Google's own words limit the claim: there are limits to how flexible a data centre can be, and flexibility is still early and available only at certain locations.

Texas has put flexibility into law. Senate Bill 6, as enrolled, requires large loads connected after 31 December 2025 to install equipment allowing curtailment during emergency load shedding, and has ERCOT create a service in which loads of 75 MW or more cut demand in emergencies with at least 24 hours' notice. It also requires a flat initial study fee of at least $100,000, financial commitments per megawatt that are refundable as milestones are met, and a contribution to interconnection costs. The state regulator must review how transmission costs are allocated by the end of 2026.

Who sets the national rules

Load connection has traditionally been regulated by states. On 23 October 2025 the US Secretary of Energy directed FERC to begin a rulemaking to standardise connection of large loads above 20 MW, with a final rule asked for by 30 April 2026. The Kirkland alert notes the directive proposes that FERC assert jurisdiction over load connection, which has not been done before, and that stakeholders are expected to challenge it. Its principles include studying loads together with generation, giving faster study to loads willing to curtail, and assigning 100 percent of network upgrade costs to the large load.

The deadline moved. Law firm summaries on JD Supra say FERC said on 16 April 2026 it would act by the end of June, and that on 18 June 2026 it issued six show-cause orders under Section 206 of the Federal Power Act, one to each regional grid operator, asking them to justify within 60 days why their current rules for large loads are just and reasonable. No final rule had been issued as of 19 October 2026. The orders gave each operator a choice: show that its current rules are just and reasonable without special provisions for large loads, or file tariff changes. Responses were due by 17 August 2026, and FERC's decisions on them were still pending at the time of writing.

What is firm and what is uncertain

Firm:

• PJM's 2027/2028 and 2028/2029 auction results and the data centre share of its forecast peak increase.
• Virginia's GS-5 class and its minimum demand terms from 1 January 2027.
• The AEP Ohio tariff terms as ordered in July 2025.
• The Texas statute's requirements as enrolled.

Uncertain:

• How much of any future bill increase is caused by data centres rather than weather, fuel or other demand.
• Almost every PPA price.
• The final federal rule, if there is one, and whether courts uphold FERC's jurisdiction over load connection.

What to watch next

• Responses to FERC's June 2026 show-cause orders.
• PJM's 2029/2030 auction, scheduled for December 2026 according to PJM's July release, and its filings with FERC on the backstop procurement and Connect and Manage.
• The Virginia commission's ruling on direct assignment of transmission costs.
• The EIA's next outlook on 10 November 2026.
• Whether more states copy a minimum take tariff.

For the demand side see the forecasts post, and for supply see gas turbines and on-site power. For the buyers' contracts for chips, see Anthropic's compute commitments.

If you track suppliers and dependencies, Safeguard offers SBOM and dependency scanning and a free scan at https://gold.safeguard.sh/scan.

Quick check

Sources

• Corporate PPA deals down 10 percent in 2025 as AI demand plugs gaps (pv magazine, 20 February 2026)
• Regulator approves AEP Ohio's landmark data center tariff (POWER Magazine, 10 July 2025)
• PJM auction procures 134,479 MW of generation resources (PJM, 17 December 2025)
• Short-Term Energy Outlook, October 2026 (US Energy Information Administration, 6 October 2026)
• How we're making data centers more flexible to benefit power grids (Google, 4 August 2025)
• Texas S.B. 6 bill analysis, enrolled (Texas Legislature)
• Potential game changing rulemaking for data centers (Kirkland law firm alert, November 2025)
• Large load show cause orders, law firm summaries index (JD Supra, June 2026)
• Talen Energy and Amazon agreement (Talen Energy, SEC filing, 11 June 2025)
• PJM capacity market page (PJM, checked 19 October 2026)
• PJM capacity auction procures 138,318 MW of generation resources (PJM, 14 July 2026)
• New utility rate class approved for data centers (Annandale Today, 26 November 2025)
• SCC orders Dominion to develop tariff to assign more transmission costs to data centers (Virginia Mercury via WTOP, 5 August 2026)

Last reviewed: 19 October 2026.