Charleston P&C: SC EMC's unite to assure long-term service contracts with data centers protect their customer-owners
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19 electric cooperatives in SC join forces to require long-term contracts as data centers move in
South Carolina lawmakers are considering new regulations for large data centers.
COLUMBIA — South Carolina’s electric cooperatives signed a joint agreement that seeks to regulate the contracts they all sign in the run of new data centers trying to gain a foothold in the state.
One key provision is a 15-year minimum buying commitment and penalties for early termination.
The move comes as state lawmakers continue to weigh whether state regulators have a role in managing the large energy consumers seeking spot in the state’s electric grid.
For years, there has been no regulatory framework for data centers in the state, leaving utilities on their own as they negotiate rates between themselves and any large-scale power user that seeks a spot in their service area.
As things stand today, power companies and electric cooperatives negotiate terms on a case-by-case basis. They weigh the demands of their new customers and the money they would pay against their own ability to actually provide the power they need.
As they negotiate, they set terms and conditions around questions of price and guarantees those companies would remain operating in the area long term. They could also impose penalties if someone were to back out of the deal, leaving everyday ratepayers holding the bag.
Those terms are widely considered best practices. But until the March 18 agreement, they were not standard practices.
South Carolina lawmakers are working their own effort to standardize those agreements in a pair of sweeping pieces of legislation in the Senate where two separate bills sponsored by Horry County Republican Luke Rankin and Beaufort Republican Tom Davis have yet to receive a vote to the floor.
The electric cooperatives, meanwhile, are moving ahead on their own.
The pace of self-regulation
In a March 18 news release, the Central Electric Power Cooperative Board said its 19 members unanimously voted to create their own regulatory regime around data centers, making permanent five specific policies for any large-scale projects demanding 20 megawatts of power or more. These include:
- 15-year minimum-term contracts with early termination penalties
- Prepayment for necessary electric infrastructure upgrades
- Provisions for ramping down electricity use during potential energy shortages
- Cash deposits and other financial security requirements
- Monthly energy demand minimums, which ensure sufficient revenues are generated to cover system costs.
The decision to regulate data centers appears to be preemptive. Across its membership, the electric cooperatives currently serve just one data center in South Carolina, with three others under development already including the consumer protections enacted by the board this week.
Up until the agreement, consumer protections were written into contract negotiations on a case-by-case basis. Writing them into policy, they say, cements what are considered industry best practices into standard practice.
“We need accurate plans and solid commitments from large consumers so the right facilities are built at the right time and for the right price,” Rob Hochstetler, CEO of the cooperatives board, said in a statement. “This will help us keep South Carolina open for business and protect our members from unnecessary costs while we invest in the reliability of our power grid.”
The major utilities are considering similar policies. In testimony before the South Carolina Senate Judiciary Committee on March 17, numerous power companies — including the cooperatives — testified on their own negotiation practices with data center companies.
Jonathan Yarborough, director of government affairs with Dominion Energy, told lawmakers their utility already requires minimum-use agreements of 14 years with upfront payment required for major power consumers, as well as termination fees to help offset the financial impact of those users leaving the system unexpectedly.
Others have curtailment provisions in their service agreements, which ensure large users can create additional space on the power grid at times demand is too high.
The policies are standard. At this point in the conversation, those practices are also optional.
Contact Nick Reynolds at 803-919-0578. Follow him on X at @IAmNickReynolds.
Nick Reynolds covers politics for the Post and Courier. A native of Central New York, he spent three-and-a-half years covering politics in Wyoming before joining the paper in late 2021. His work has appeared in outlets like Newsweek, Poynter, the Associated Press, and the Washington Post. He lives in Columbia.