The Michigan Public Service Commission has approved tailored rate provisions between Consumers Energy and energy-intensive load customers.

Clean energy groups commended the commission’s efforts to protect consumers but were critical of the Nov. 6 ruling’s lack of directives that large loads meet Michigan’s clean energy standard of 80% by 2035 and 100% by 2040.

The new provisions apply to customers with loads of at least 100 MW. Contracts would contain a five-year ramp-up period to full service and a 15-year term thereafter. The contract’s minimum billing demand requirement would have customers paying for on-peak demand, transmission demand and maximum demand charges based on 80% of their contracted capacity, regardless of actual usage. If customers want to exit the contract early, they must pay a fee equal to their minimum billing demand multiplied by the number of remaining months in the contract (U-21859).

The PSC said its decision attempts to simultaneously take advantage of economic opportunities while making sure large load customers cover the costs required to serve them. It said it believed its order would ensure “adequate guardrails” to avoid socializing data center costs and would prevent other customers from picking up the tab on stranded costs if anticipated loads fail to materialize.

Contracts would extend automatically in five-year increments and require four years’ notice to terminate.

The order requires prospective customers to pay an administrative fee to Consumers for worker hours spent studying and drawing up plans to serve the customer.

“These requirements are meant to ensure large load customers remain in service long enough that they will contribute significantly to new and embedded costs while also giving Consumers time to plan for unprecedented changes to its overall load,” the PSC said in a press release accompanying the order.

The new terms allow a large load customer to seek a one-time capacity reduction of no more than 10%, with a four-year written notice. Requests for reductions larger than 10% will have to go through commission approval. Consumers can suspend service to the customer if its usage begins to exceed contracted capacity by 1 MW or more.

However, the commission did not prescribe a specific rate design, leaving that for future rate cases Consumers brings forward. Instead, the PSC directed Consumers to propose six different cost-of-service study and rate design proposals “meant to analyze large load customers’ impact on rates and their contribution to interconnection costs, which will be used to set the rate for these customers going forward,” the PSC said.

The commissioners said large load customers can expect to be categorized under a separate rate class using a different cost allocation. They told Consumers to file ex parte cases for each large load customer to show that costs wrought by them aren’t bankrolled by other customers.

Consumers is further obliged to make annual reports to the commission containing data on large loads, their demand and energy use, changes in their capacity requirements and possible exit fees.

Finally, the commission held off on ordering further stipulations to mitigate large load customers’ effect on integrated resource planning and the state’s renewable and clean energy standards. The PSC said those matters were best handled in separate, ongoing proceedings before it.

Prior to the PSC’s order, Consumers had only its general primary demand (GPD) rate as its default terms of service, with the largest customer under the GPD at 28 MW. The original GPD uses a minimum on-peak billing demand of 60% based on previous summer use with a one-year minimum contract.

Consumers currently serves just one customer larger than 100 MW through a special rate established by the state legislature.

In testimony, Jim Dauphinais, counsel for the Association of Businesses Advocating Tariff Equity, said Consumers has received inquiries for new data center projects totaling 15 GW, with a half dozen of the inquiries for 900 MW or more for an individual customer. Dauphinais said discovery in the commission’s proceeding showed that Consumers contacted a local transmission owner over a 2.65-GW addition and was told the needed transmission investment to accommodate the extra demand would range from $730 million to $780 million.

Dauphinais testified that Consumers risked entangling its existing customers in subsidizing large loads unless it was held to strict consumer protections and annual reporting.

Consumers’ peak total demand is 7 GW. It announced in late July that it had reached an agreement to supply power to a data center of up to 1 GW for an unnamed developer.

Environmental advocates said that while the commission addressed the threat of higher bills, it didn’t shut down the possibility that data centers would undercut Michigan’s clean energy goals.

“This ruling is an important first step towards protecting Michiganders from the energy costs of data centers and the speculative rush that’s threatening to drive up our already high costs of electricity and deplete our water supply. We cannot afford to continue building high-cost gas or running expensive, dirty and old coal plants just to feed the data center rush. We expect regulators and our utilities to prioritize the use of cleaner, cheaper renewable energy to benefit all Michiganders,” Elayne Coleman, director of the Sierra Club’s Michigan chapter, said in a statement following the ruling.

The Michigan Environmental Council, Natural Resources Defense Council, Sierra Club and Citizens Utility Board of Michigan intervened in the case, arguing for 90% capacity payments instead of 80% under the new service terms. The group was represented by Earthjustice and Troposphere Legal.

“When data centers arrive, they typically bring the threat of higher utility bills and too often the undermining of clean energy goals. Today’s ruling is an important step towards reducing the risk of the former but, unfortunately, fails to address the latter,” said Shannon Fisk, director of state power sector advocacy at Earthjustice.

Fisk said she was encouraged the commission protected consumers against stranded asset costs and vowed to continue fighting to ensure data centers are supplied by clean energy “rather than dirty fossil fuels.”

Derrell Slaughter, a Michigan-based policy director at the NRDC, said that while the PSC’s order “makes strides on customer protection,” it fell short of compliance with Michigan’s clean energy standards.

“Without guardrails from the Public Service Commission order, it creates uncertainty about whether these large new customers will be powered by clean energy and ultimately help Michigan meet its clean energy goals,” Slaughter said.