Michigan Regulators Order I&M to Address Data Center Reliability Risks But Fail to Fill the Gap in Regulation

Today, the Michigan Public Service Commission (MPSC) issued an order on I&M's proposed large load tariff for how to serve customers like hyperscale data centers. Represented by Environmental Law & Policy Center (ELPC), the Union of Concerned Scientists (UCS) intervened in the case with the Clean Energy Organizations coalition, recommending stronger reliability requirements in the tariff and the creation of a working group to establish and implement additional protections statewide.

The MPSC's order adopted the recommendation for stronger reliability requirements for I&M, but declined to establish a statewide workgroup and is the first in Michigan to address data center reliability issues head on.

"A current lack of regulatory clarity is leaving communities vulnerable to unexpected power outages due to data centers' massive, highly variable energy consumption," said Lee Shaver, senior energy analyst at the UCS. "The Commission's decision is a much needed first step to ensure I&M adequately manages the risk of data center-driven electricity outages. However, by failing to create a workgroup to explore these issues statewide, the Commission leaves a gap in protections for all other Michiganders, deferring to the 'wait and see' approach that investor-owned utilities and Big Tech have advocated for."

According to a recent UCS report, data center electricity load growth in Michigan over the next 25 years could put Michiganders at financial risk of $18 billion in additional electricity systems costs. The anticipated strain this unprecedented growth will put on the state's grid is a major concern shared by experts nationwide. Last month, the Federal Energy Regulatory Commission ordered the creation of reliability requirements for data centers by the end of the year.

"As large data centers come online, the Commission can and should do more to protect Michigan ratepayers by requiring all utilities to address the reliability risks of serving new data centers," said Katie Duckworth is a Staff Attorney at ELPC.

"While the North American Electric Reliability Corporation (NERC) is actively developing reliability standards for data centers, the timeline and applicability of these requirements is unclear," Shaver continues. "By failing to establish a workgroup to address that gap, the Commission runs the risk that these standards will come up short in providing actual protection from widespread outages."

As Shaver explains in a recent blog post, costly and polluting fossil fuel energy sources like methane gas plants can't respond quickly to the sudden changes caused by data centers, creating a risk of outages.

"While reliability concerns are being raised around the state and across the industry, that has yet to translate to clear, cohesive safeguards at the utility level," said Shaver. "As Michigan considers meeting data center energy demand with unreliable fossil fuels, it's particularly important that the Commission require utilities to identify and minimize the risk of people and small businesses suddenly losing power."

Looking ahead, for its tariff to be approved I&M must update its interconnection requirements to include ramp rate limits and voltage ride-through limits, both of which have been identified as critical to preventing events like the three-gigawatt loss of load event in Virginia last month. While this event did not directly trigger outages or grid damage, NERC previously described such events as a "five alarm fire" for reliability.

Additional UCS Resources:

• "Power After the Storm," report on protecting the grid from worsening extreme weather event
• Blog post on electricity demand data needed to better plan for data center load growth
• Expert testimony on DTE large load tariff
• Expert testimony on Google data center