How Florida’s largest electric utility is solving the data center problem

As data centers fuel the digital economy, powering everything from artificial intelligence to cloud storage, states across the country are grappling with an uncomfortable question: who pays for the massive energy demands these facilities bring with them?

In several markets across the U.S., consumer advocates and regulators have warned that the rapid growth of large-scale data centers can drive up electricity costs for everyday customers, forcing households and small businesses alike to subsidize large-scale industrial users. Those concerns have become more pressing as utilities face decisions about new generation, transmission upgrades, and long-term system planning.

Florida has so far avoided the data center boom seen elsewhere, but that may not last. With population growth continuing and interest in Florida-based projects increasing, Florida Power & Light Company says it has used the benefit of time — and lessons learned in other states — to put guardrails in place before high-load customers arrive.

Scott Bores serves as president of Florida Power & Light Co., the prime subsidiary of multistate operator NextEra Energy, which supplies power to more than half of Florida’s population. Florida Politics sat down with Bores to discuss how FPL plans to protect its customers from rising costs if data centers take off in Florida.

We’ve seen countless reports in other states claiming that data centers raise power bills for everyday consumers. Will that happen here?

No. Last year, FPL proposed, and the Florida Public Service Commission (PSC) approved, the most forward-looking and strict consumer protections in America to ensure what you just described does not happen here.

Thanks to the PSC’s approval, we now have special rates that will apply to any large-load customer who requests service from FPL. Those rates are designed to ensure that data centers pay their own way — and Florida’s households do not subsidize the energy needs of these power-intensive projects.

When designing these protections, how did FPL approach the problem?

These big data centers haven’t yet made it to Florida. So, we fortunately have the benefit of time to learn from the experiences of other utilities who have seen heavy data center growth.

We all know data centers are energy-intensive. To serve them, FPL will need to build new power generation — power generation we wouldn’t otherwise need to build.

There’s a simple principle in utility ratemaking, which is that the cost-causer (or the data center in this case) should be the cost payer. So, for example, one of the protections we put in place is called an incremental generation charge. That charge requires the data centers to fund 100% of the cost of new power generation needed to serve their project.

But will FPL be spending to upgrade its system to accommodate these data centers?

We can keep system network upgrades to a minimum by steering data center projects toward areas that are already near our large (500 kV) transmission facilities and have land suitable for incremental generation capacity. We have already identified the first of three geographic zones that fit this description. These locations would allow the data center facilities to be built with minimal impact to infrastructure.

What other protections are in place?

We’ve also established requirements on the front-end designed to ensure the only data center projects that move forward are from mature, creditworthy companies that intend to stay in Florida. For example, if one of these large load customers wants FPL to serve their data center, they have to fund an engineering study to evaluate, among other things, the project’s feasibility and how much it would cost to connect to the grid. They have to pay the project cost to connect to our system. If they want to reserve capacity on FPL’s system, they must be able to meet strict collateral requirements tied to their credit. Not to mention, they also must be willing to agree to a minimum contract term of 20 years and be willing to pay the incremental generation charge we discussed earlier.

What about once the project is in service?

Once in service, the data center is subject to a minimum bill to ensure they pay for the capacity they reserve — even if they don’t end up needing all of it — as well as an exit fee for early termination. That exit fee would amount to an accelerated payment of the remaining 20-year incremental generation charge.

So they have to stand by their commitments, right?

Right – if they leave early, they’re still on the hook. So, we have protections on the front end to weed out bad projects before they move forward. We have protections during the planning phase that will keep network upgrades to a minimum. We have protections that keep the cost-causer — the data center — the cost payer. And once in service, we have protections to ensure data centers pay for the capacity they reserved and also ensure no one can cut and run without paying their fair share.

All of these combine to make up the strictest consumer protections in America as far as data centers are concerned.

FPL has an obligation to serve all customers, including any data centers that request our service. But we have designed these rates to ensure we can serve data centers in a responsible and thoughtful manner, and in a way that protects our existing customers.