On July 9 the Public Utilities Commission of Ohio approved a tariff that changes the deal between a utility and its largest new customers. Under AEP Ohio's data center tariff, new data centers and expansions larger than 25 MW must pay a minimum monthly bill based on at least 85% of the demand they expect to need, whether or not they use it, for up to 12 years including a four-year ramp-up period. The commission ordered AEP Ohio to file updated tariffs and lift its moratorium on connecting new data centers as soon as possible. The tariff took effect on July 23.
The principle is not new in utility regulation. Large industrial customers have long signed contracts with minimum demand charges. What is new is the scale and the reason. AEP Ohio faced a wave of data center requests in central Ohio, around Columbus, far larger than its system could serve on existing timelines. The utility had paused new data center connections while it worked out terms. The tariff is the price of reopening the door.
How the minimum bill works
Utility Dive's summary of the order sets out the mechanics. The minimum monthly bill for a new data center is based on a percentage of either its highest monthly billing demand over the previous 11 months or its contract capacity. In effect, a customer that contracts for 100 MW pays for at least 85 MW each month once its ramp-up period is over, even if it draws less. The obligation runs for the length of the ramp-up period plus eight years, so a facility with a four-year ramp is bound for 12 years.
The commission adopted the settlement agreement largely as proposed in October 2024, with one modification: it requires the data center customer or its financial sponsor to put up collateral, provided the sponsor is a co-signer on the contract. That addition closes a gap. Many data centers are developed through special purpose entities with limited assets. If the project fails, a minimum bill is worth little unless someone with a balance sheet stands behind it.
The study and ramp rules
The tariff page that AEP Ohio published after the order adds operational detail. Every new data center request must go through an online application, and loads of 25,000 kW or more pay a one-time load study fee of $10,000 to $100,000 depending on size. Once the study is done, the customer signs a letter of agreement that requires it to reimburse 100% of the buildout costs if it cancels or substantially delays the project. The ramp period cannot exceed four years, and contract capacity must be at least 50% of the final load in the first year, 65% in the second and 80% in the third. Those steps stop a developer from booking a large final load and then taking years to grow into it at the expense of other customers.
Why the utility wanted it
The tariff answers a question that every utility facing data center growth must answer: what happens if the load does not show up? To serve a large data center campus, a utility may need new substations, new transmission lines and, in a vertically integrated state, new generation. Those investments are recovered over decades through rates. If a data center developer signs up for 300 MW, the utility builds for 300 MW, and the developer later scales back or leaves, the cost of the stranded infrastructure falls on everyone else.
An 85% minimum charge for 12 years shifts most of that risk back to the developer. A customer that books more capacity than it needs pays for it anyway. That gives developers a strong incentive to request only what they will use, which in turn should make the utility's load forecast more accurate. Speculative requests, made to hold a place in line while a developer shops among sites, become expensive.
The PJM connection
Central Ohio sits in PJM, and the tariff matters beyond AEP Ohio's own distribution system. PJM's load forecast is built partly from utility submissions of expected large loads, and those forecasts drive both capacity procurement and transmission planning. Forecasts inflated by speculative data center requests raise capacity prices for every customer in the region. A tariff that filters out speculative requests at the utility level improves the inputs to PJM's forecast.
The timing is notable. PJM's capacity auction for the 2026/2027 delivery year is due to report later this month, and forecast data center load is widely expected to keep prices near the cap agreed with Pennsylvania. Every state that tightens its large load terms reduces the risk that customers pay for capacity procured for data centers that never arrive.
The arguments against
The commission had two settlements in front of it. The one it adopted, filed on October 23, 2024, was signed by AEP Ohio, the commission's staff, the Ohio Consumers' Counsel and several other parties. It rejected an earlier settlement filed on October 10 by parties including the Data Center Coalition, Amazon, Google, Microsoft, the Retail Energy Supply Association, Constellation and IGS Energy, which proposed a separate tariff for electricity-intensive customers on different terms. The commission's choice signals that it gave priority to protecting existing customers over maximizing the speed of data center investment.
There is a real trade-off. Ohio competes with Virginia, Texas, Georgia, Indiana and Pennsylvania for data center investment, and terms that are much tougher than those elsewhere could shift projects. But the trend across states is toward tougher terms, not looser ones, which limits the risk of Ohio being undercut for long.
What others are watching
The AEP Ohio tariff is likely to be cited in proceedings across the country, for three reasons. Its threshold of 25 MW captures nearly every modern data center without sweeping in ordinary commercial customers. Its 85% minimum and 12-year term set a benchmark that other utilities can point to. And its collateral requirement addresses the special purpose vehicle problem directly. Regulators in other states will adjust the numbers to local conditions, but the structure, a minimum bill, a long term and financial backing, is becoming standard.
The deeper message is about who bears the risk of the AI build-out. For two years, utilities and their regulators have been asked to plan for demand that may or may not materialize. Ohio's answer is that the companies making the bet should carry most of the cost if it does not pay off.