New Electric Rate For Data Center Moves To Clarksville Council
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by Megan Wylie
Clarksville Connected Utilities (CCU) Commissioners forwarded a proposed ordinance to the City Council, which approved it Monday, creating a new electric rate for extremely large power users, including the proposed Serverfarm data center, referred to in the agenda as Project Aether. (Editor’s note: see page 1 of the March 11 edition for the City Council story or click here.)
The action came during a special called CCU Commission meeting on March 6. General Manager Roy Young said the rate was developed because the scale of electricity demand from the project exceeds the utility’s current transmission capacity and available power supply.
Under the approved “oversized demand electric service” rate, most costs associated with supplying power to these large users, including power, transmission, and generation, will be passed directly to the large customer (i.e., the data center) rather than being absorbed by CCU or other utility customers.
CCU attorney Jason Carter said the rate structure is designed so the utility can arrange power for very large projects while ensuring the financial risks remain with the customer – in this case, the data center.
“The oversized rate is structured to pass all costs and risks of service to the (oversized demand) customer,” Carter said in an email explanation of the ordinance. “No costs or risks are allowed to be borne by other customers of CCU.”
In effect, CCU would act largely as a pass-through utility for the electricity needed by the data center, arranging contracts to bring power to the site while charging fees to cover operations and provide revenue to the utility and city. The city receives 5% of CCU’s revenue from the charges.
Young said about 18 megawatts (MW) previously discussed would be the only portion of power supplied directly from CCU’s existing system.
According to Exhibit G of the ordinance, the rate includes five charge categories:
— Market charge: the actual cost of power purchased from the regional grid, Southwest Power Pool (SPP).
— Transmission charge: the cost of third-party contracts and the customer’s share of SPP fees to move electricity to the site.
— Generation charge: costs of third-party contracts for energy, capacity, or renewable energy credits.
— Service availability charge: a fixed monthly rate based on the total capacity reserved, ranging from $480,000 for loads up to 500 MW to $960,000 for loads over 1,000 MW.
— Administrative charge: a monthly rate based on total electricity usage, ranging from $6.40 per megawatt hour (MWh) for smaller users to $3.40 per MWh for very large users.
Young said the service availability and administrative charges are intended to ensure the large customer pays its share of operating costs and the arrangement produces a net financial benefit for the community.
The ordinance also exempts oversized demand customers from CCU’s power cost adjustment (PCA).
The PCA is a mechanism utilities use to account for changes in the wholesale cost of electricity outside their control, such as fluctuations in natural gas prices or regional energy markets. Under that system, utilities estimate a base cost for power and periodically adjust customer bills if actual costs are higher or lower than expected.
For oversized demand customers, Carter said, those adjustments are unnecessary because the customer pays the actual cost of power directly.
“There is no estimated base cost,” Carter said. “All costs are directly assigned to the (oversized demand) customer, so the power cost adjustment would not apply.”
The ordinance does not change existing residential, commercial or industrial electric rates. Carter said those rates were last set by Ordinance 24-959 and remain unchanged. While the new ordinance references those rate schedules as Exhibits A through D, they were not attached because the ordinance does not modify them. Only the sections being amended, including the power cost adjustment and the new oversized demand electric service rate, were included with the proposal.
Information provided at the meeting states the ordinance benefits the city by passing variable costs to the large-load customer, generating significant revenue for CCU and the city, keeping utility rates low for Clarksville residents, funding infrastructure upgrades paid for by large users which benefit the entire city, and supporting economic growth through additional revenue and job creation.
The ordinance is expected to go into effect April 10.
Chair LaShainea Pollander, Vice Chair Freeman Wish, and Commissioner Roger Brooks were present for the vote. Commissioners Jennifer Risinger and Ethan Powell were absent. The Commission’s next regular meeting is Monday, March 16, at 4:30 p.m. in the CCU conference room and is open to the public. The agenda is typically posted the Friday prior to the meeting and may be found on CCU’s website under the ‘About’ tab.
Read this story and others in the March 11 issue of The Graphic, available online and at businesses throughout Franklin and Johnson counties. Subscribe or donate here to support more hometown journalism.
