Report puts pressure on KY lawmakers to protect ratepayers amid data center boom
A taxpayer-funded commission on energy resource planning says the shared cost of building and operating data centers in Kentucky should be decided before they are built.
That kind of timeline sets a tight clock for lawmakers and regulators to institute broad utility customer protections as the commonwealth gains the attention of tech firms seeking low-cost energy and cheap land.
The Kentucky Energy Planning and Inventory Commission issued its first report since it was founded in 2024 analyzing the economic impacts of data centers. The report, released June 4, highlights tariffs utilities like East Kentucky Power Cooperative have in place to ensure customers aren’t strapped with paying for bad data center investments.
The report reaches four broad conclusions: Kentucky is experiencing a level of interest in large loads unlike anything it has in decades, data centers bring opportunity for economic growth, growth does not eliminate the need for planning, and the state is in a position of strength.
Kentucky hosts 37 data centers, but dozens of projects are in the pipeline for investor-owned utilities and cooperatives across the state. By 2028, data centers could consume up to 12% of national electricity use, according to a Lawrence Berkeley National Laboratory data center energy use report.
At a press conference Thursday morning, state lawmakers and commission members said Kentucky is in a “unique position” for data center investment because of low industrial electricity rates and available resources like land and water.
“We have affordable electricity, we have available land; we have a very strong industrial base, and companies are taking notice around the country,” said EPIC Executive Director Eric King.
Kentucky can learn from other states
Adequate standards that balance low rates with market needs ensure serious developers move forward while discouraging speculative or non-committed requests, the report states.
“The experience of other states shows that the presence or absence of those standards determines whether existing customers are sufficiently protected,” it reads.
The report delves into the experiences of two neighboring states and how they have regulated data centers to the protection or detriment of ratepayers.
The Ohio Public Service Commission OK’d a landmark settlement agreement with one of the state’s largest investor-owned power companies last year that require data centers to pay for at least 85% of their contracted energy needs for at least 12 years, regardless of their actual usage.
Virginia, on the other hand, has not instituted data center-focused protections for existing customers, and residential rate increases of between $14 to $37 a month are expected by 2040, the EPIC report states.
During the 2026 legislative session in Kentucky, lawmakers introduced multiple proposals to protect Kentuckians from data center costs, but none of those bills became law.
House Bill 593 would have required companies building data centers to pay for any electrical infrastructure upgrades and strapped developers with a $75,000 fee for applying to connect to the grid. Sponsored by Rep. Josh Bray, R-Mount Vernon, HB 593 would have required companies to pay for the power they use instead of passing costs onto existing utility customers.
While the bill passed the House with bipartisan support, it stalled in the Senate.
Gov. Andy Beshear said Thursday he thinks there’s still time to pass “good legislation” on data centers, adding it takes a long time to build these facilities.
“I know people feel surprised when they hear news about them, but from the initial discussions to the siting to the permitting to the actual construction, given the size of these projects, there’s going to be a lot of time for people to have their voices heard and for the legislature if they choose to pass certain legislation,” Beshear said.
According to EPIC’s January strategic planning framework, “data centers can achieve commercial operation in 18-24 months while combined cycle natural gas generation requires 5-7 years from planning to operation. This timing disparity creates significant planning challenges that Kentucky must address through robust demand forecasting across multiple time horizons.”
If lawmakers want to pass data center legislation, Beshear said he wants to see language that would require data centers to pay for all their power, resolve any water and environmental issues and ensure that they don’t get a “huge break” on taxes.
The report doesn’t recommend any specific cost-sharing strategy; instead it presents utilities that have instituted industrial-grade tariffs as an adequate model for ensuring customers are protected. Utility tariffs are financial structures that govern how different customers with similar needs will pay for the energy they need.
Kentucky Power has negotiated with TeraWulf Inc. for what could become Kentucky’s largest data center to date near Ashland. The American Electric Power-owned utility applied a standard large-load customer tariff to the agreement that ensures data center customers pay 100% of grid upgrades and ensure long-term contract guarantees.
The TeraWulf project has already faced significant pushback from nearby residents, as have other proposed data projects around the state.
Officials tout first EPIC report
King, the EPIC director, said the report isn’t meant to make the case for or against data centers. Instead, the report is about providing necessary information about these centers and their potential economic impacts.
“This report also reinforces a simple principle: economic development and rate payer protection are not mutually exclusive,” King said. “Kentucky can pursue both. Kentuckians deserve confidence that growth can occur while existing customers remain protected.”
King said Kentucky can learn lessons from other states, like Ohio and Virginia, when it comes to protecting utility customers from data center energy costs. Both have seen an influx of data centers, he said.
Since late last year, EPIC has turned its attention to the formation of an energy-use roadmap in Kentucky, partly in response to the growth of power-hungry data centers. In January, the commission highlighted a “critical mismatch” between the timeline for starting data center operations and building new power plants.
Decision-makers must be equipped with better demand forecasting that takes into account data center load characteristics that differ from seasonally variable traditional manufacturers, the commission said earlier this year. The commission characterized Kentucky’s energy context around three main pillars: demand, supply and transmission infrastructure.
Senate Majority Caucus Chair Robby Mills, R-Henderson, said EPIC will better inform legislators ahead of the 2027 session and help decide whether lawmakers will pass a data center bill.
“We’re in a learning position, and I think we’re still taking in information to figure out if there is a need for it or not,” Mills said.
EPIC established to protect fossil fuel interests
Lawmakers stood up the commission in 2024 over the objections of investor-owned utilities and environmental groups who worried it could put up bureaucratic barriers to replacing outdated coal-fired power plants.
The General Assembly gave the 18-member taxpayer-funded commission the authority to review requests to close fossil fuel-fired plants before the state’s Public Service Commission — the primary regulatory body for overseeing public utilities.
Those recommendations aren’t binding, but they can delay the start of a formal regulatory review by up to 180 days.
Since its founding, EPIC has only been approached by one Western Kentucky utility to retire a natural gas-fired combustion turbine that suffered a “catastrophic failure” in 2024. The commission opted to make no formal recommendation at all.
But the commission’s role — as envisioned by one of its primary backers, Senate President Robert Stivers, R-Manchester — is more than just a legislative-sponsored regulatory review board. Stivers told fellow lawmakers two years ago that the General Assembly should lean on the commission for “independent” advice on energy policy.
He said Senate Bill 349 establishing the commission was not a “coal bill,” but it’s been inextricably linked to the coal industry ever since. Dependable Power First Kentucky, an arm of the mining advocacy group America’s Power, became a strong public advocate for the bill in 2024.
Joe Craft, a Kentucky native who made his fortune in the coal industry, is a former America’s Power chairman. He has emerged a prominent Republican donor with close ties to Stivers. The two met as recently as early last month for a closed fireside chat in Hazard, Craft’s hometown.
Earlier this year, the Republican-controlled legislature passed a bill over Democratic Gov. Andy Beshear’s veto that shielded EPIC records and correspondence from Kentucky Open Records Act, and removed a University of Kentucky employee from the commission’s powerful executive committee in favor of a business manager for one of Craft’s Alliance Resource Partners subsidiaries.
The bill also stripped Beshear’s appointment power and gave them to Republican Attorney General Russell Coleman.
EPIC membership automatically includes a plurality of coal industry representatives alongside those from the oil and gas industries, nuclear power industry and one renewable electricity representative.
