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New Ways to Power Data Centers and Other Large Energy Users
How Bring-Your-Own and Clean Transition Tariffs could meet the energy needs of large customers while reducing risks for other ratepayers.
Note: In this insight brief, “tariffs” refer to electricity rate tariffs that govern utility services, not trade-related import/export tariffs.
Large energy users such as data centers and other advanced manufacturing facilities are driving demand for electricity. This demand is outpacing the rate at which existing resource planning, procurement, and market processes can identify and integrate new generation in the United States. This mismatch is raising concerns for public utility commissions and grid operators as they consider how to connect large loads without comprising system reliability, affordability of electricity bills, and state decarbonization policies.
To address this, states are turning to large load tariffs to bring large energy users onto the grid in a transparent, standardized way. These tariffs are focused on establishing (1) rates that account for large loads’ potential grid impacts, and (2) measures that reduce the risk of cost increases to other ratepayers, primarily by focusing on the risk of overbuilding due to load that doesn’t materialize. We will refer to this kind of tariff as a “baseline” large load tariff.
Although valuable for transparency and risk mitigation, a “baseline” large load tariff typically doesn’t contain provisions that speed up getting more energy online or that enable customer choice. To realize these additional benefits, a baseline tariff can be complemented by a Bring-Your-Own (BYO) tariff, which defines differentiated rates if large energy users pay for new power resources themselves, allowing new resources to be added quickly and dynamically. These BYO taffirfs can be a separate tariff or be implemented as a voluntary element of a baseline tariff. Eligible resource types can be restricted to clean energy under a subtype of BYO tariffs, Clean Transition Tariffs. Stakeholders should evaluate eligibility rules to determine which resources can participate in BYO tariffs and consider how BYO tariffs can align or conflict with policy goals on decarbonization and affordability.
Procurement under BYO programs can be arranged in a variety of ways
What is a BYO Tariff?
A bring-your-own (BYO) tariff contains a mechanism that allows large electricity customers to fund the development of one or more system resources through a procurement pathway that operates alongside existing utility resource planning processes or wholesale market procurement. The customer then receives electricity at a different rate and terms than what they would pay without bringing that resource. Resources procured through a BYO tariff can be added to those already selected through utility planning or may e intended to accelerate the deployment of anticipated resources awaiting interconnection. This could be especially valuable in regions like PJM where new resources can wait years to connect to the grid.
We have seen a variety of BYO programs proposed over the past year in both vertically integrated and market contexts:
- PJM’s recent board letter outlines a Bring Your Own New Generation Program and accelerated interconnection for generators greater than 250 MW in size. The program is for load-serving entities. There will likely be a complementary BYO retail tariff to assign costs to the appropriate large load customers.
- Electric Cooperative Tri-State Generation and Transmission Association refers to its member cooperative self-supply program as Bring Your Own Resources program. With a BYO retail tariff in place, member co-ops could leverage the program to offer a procurement pathway for large load customers.
- The settlement agreement for Evergy Kansas’ Large Load Rate Plan includes a Clean Energy Choice Rider to “support the procurement of clean energy resources and/or replacement of identified existing resources in lieu of or in addition to the Company’s Preferred Resource Plan.”
- Through NV Energy’s Clean Transition Tariff, Google procured an enhanced geothermal system to meet some of its demand and make progress toward its corporate goal of 24/7 clean energy.
- The settlement agreement for Georgia Power’s 2025 Integrated Resource Plan added a Customer-Identified Resource (CIR) procurement option to the utility’s Clean and Renewable Energy Subscription (CARES) program. CIR resources must meet or exceed the average total net benefit of the broader CARES portfolio.
Aligning large load interests and system outcomes
BYO tariffs can be structured to offer large load customers a “speed to power” opportunity to connect to the grid and begin operating earlier. While operationalizing this pathway will vary by jurisdiction, grid operators can accelerate interconnection for eligible load and generation, as seen in the recently approved High Impact Large Load Generator Assessment process from SPP, or PJM’s Bring Your Own New Generation proposal.
Aside from expedited interconnection, a BYO tariff may allow independent third parties to develop and construct resources in parallel with the utility’s efforts. This could accelerate the timeline for the utility to procure additional capacity to serve the load request.
For utilities and ratepayers, BYO tariffs may offer a lower-risk mechanism to invest in resources that are not included in a utility’s current investment plans. They can also help insulate other ratepayers from the risks and costs associated with sourcing new generation. This can be done by allowing specific resources to be assigned to participating customers (large loads), rather than embedded in the rate base where costs are recovered by allocating them across all ratepayers. This also ensures that resources identified to supply other ratepayers are not preempted by large load customers.
For new clean energy technologies, BYO tariffs can be a vehicle for insulated investment and can drive costs down as these resources scale. Ratepayers may benefit from increased grid reliability, reduced emissions, and economic growth from these technologies while avoiding the associated financial risk if the pricing and contracting mechanisms are structured appropriately. This would be similar to how corporate procurement of wind and solar helped accelerate their transition from higher priced resources into some of the lowest-cost resources on the grid.
Design considerations for implementation
Pricing and contracting mechanisms
A BYO tariff provides the opportunity to align the costs and benefits of the new resource with the interests of large load customers seeking a faster interconnection. BYO tariffs can be designed to support multiple resource ownership and procurement structures that we sort into four categories below. Payment for underlying grid services (transmission, distribution, balancing, and reliability) may be set forth in the BYO or the baseline large load tariff.
Alignment with system planning
BYO tariffs could specify how customer-funded resources are incorporated into utility system planning and load forecasting to promote optimization and efficiency across generation, transmission, and distribution plans.
BYO tariffs can complement planning reforms by providing a mechanism to allocate cost and risk of large-load-driven resources directly to participating customers. By contrast, this may be more challenging to achieve through standard utility planning in the near term. Regulators could validate that the utility is accurately capturing resources procured under BYO tariffs in their long-term planning process to avoid building redundant and underutilized resources that create a more expensive system for ratepayers.
A BYO tariff also creates an opportunity to greenlight projects the utility did not select and inform subsequent resource procurement cycles. Projects may be shovel-ready yet excluded due to utility cost thresholds, caps on resource types, or simply longer planning cycles. Regulators can ensure that the utility uses the large load customer experience of bringing new resources online to update cost assumptions for such resources in future planning cycles.
Emission impact assessment and reporting
BYO tariffs, particularly those focused on clean energy resources such as Clean Transition Tariffs, may include provisions to assess and report emission impacts. The tariffs could incorporate hourly load matching or other accounting approaches to distinguish whether the procured resource or other grid resources are meeting the customer’s demand.
Flexibility as a part of BYO tariff implementation
Regulators and grid operators seeking to leverage demand-side flexibility in large load integration may implement interruptible service tariffs to allow large loads to connect quickly or expand service in exchange for a commitment to reduce demand through load shedding, self-supply, or procurement of flexibility elsewhere. The latter presents an opportunity to pair interruptible power and BYO tariffs to procure off-site flexibility, such as virtual power plants.
Expediting new clean energy procurement
As jurisdictions develop baseline large load tariffs and update utility planning processes, stakeholders can leverage BYO tariffs as a complementary strategy to provide a path to speed and clean resource selection for large customers, manage risk and affordability concerns for ratepayers, and supplement utility resource plans.
To learn more about RMI’s research on tariffs, grid planning, and load flexibility, contact Charles Cannon <ccannon@rmi.org> or talk to an RMIer at the upcoming NARUC Winter Policy Summit.