Electric co-ops: Say no to data centers

They have massive demands. And if this proves to be like the dot.com meltdown of the early 2000s?

 

by John Gavan

Since the 1930s, America’s rural electric co-ops have provided reliable and affordable power to places that investor owned utilities would never serve. The co-op model of member ownership has served rural Americans very well.

Now, the rise of AI and its driving need for more data center capacity is turning the electricity supply situation upside down across the United States. This issue has been mostly relegated to cities so far but now as they run out of power, a move to rural areas by the tech industry is afoot.

Traditionally, electric co-ops have operated as very fiscally conservative organizations, and this is why we have seen very few go belly up. Our local Colorado Ute co-op was an exception back in 1990. Local board governance and a relentless focus on the best interests of co-op members has generally kept electric co-ops very financially strong with electric rates lower and more stable than those of investor-owned utilities.

Now as the tech industry’s data center developers go into overdrive to secure more processing capacity, electric co-ops need to be more vigilant that ever about getting lured into high-risk electric supply contracts with these entities. Supplying data centers, which can consume as much electricity and water as a medium sized city, can demand massive expansion of a utility’s generation and transmission resources. This could amount to hundreds of millions of dollars of new capital expenditures by the co-op.

To complicate matters, many financial experts are vocally urging caution as the AI/Data Center business has all the ear marks of a massive bubble. If it pops, it could make the Dot Com meltdown of the early 2000s look like a minor blip. Such an event could leave a co-op holding the proverbial financial bag as the data center clients fade away.

So, this is the time for electric coops to be very fiscally conservative and to always put the interests of their members first. Avoiding high risk entanglements with volatile tech industry players is the smartest course of business. So, co-op members…say NO to data centers!

John Gavan, a resident of the Paonia area of Colorado, was a director of Delta-Montrose Electric Association from 2014 to 2018 and a member of the Colorado Public Utilities Commission from 2018 through 2022..