Electricity generation in Kentucky is expanding at a pace not seen since the rural electrification wave of the 1930s and 1940s, driven by a surge in industrial and technological investments, according to Linda Bridwell, executive director of the Kentucky Public Service Commission (PSC). The decisions made today will shape the state’s economic trajectory and influence utility costs for all residents and businesses.
To manage the financial implications of rapid growth, utilities are proposing a new cost structure: a dedicated tariff for large power consumers, particularly data centers. Known as Rate Data Center Power (DCP), this model would require major projects to cover the upfront costs of new power infrastructure they necessitate.
Even without accounting for data centers, Kentucky’s current and planned energy projects are set to increase its 18.3 gigawatts of generation capacity by at least 20% within the next five years. This expansion supports a record-breaking economic boom, including high-profile investments like Ford’s $5.8 billion BlueOval SK Battery Park, the largest single project in state history.
However, the emergence of over 20 potential data center developments introduces unprecedented demand. These facilities, essential for artificial intelligence and cloud computing, consume vast amounts of electricity—potentially requiring the state to more than double its existing power output.
Kentucky’s appeal—low electricity rates, favorable business conditions, and strategic location—has made it a top contender for data center siting. Yet this growth brings financial risks. Historically, infrastructure costs have been distributed across all ratepayers, but regulators now insist that new demand should not burden existing customers.
The PSC has been firm: new economic ventures creating additional utility needs must shoulder their share of associated costs. This principle underpins the proposed DCP tariff, modeled after similar policies adopted in Oregon and Ohio.
East Kentucky Power Cooperative (EKPC), which serves 1.1 million people across 89 counties, has submitted a 19-page proposal outlining the framework. Under the plan, any customer requiring 15 megawatts or more of continuous power would trigger the DCP process. Projects needing 250 MW or more would be responsible for the full cost of new generation facilities.
Building a 250 MW natural gas plant could cost between $425 million and $500 million, factoring in land, grid connections, and construction. The U.S. Energy Information Administration estimates $1.1 million per MW for the plant itself, with additional expenses pushing the total higher.
The upfront payment requirement protects utilities and consumers from financial exposure if a project fails or defaults. “We need assurances that communities won’t be left with the bill,” Bridwell noted, referring to the broader principle behind such policies.
EKPC is advancing multiple generation projects, including a 745-MW natural gas unit at Cooper Station, expected online by 2030, and a 214-MW flexible plant near Liberty capable of rapid response during peak demand. Two new solar facilities—one 96 MW in Marion County and another 40 MW in Fayette County—are also in development.
Meanwhile, Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU), serving 1.3 million customers, are shifting their energy mix. By 2032, coal’s share will drop from 84% to 52%, while natural gas rises to 46%. They are adding a 645-MW gas unit at Mill Creek (completion in 2027) and pursuing two additional 645-MW units at Ghent, with operations starting in 2030 and 2031.
A stipulation agreement filed in July outlines key commitments, including emission reductions at Ghent Unit 2 and the potential extension of Mill Creek Unit 2’s operation until 2031. Battery storage plans at Cane Run have been withdrawn, though future proposals remain possible.
The Tennessee Valley Authority (TVA), operating over 3 GW in Kentucky, has also seen rising demand, particularly from data centers and cryptocurrency mining. While crypto loads fluctuate with market conditions, data center demand is more stable but grows rapidly—new facilities can come online in 12 to 36 months, while building equivalent supply takes 3 to 5 years.
TVA maintains a balanced energy portfolio, including hydro, coal, gas, and renewables. Its Kentucky assets include the 1.1 GW Shawnee coal plant, the 1.1 GW Paradise Combined Cycle Plant, and hydroelectric capacity at Kentucky Dam.
Utilities and regulators are navigating a complex balancing act: encouraging economic development while ensuring affordability and reliability for all customers. The goal is to foster growth without imposing undue financial strain on households and small businesses.
— news from Lane Report
— News Original —
Utilities: Tariffs for Data Centers?
Electric power generation is booming at a pace the nation hasn’t seen since the sweeping electrification of rural America in the 1930s and ’40s, according to Linda Bridwell, executive director of the Kentucky Public Service Commission, which regulates and sets utility rates across the state. n nThe stakes are unprecedented, too. Choices made in the next months and years will permanently boost or limit the state economy and impact the budget of every resident and business that pays an electric bill. n nTo address the financial impact, utilities are proposing a major shift in cost structure. Under the new tariff — called Rate Data Center Power (DCP) — large projects would be required to cover the cost of new power plants upfront. n nThe good news is that even without factoring in data centers, current and planned projects are on track to boost Kentucky’s 18.3 gigawatts of generation capacity by roughly 20% — or more — within the next four to five years. And that will allow the state to keep up a record economic winning streak. n nHowever, factor in the electricity-gobbling data centers — with more than 20 projects reportedly eyeing Kentucky sites — and the stakes for everyone can legitimately be called shocking. Data centers, with acres of computers to power artificial intelligence services now being incorporated into every sector, consume so much electricity that utilities could need to more than double their current capacity. n nFor five years running, Kentucky has landed the largest economic projects in state history as vehicle makers shift to electrification and manufacturers reshore supply chains. It is ongoing. In August, another $6.3 billion in investment involving 1,000 jobs occurred in 10 days, more than the state typically saw in an entire year a decade ago. n nNew growth, new costs n nElectricity capacity is the enabling cornerstone of today’s economy but growing it is a major capital commitment. The PSC in its recent rulings has been “very adamant,” Bridwell said, that existing customers not bear the financial brunt of increasing capacity for a burst of new demand. n nState law requires utilities to provide electric service to any new home, business or industry in their service area. Also by law, the PSC must set rates that fund not only utility infrastructure and reliable operations but a “reasonable” return on assets — around 10% is the practice. n nAs utilities race to expand their generation fleets to power historic economic growth, many Kentucky residents and businesses worry that a jolt in rates could follow the jobs, investment and wealth they otherwise welcome. To insulate present users from ongoing cost shocks, states and utilities are turning to a new tool with an old name: tariffs. n nKentucky regulators now have an active request to follow the groundbreaking lead of Oregon and Ohio, which enacted electric power tariffs in June and July, respectively. n nDozens of data center projects are searching for sites nationwide — with Kentucky high on the list thanks to its low electricity rates, business-friendly costs and strategic location near the eastern U.S. n nAfter a stagnant decade in which users and utilities alike adopted efficiency measures and the pandemic shorted out growth, demand has been expanding the past several years. Still, far more generation capacity will be needed to power the wave of data center campuses in search of sites — all aiming to meet the explosive growth in artificial intelligence services. n nExpanding the fleet costs billions and for a century, such dollars have ultimately come from all users. Now, however, electric utilities want tariffs specially for customers whose projects create the need for new generation. n nUtilities, states and tax bases find economic projects and investment attractive, but not at the cost of burdening residents with monthly bills they can’t afford. Eastern Kentucky residents already bear some of the highest rate burdens in the country due to the cost of infrastructure and operations in difficult geography being spread across a sparse and declining population. The solution is economic development and jobs, said Eastern Kentucky native and KyPSC Chair Angie Hatton in the Lane One-on-One interview in May. n nData center projects could help. n n“Yes, there are economic development benefits,” Bridwell said, “but that new growth is going to have to pay their fair share of building the capacity for that new demand.” n nEast Kentucky Power Cooperative (EKPC), which provides electricity to 16 cooperatives in 89 counties serving 1.1 million Kentuckians, has four new generation projects and expansions in the works, along with plans to double investment in energy efficiency and demand-side management programs. It has 3.5 gigawatts of winter capacity but experienced record peak demand of 3.7 GW in both January 2024 and January 2025, which was met with power from PJM, a 13-state regional wholesaler. n nOn April 30, EKPC submitted a 19-page proposal to PSC to create data center tariffs that the data center operator would pay up front. n nEKPC’s proposal calls for a Rate DCP process to be triggered if a new customer needs 15 MW or more of continuous power, with projects requiring 250 MW or more expected to cover the entire cost of new generation stations. Utilities, project owners and state regulators together would arrive at the cost of building and operating new electric generation or contracting for it from other providers, such as PJM. A data center campus could opt to build its own supplemental power generation, but the local utility would be the primary electric supplier. n nThe U.S. Energy Information Administration estimates new combined-cycle natural gas power generation units, which is what Kentucky’s electric utilities primarily build today, cost around $1.1 million per megawatt. That price doesn’t even include the land, grid connection and other factors that bring costs to $1.7-2 million per MW, putting the total cost of 250 MW at $425-500 million. n nBalancing the costs of growth n nThe upfront payment is to keep utilities and their customers from being stuck with the bill for a generation project if a data center does not come to fruition, goes out of business or can’t pay its bills in the ensuing several decades. n n“You have to make sure there are some guarantees that the community doesn’t get left holding the bag if you go bankrupt (or) if you damage things,” Bridwell said, speaking not about the specific Rate DCP proposal but major projects in general. n nKentucky has won an unprecedented $40 billion in private-sector investment with more than 60,000 jobs the past five years, most notably electric-vehicle projects like Ford’s big BlueOval SK Battery Park in Glendale, just south of Elizabethtown. The first of what will be twin EV battery plants with an eventual workforce of 5,000 began production Aug. 19. Announced in 2021 as a $5.8 billion undertaking, it is the biggest investment in state history. n nA $6 billion data center proposal revealed for Oldham County at midyear was quickly postponed indefinitely due to local residents’ concerns about its various impacts. n nSmall business creates more jobs overall than the splashy publicly announced projects that state economic developers have a hand in. But it is the big operations that build the reliably steady demand profile utilities need to manage their systems efficiently and more cheaply — and set rates accordingly. n nThe PSC is looking for some kind of balance in its approach to encouraging growth without creating a financial burden for ratepayers. n n“The commission was very, very clear” in its handling of recent proposals, Bridwell said. “Yes, we support economic development, but new economic development that creates new utility service has to pay their fair share of that cost of the service.” n nElectric capacity expansion is happening n nEKPC plans to add a new 745-MW natural gas combined-cycle unit at Cooper Station in Pulaski County, effectively tripling that plant’s capacity to meet demands. The new unit will feature two combustion turbines whose exhaust heat is captured to power a third turbine with its own generator. The new units will provide reliable 24/7 power for southern Kentucky’s grid and are expected to be in operation by 2030. n nEKPC also plans to build an innovative 214-MW natural gas power plant near Liberty in Casey County, with 12 natural gas engine/generator sets capable of starting in minutes and quickly ramping up and down. This can support demand during peak usage hours or when solar output is reduced. The plant is expected to be in operation by late 2028. n nTo manage carbon emissions and hedge against energy costs, EKPC plans two new solar facilities. A Marion County facility just north of Lebanon will have capacity to generate 96 MW. A Fayette County facility along I-64, just three miles from EKPC’s very first solar facility, will have enough capacity to generate 40 MW of electricity. n nEKPC plans to convert coal units at Spurlock Station in Mason County and Cooper Station in Pulaski County — currently slated for closure in 2032 — so they can run on both coal and natural gas. n nEKPC also plans to double its demand-side management/energy efficiency (DSM/EE) programs. By 2030, this and existing programs are expected to cut winter peaks by 38 MW and reduce total energy use by 69 gigawatt-hours. n nLouisville Gas & Electric and Kentucky Utilities, the state’s largest provider, has a capacity of just over 7.2 GW and serves 1.3 million customers. Its current fuel stream is 84% coal, 15% natural gas and 1% renewables, mostly from McAlpine Dam at the Ohio River falls and Dix Dam near its EW Brown generating complex in Mercer County. n nIf the PSC approves LG&E and KU’s present plans, the utility’s generation mix will undergo a major shift by 2032 to 52% coal, 46% natural gas and 2% renewable. And it will increase its generating capacity. n n“Kentucky’s economy is on fire and we expect that to continue,” said John Bevington, senior director of business and economic development for the Louisville-headquartered utility. n nLG&E and KU Energy is taking an all-of-the-above approach to increasing electricity generation capacity for Louisville, Lexington and many of the most active portions of the middle of the state, said Liz Pratt, senior director of communications and corporate responsibility. She said this allows the utility, which is a subsidiary of publicly owned PPL Corp. of Allentown, Pennsylvania, to be flexible and among the most reliable in providing power. n nLG&E is now adding a 645-MW natural gas combined-cycle unit to its Mill Creek Generating Station, which is expected to be finished in 2027. This year, it is adding 120 megawatts of solar generation in Mercer County at E.W. Brown, along with a 125MW battery storage unit. It has signed an agreement for a 120MW solar facility to be built in Marion County. n nAs part of the multi-step process of expanding generation—which typically drives rate increases—LG&E has requested a certificate of necessity from the PSC to add two 645-MW natural gas combined-cycle units and 400 MW of battery storage at its Ghent Generating Station near Louisville, while also upgrading emission controls so Ghent Unit 2 can operate during the summer ozone season. n nLG&E and KU and several parties that intervened legally in the PSC process reached a stipulation agreement that was filed with the KPSC for approval on July 29. The agreement supports: n nConstruction of the two 645-MW natural gas combined-cycle units with advanced technology as proposed. The first Brown 12 unit would be available in 2030; the second Mill Creek 6 unit would come on line in 2031. n nInstallation, as proposed, of a catalytic reduction facility available in 2028, to reduce nitrogen oxide (NOx) emissions for Ghent Unit 2. n nLG&E and KU will request to extend operation of coal-fired Mill Creek Unit 2, subject to environmental permitting, beyond its planned 2027 retirement date until Mill Creek 6 is in service in 2031. n nLG&E and KU will withdraw a request to add battery storage at Cane Run but maintain a right to file a separate request for battery storage in the future if necessary. n nTVA a major Kentucky provider also n nIn south-central and western Kentucky, the Tennessee Valley Authority, a major national electric utility, operates more than 3 GW of capacity within the state and over 32 GW across its multistate system. This includes nuclear power, which Kentucky law still prohibits but is currently under review by the PSC. Additionally, TVA contracts for 8 GW of power from external sources, according to Clifton Lowry, vice president of planning and investor relations. n nUniquely, TVA has an almost equally balanced fuel mix of hydropower, coal, natural gas and wind/solar obtained from huge multistate systems in the Midwest. n nTVA had an all-time record demand of around 36 GW in January 2025. n n“We’ve been seeing growth on the system since 2021,” Lowry said, explaining that more Americans are moving to the Tennessee Valley region, largely because of its quality of life. More recently, industrial growth has followed. About a third of TVA’s overall electric demand is now industrial. n n“The data center trend is one that’s front of mind for all utilities,” Lowry said. “We’ve seen a decent bit of growth from data centers in the industrial space.” n nTVA’s Kentucky assets are only a small portion of its 32GW but are considerable, nonetheless. n nThe 1.1 GW Shawnee Fossil coal plant that has operated in Paducah since 1953 added catalytic reduction devices so four of its units can run year-round. There is a 223MW facility of five units at Kentucky Dam, which is one of 29 hydroelectric dams in TVA’s multistate system. n nThe Paradise Combined Cycle Plant in Muhlenberg County, built in April 2017, has a capacity of 1.1 GW. Another 750 MW at Paradise Combustion Turbine came online in 2024 with three natural gas peaking units that can reach full capacity in 12 minutes. The Marshall Combustion Turbine site in Calvert City has eight fast-start turbines that can hit 571 MW in summer. n nMuch of the demand growth TVA has seen for more than a year has been from data centers and cryptocurrency mining projects, Lowry said. The crypto operations’ loads are not as reliable because they rise and fall with crypto market prices, so TVA has implemented specific pricing structures for those operations. n nLowry said TVA has always viewed creating prosperity in its service area as part of its mission but it is cautious in its outlook toward data centers, especially in light of discussion that eight, nine or 10 gigawatts of data center operations are currently looking for locations in or near the utility’s region. n nNew demand from data centers can occur in from 12 to 36 months, he said, but it takes three to five years to build a 500 MW to 1 GW of new supply. n nPart of managing such complex systems is implementing different rates for different classes of customers. n nTVA has separate rates for industrial, manufacturing, commercial, residential and the local power company customers it wholesales to. Steady industrial demand is cheaper to provide and has lower rates than widely varying residential demand, with its dramatic peaks in the morning and evening. n nData centers are creating new challenges that utilities and their rate-setting regulators are now in the process of assessing in search of financial mechanisms that support the broad economy and produce jobs and overall quality of life with fair, affordable, reliable results.