AES Ohio’s proposed data-center tariff adds exit exposure to collateral

AES Ohio’s July 2026 data-center proposal would make credit support a material part of securing utility service. For customers subject to its new-contract requirements, collateral would combine ramp-period minimum charges, three years of service-term minimum charges and an exit fee. A qualifying ultimate parent or corporate affiliate could provide a guarantee, but a credit rating alone would not remove the security requirement.

The stipulation signed on July 21 proposes these terms within AES Ohio’s 2027–2029 distribution-rate settlement. It asks the Public Utilities Commission of Ohio to approve the package; it is not itself an approval order. The Ohio Consumers’ Counsel, a signatory, likewise described the settlement as requiring commission approval. This analysis examines that July proposal rather than a subsequent decision or an executed customer agreement.

The customer would support construction and a long payment term#

The proposed tariff defines data centers broadly, including cryptocurrency mining, with aggregate monthly maximum demand above 25,000 kW. It is not limited to AI facilities. A customer would need a specific site and ownership or exclusive land-use rights, then reimburse AES Ohio for the facilities study.

A construction service agreement would put actual direct-connection costs, including a tax gross-up, on the customer. If it failed to take service, it would also be responsible for other necessary network-upgrade costs, including the tax gross-up and accrued financing allowance. During the contract, the customer would pay transmission upgrades needed to serve it plus a reasonable share of existing transmission costs. The proposed cost boundary includes projects not directly allocated to the customer that would not have been planned without its request.

After construction of the relevant facilities or phase, the ramp could last up to two years. The service term would then run for at least ten years after the ramp. Minimum billing demand would be at least 85% of agreed contract capacity, including the capacity specified during the ramp. That is a demand-billing floor, not an obligation to consume 85% of a fixed energy quantity.

The monthly minimum includes customer and applicable supplemental charges, demand and reactive-demand components, approved riders and any adjustment needed to reach the contractual demand floor. It would remain payable during the initial term despite curtailed, reduced, suspended or terminated service, unless the customer exited by paying the exit fee.

Collateral would include the cost of leaving#

After the ramp, termination would require at least 36 months’ notice. The proposed exit fee is the higher of minimum charges for at least 75% of the service term, or the facilities’ actual construction costs, including accrued financing allowance, multiplied by the percentage of the service term remaining, including a tax gross-up.

That exit fee would also enter the collateral calculation, alongside ramp-period minimum charges and three years of service-term minimum charges calculated at rates in effect when collateral was provided. Security therefore reaches beyond a few months of unpaid electricity bills. An investor assessing a new site would need the contract’s minimum-charge base and construction-cost exposure to size it; the public formula alone supplies no project-dollar amount.

The proposal permits one or more forms of security. A guarantee from the ultimate parent or a corporate affiliate must cover the full requirement, use a company-approved form, and satisfy ratings of at least A- from S&P and at least A3 from Moody’s, with liquidity greater than ten times the requirement. Alternatively, an unaffiliated qualifying bank could issue a standby irrevocable letter of credit, or the customer could provide cash. The guarantee is a way to satisfy collateral, not a blanket waiver.

Collateral would reduce annually for remaining minimum charges and exit exposure, while financial, ownership or market changes could trigger reassessment. As AIB’s Texas site purchase illustrates, identifying the obligation secured by a guarantee or letter of credit matters as much as its face amount.

Existing contracts and ratepayer credits change the analysis#

The proposed minimum-contract and collateral sections expressly exclude “Existing Load”: data-center load with a contract signed before January 1, 2027. Specified billing and other provisions would still apply, and load above an existing contract’s capacity would enter the tariff. A buyer of an existing site therefore could not assume the new-project security formula governed its whole load.

The settlement also directs exit-fee and collateral-forfeiture revenue to retail ratepayers, and excess minimum-demand charges to the applicable revenue requirement. It calls for a separate transmission cost-allocation proceeding. Those provisions explain the proposed financial bargain: customer commitments would support infrastructure built for data centers, while the treatment of those payments would protect other customers. Neither the signed settlement nor its requested January 2027 rate start establishes that this bargain had regulatory approval or was already embedded in a particular customer’s contract.