Former PUC commissioner: data centers could shift large electric and water costs onto Colorado ratepayers

John Gavin, a former Colorado Public Utilities Commission commissioner, told the Regulatory Agencies board that modern data centers are “essentially a warehouse for computers” and that their rapid growth poses potential risks to Colorado utility customers and water supplies.

Gavin said the recent arrival of large, campus-style data centers—driven in part by artificial intelligence hardware—has dramatically increased power and cooling needs, and pointed to a 77-megawatt data center in Aurora as an example of the scale now being built.

The issue matters because large new electric loads require transmission and substation upgrades, can consume significant quantities of water for cooling, and may receive discounted utility rates or other incentives that shift costs to other customers.

Gavin told the board that modern server racks draw far more power than in the past, “Today, a server rack burns a 20 kilowatts.” He said developers increasingly buy large parcels—“60 to a hundred acres”—to build expanding campuses rather than the smaller urban data centers of earlier decades. Those campuses can require on-site generation, large transmission upgrades and substantial water for evaporative cooling, he said.

The immediate Colorado examples Gavin cited included the QTS project in Aurora, which he said is using about 77 megawatts and paid approximately $28,100,000 for a new 230 kV double‑circuit transmission line and substation upgrades to interconnect that first building. He said the project secured an economic development rate (EDR) tariff award; Gavin estimated, by his “back‑of‑the‑napkin” calculation, that at 77 megawatts the EDR could amount to about a $50,000,000 annual discount on power costs for that facility and warned that the difference is ultimately borne by other ratepayers.

Gavin noted two recent legislative developments he said were relevant: HB 1177, which he described as having “sweetened” the EDR tariff, and SB 280, which he said failed in the legislature. He also urged the board to watch artificial intelligence policy, saying Colorado had passed an “AI protections bill” and that further legislative work might be needed.

Board members asked about cooling technology and load flexibility. Gavin said cooling approaches affect both water and electricity use: evaporative cooling reduces electricity demand but consumes water, while vapor‑compression refrigeration reduces water use but can add roughly “40% of the power consumption” in some systems. He described a trend back to water cooling for high‑performance AI processors and said that, while thermal storage can provide some load flexibility, the sheer heat output and continuous operating profile of many cloud and AI workloads limit demand‑response opportunities.

Several board members pressed Gavin on local impacts: where centers are likely to be sited, contractor availability, and environmental tradeoffs. Gavin said the Front Range corridor—Denver and nearby suburbs—remains the most likely location for large data centers because of fiber connectivity and power availability; he flagged Pueblo and the Western Slope as places that have courted data centers but noted local capacity constraints and limited spare power in some areas.

Gavin urged caution about subsidies. “Let other states make the mistake,” he said, arguing the industry is wealthy and that Colorado should avoid large subsidies or long‑term discounted power rates that shift costs to other customers.

The board asked staff to track several items raised in the discussion, including the Aurora QTS interconnection costs, the EDR tariff changes referenced as HB 1177, and any new legislative activity related to data centers or AI.

Looking ahead, Gavin recommended close regulatory and legislative attention on AI hardware deployment, utility interconnection processes, and how large loads are classified and charged so that cost shifts to residential and small commercial customers are minimized.

Ending: Board members thanked Gavin for the presentation and said staff would share the detailed slide pack he referenced for deeper review.