Pepco warns data centers can drive large new loads; proposes letters of credit and feasibility fees to limit ratepayer risk

Mark Scurano, senior economic development manager for Pepco (an Exelon company), told the Qualified Data Center Task Force that large data center projects typically require extensive grid study and can trigger multi-year interconnection and infrastructure upgrades. "Data centers are projected to require $6,700,000,000,000 in new investments internationally," Scurano said, and he cited U.S. data-center electricity figures that rose from about 58 gigawatts in 2014 to 176 GW in 2023, with forecasts that demand could increase substantially by 2028.

Nut graf: Pepco outlined procedural and financial protections designed to limit the risk that ratepayers bear the cost of transmission or distribution upgrades for projects that do not materialize, and described how studies and interconnection timelines can delay first power delivery by several years. The utility said it does not generate electricity, is regulated by state and federal agencies, and must assess impacts on the broader regional grid (PJM and neighboring utilities) when large loads cluster in a service area.

Scurano said Pepco treats proposals above roughly 50 megawatts as "large load" projects that require an initial feasibility study and, if pursued, advanced engineering and construction. He described two cost-control measures the company is implementing: a costly feasibility-study process (staff estimated study costs could approach $1,000,000 in some cases) and a Transmission Service Agreement (TSA) that requires a developer-provided letter of credit sized to a multi-year load-ramp projection. "We then take that. We look at the potential rate of each 1 of those years and we tell them they need to have a letter of credit for 10 years' worth of that load ramp," Scurano said. He said the letter-of-credit requirement is intended to allow Pepco to recover the difference if a developer underutilizes or abandons a project after Pepco makes grid upgrades.

Pepco said it will not arbitrarily deny service: the company is a regulated transmission-and-distribution provider and must offer equitable access under tariffs, but it must also ensure that grid upgrades are paid for by the requesting customer or secured via the TSA. Scurano said that because of clustering and the growing number of large loads, some interconnections can take five to six years. He also said utilities are seeing more regional coordination needs and that PJM and FERC-level considerations matter for assessing whether generation and transmission capacity can meet projected demand.

Task force members asked technical and policy questions: whether banks would issue the letters of credit (Pepco said the requirement is new and large corporations will need to satisfy their own bank underwriters), how the TSA collateral would be structured (Pepco described the letter of credit as a bank instrument tied to the developer, rather than a lien on utility infrastructure), and whether the TSA is an industry best practice (Pepco said other utilities are exploring similar protections and that Pepco is an early adopter). Members raised concerns about potential greenhouse-gas consequences of increased power use and asked Pepco to participate in future public sessions; task force staff confirmed invitations to PJM and other agencies are pending.

Ending: Pepco's presentation framed the technical and commercial complexity of accommodating data centers on the grid and identified policies the utility believes can reduce the chance that ratepayers would subsidize stranded infrastructure. The task force asked staff to seek PJM and other technical agency participation at a future meeting and to include the utility's feasibility and TSA descriptions in the task force's report to the County Council.