Vermont transmission officials warn federal proposal to allow transmission-level data‑center hookups could erode state rate oversight

VELCO officials told the House Energy and Digital Infrastructure Committee on Feb. 12 that a proposed federal approach to allow data centers to interconnect at the transmission level could remove a key layer of state oversight over rates and renewable‑energy obligations even as states would retain siting authority.

"We do not have retail customers in the same way that a distribution utility would have," said Shana Loisel of Vermont Electric Power Company (VELCO), explaining that VELCO is a transmission utility subject to Federal Energy Regulatory Commission rules. She added, "To date, there are no current requests, for data center interconnection to Velco's system." The testimony framed H.727 and related questions about where data centers would buy power and how costs would be allocated.

The witnesses, including VELCO general counsel Mark Grama, said transmission service is federally regulated while distribution service and retail rates are largely under state law and Public Utility Commission (PUC) oversight. Grama described a possible federal rulemaking prompted by the U.S. Department of Energy that would require regional transmission operators such as ISO New England to develop tariffs allowing wholesale (transmission‑level) access for data centers. "It would be to shift jurisdiction that currently sits with the state," he said, noting the proposed change would leave siting decisions to states but could let a federal tariff determine rates and terms for data‑center service.

Committee members pressed witnesses on practical consequences. Representative Kathleen James asked, "Does that mean they can't do it, or does it mean there's not a process in place if they want to do it?" Grama replied that Vermont law currently does not allow retail transmission service and that an entity seeking wholesale access would generally have to become a distribution utility or pursue an unusual pathway—GlobalFoundries, he said, built a self‑managed utility arrangement to accept roughly 50 megawatts of service.

Witnesses emphasized protections the region already requires if a large load tries to connect. Grama said large customers must pass comprehensive planning and system‑impact studies to show they will do "no harm" to grid reliability; necessary upgrades would be identified and allocated to customers that benefit.

A recurring concern was how a federal tariff might affect state policies. Committee members asked whether a federal tariff would bypass Vermont's renewable portfolio mechanisms; witnesses said a federal tariff "would not presumably" include a state renewable portfolio standard component, potentially reducing the state's ability to require RPS compliance for data‑center consumption if service were governed by a federal tariff.

Officials also discussed how charges would flow under wholesale interconnection: a data center paying for transmission service would likely pay regional transmission charges (for example, regional network service managed by ISO New England) directly into the ISO construct rather than through a local distribution utility, changing who collects which revenues and how costs are allocated.

The witnesses described ongoing federal and regional processes. They cited a DOE letter directing FERC to consider a rule and said FERC has been asked to issue a rule by April (according to testimony), after which ISOs would have months to develop tariff language—typical timelines mentioned were six to nine months to draft tariffs and additional time for FERC acceptance, subject to litigation risk.

Loisel and Grama noted a parallel FERC proceeding focused on PJM, where pro forma tariffs and fast‑track pathways have been explored for data centers that bring their own generation or agree to be curtailable—measures that could mitigate impacts on other ratepayers. "If you're a data center that brings your own generation, or if you're willing to be curtailable, then we're going to fast track you," Grama said, describing one objective behind tariff design.

Throughout the hearing VELCO representatives underscored reliability as the paramount concern. They warned that if state regulatory levers over rates are narrowed, policymakers could lose effective tools to protect ratepayers. The testimony did not report any current, concrete requests to interconnect data centers to VELCO's system; rather, witnesses described possible pathways, protections, and the evolving federal process.

The committee did not take action during the hearing. Witnesses said they would continue to collaborate with the Department of Public Service and ISO New England and indicated they would provide additional detail in follow‑up testimony or technical sessions.