Why Are Ohioans Paying More?
Ohio residents continue to face steep increases in electricity bills. In comparison to July 2024, the average residential electricity bill in July of this year was approximately 23.3% higher, which is one of the largest increases in the nation. While inflation and natural gas prices play a role, a major driver is the rapid expansion of data centers.
With nearly 194 facilities across the state, Ohio now ranks fifth in the country for most data centers. As data centers continue being developed, the legal and regulatory framework governing who pays for the infrastructure to support this growth is now at the center of a high-stakes battle.
The Legal Question: Who Should Pay for Big Tech’s Power Appetite?
Traditionally, Ohio’s utility laws allowed infrastructure costs, such as new power plants and transmission lines, to be spread across all consumers. Today, however, tech companies are driving unprecedented demand, raising the question: should residential consumers subsidize grid upgrades primarily serving private data centers? Consumer advocates argue that cost-shifting is unfair, while utilities note that Ohio’s deregulated market limits their ability to build generation directly, which leaves costs up to the competitive market.
Ohio’s Regulatory Response: PUCO Steps In
In July 2025, the Public Utilities Commission of Ohio (PUCO) approved a tariff requiring large data centers to pay for at least 85% of their projected electricity usage for up to 12 years, regardless of actual consumption. Additionally, the tariff imposes exit fees on projects that are canceled after utilities incur costs. Key objectives of the tariff include:
- Protect ratepayers from bearing the cost of grid expansion.
- Ensuring data center operators contribute to infrastructure investments.
- Reducing risks associated with project cancellations after utilities incur significant costs.
The tariff also ended AEP Ohio’s moratorium on new data center agreements in Central Ohio, signaling that growth can continue under a framework that aligns costs with those driving demand.
Ongoing Legal Battles
The tariff has sparked litigation. Last month, the Ohio Manufacturers’ Association Energy Group (OMAEG) filed an appeal with the Ohio Supreme Court, arguing that PUCO’s approval of AEP Ohio’s tariff is discriminatory and violates Ohio’s Certified Territories Act. The appeal also challenges AEP’s prior moratorium on new data center connections, claiming it was unlawful and based on speculative load forecasts.
Environmental and Policy Dimensions
Ohio’s energy policy only further complicates the matter. Senate Bill 52 permits counties to ban or restrict large wind and solar projects, limiting renewable development and forcing reliance on natural gas and nuclear generation. This constraint makes it harder for data centers to meet sustainability goals and increases pressure on the grid.
What Does This Mean for Developers?
As Ohio’s energy policies evolve and legal challenges unfold, developers should keep several critical considerations in mind to protect project viability and manage long-term costs. From the time of project conception, developers should:
Plan for Tariff Compliance
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- Incorporate PUCO’s requirement to pay for 85% of projected electricity usage into financial models and contracts.
- Account for exit fees in case of project abandonment.
Leverage Incentives
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- Explore Ohio’s tax credits and economic development incentives early in the planning process.
- Structure your capital stack with available incentives to mitigate risk.
Integrate Renewable Energy
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- Consider on-site generation or power purchase agreements to manage costs and meet sustainability goals.
- Factor in local restrictions on utility-scale renewable projects.
Engage in Policy and Regulatory Processes
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- Participate in PUCO proceedings and legislative advocacy to influence future regulations.
- Monitor developments affecting large-load customers and infrastructure requirements.
Conclusion
Ohio is emerging as a key battleground in the national conversation on how to allocate the costs of powering the digital economy. PUCO’s new tariff marks an important shift, but it is only the beginning. Consumers can expect continued regulatory changes, litigation and legislative activity as utilities, policymakers, and stakeholders work to balance infrastructure needs with economic development goals.
For data center developers, this evolving landscape presents both challenges and opportunities. Navigating complex energy regulations, securing incentives and managing long-term cost exposure will be critical to project success. Proactive measures such as compliance planning, renewable integration and active participation in policy discussions, are essential for positioning data center projects to succeed in a competitive and rapidly changing market.
Contact
KJK’s Economic Development and Incentives practice group collaborates with our Start Ups and Capitalization team to assist clients in navigating this complex regulatory landscape. For more information on how KJK is able to assist with your project, please contact attorneys Rich Morehouse (RAM@kjk.com), Collin Harrington (CHarrington@kjk.com) or Jace Libman-Phelps (JDL@kjk.com).