DTE ties possible rate hike freeze to data center approvals, Nessel says it’s ‘ransom note’

DTE Energy, which filed a $474.3-million electric rate hike request Tuesday, says it could pause rate hike requests for at least two years if an Oracle data center in Saline Township comes online by 2027 and the utility secures other regulatory approvals.

DTE needs the higher rates to improve grid reliability and “sustain the reliability of its generation fleet while moving toward cleaner sources of generation,” the utility said in a filing with state regulators.

The Michigan Public Service Commission granted DTE’s last electric rate increase in February, approving a $242-million rate hike.

That’s less than half the $574.1 million the company requested.  Days later, the company announced its intention to file for another increase. 

DTE’s latest rate hike proposal would increase residential rates by 9.7%.

Michigan Attorney General Dana Nessel appealed the conditional approval of power contracts for the Saline Township data center April 17, and announced Tuesday that she’ll intervene in DTE’s latest electric rate case.

“DTE only offers a break in rate hikes if they win some other, unnamed data center approvals, and their Saline data center comes online with no delay,” Nessel said in a statement.

“This isn’t a commitment, it’s a ransom note.”

What do data centers mean for DTE customers?

In its rate hike announcement, DTE said large customers spread fixed costs more evenly. 

Planned hyperscale data centers in Saline Township and Van Buren Township will contribute nearly $9 billion to improving DTE’s electric system by 2045 and reduce the amount of revenue needed from other customers, the company said.

Lee Shaver, senior energy analyst for the Union of Concerned Scientists, told Planet Detroit that DTE’s argument that acquiring a large customer could spread out costs is “true in theory.”

The total cost of serving the data center could offset the savings, he said.

Data centers could create congestion on power lines, require new power plants, and drive up the demand for gas and electricity, all of which could add costs for other ratepayers, Shaver said.

The approval of a rate increase based on data centers lowering costs is a “huge risk,” he said. 

“What happens if those data centers don’t get built, or they get built and they’re smaller than projected, or they pack up and leave earlier?” 

DTE’s contracts for the 1.4-gigawatt Saline Township data center contain some protections for other ratepayers, including a power supply agreement of 19 years, with an option to extend it by 20 years. It also includes an energy storage agreement with a duration of 15 years.

DTE spokesperson Ryan Lowry said the contracts include protections to keep other ratepayers from subsidizing data center rates and ensure Oracle covers the cost of battery storage and grid upgrades needed to protect system reliability.

Nessel’s challenge to Oracle, DTE contracts

DTE’s contracts for the Oracle and OpenAI data center received conditional approval in December, despite environmental and ratepayer advocates’ objections that the company pursued a rushed “ex parte” approval process, which does not allow intervenors to submit testimony.

Nessel filed a claim in the Michigan Court of Appeals earlier this month over the Michigan Public Service Commission’s ex parte approval of DTE’s contracts.

The MPSC is authorized to grant such approvals without hearings only when it will not increase the cost of service to customers, Nessel said. 

“It has never been publicly verified that these contracts will not entail an increase in the cost of service to ratepayers,” she said. 

MPSC Chair Dan Scripps said in a statement to Planet Detroit: “The commission’s conditional approval of these contracts included some of the strongest consumer protections in the country and is consistent with literally decades of applicable precedent.”

The MPSC will vigorously defend the conditional approvals to realize an estimated $300 million in affordability benefits to customers, Scripps said.

MPSC spokesperson Matt Helms said the other approvals for the Saline Township data center that are needed from the commission are for elements like energy storage that are part of the special contracts with DTE. 

The Michigan Department of Environment, Great Lakes, and Energy (EGLE) granted air and wetland permits for the data center in January. 

EGLE spokesperson Dale George said a National Pollutant Discharge Elimination System application associated with the Saline Township site is under review.

Related Digital, the developer of the Saline Township project, said in a Friday statement that it secured financing for the $16-billion project. The project will bring over 2,500 union construction jobs, 450 on-site jobs, and over 1,500 jobs nationwide, the statement said. 

It will bring millions in local tax revenue, while preserving over 750 acres of open space, wetlands, and farmland, according to Related.

The company said major construction is “well underway” in Saline Township.

Google data center may require new power generation by 2033, witness says

DTE is pursuing a contested rate case for a planned 1-gigawatt data center in Van Buren Township, rather than the fast-tracked process used for the Saline Township project. 

Google’s Michigan operations will be served by 2.7 GW of new grid resources in the form of solar power, energy storage, and demand flexibility, Will Conkling, Google’s head of data center development for the Americas, said in a March blog post. 

Shaver, with the Union of Concerned Scientists, said DTE’s filings for the data center contracts show that additional generation will be needed by 2033.  

Witness Justin J.W. Brooks, an energy consultant with the company PowerGEM, testified on DTE’s behalf in the MPSC case, and said the company performed modeling for a natural gas plant with carbon capture and storage to address this need. 

Shaver said other ratepayers would pay for a share of this new generation.

DTE’s Lowry said the utility is considering multiple baseload generation sources, including nuclear energy and natural gas with carbon capture and storage, to help replace its Monroe coal plant and serve new demand from data centers. 

“Any additional, potential load from data centers will be met with a combination of renewables, energy storage, and 24/7 baseload generation,” Lowry said.

The MPSC’s Helms said there is no statutory deadline for the approval of data center contracts.

EGLE’s George said developers of the Van Buren Township project submitted a joint wetland permit that is under review.

‘Bills are too damn high’: Ratepayer advocate       

Alex Kellogg, energy accountability manager for the Michigan League of Conservation Voters, called for an end to the constant churn of rate hikes and criticized the company for tying a pause in filings to a controversial data center. 

DTE customers pay the highest energy costs in the Midwest for some of the worst reliability in the country, he said in a statement.

“Our bills are too damn high, and it’s a joke that DTE is trying to act like they’re doing us a favor while holding us captive for a controversial warehouse of computer servers dressed up as the ‘Red Barn Project,’” he said, referring to the Saline data center, named “The Barn” by Related Digital.

Amy Bandyk, executive director of the Citizens Utility Board of Michigan, said in a statement that DTE’s proposed rate hike would increase residential rates by 9.7%, well above the 4.1% increase approved in February.

The company is also requesting a return on equity (ROE) of 10.25%, well above the national average of 9.7%, which would make DTE one of the most profitable utilities in the country, she said.

The return on equity generates profits for shareholders and is defined as the net income of a utility’s gas or electric operation divided by shareholder equity.

Cutting the utility’s ROE would save customers money and make DTE less focused on capital investments, which allow it to collect a high return, and more willing to focus on reliability-improving measures like shortening tree trimming cycles, Bandyk previously told Planet Detroit.

Agreeing to a 9.7% rate increase to avoid an increase next year is not a good deal for customers, Bandyk said this week.

“It is better for groups like CUB to fight this rate case and convince regulators to approve a lower amount, even if that means DTE will file another rate case next year.”