The Colorado Public Utilities Commission will soon start reviewing proposed rates for “large-load”‘ customers, which will include data centers. Xcel Energy, Colorado’s largest electric utility, is expected to file a proposal by April 2.
The boom in the development of artificial intelligence is driving expansion of the computing centers nationwide and raising concerns about the facilities’ need for water for cooling and electricity 24/7. Another worry is whether residential and small-business customers will see their bills go up to help cover the costs of the new power needed.
While the state considers how to plan for data centers, PUC Director Rebecca White said, “Protecting ratepayers, that’s definitely a bottom line.”
Xcel spokeswoman Michelle Aguayo said the company’s focus is to protect its customers while serving fast-growing large customers, such as data centers.
“We recognize data centers and other large projects bring jobs, investment and innovation to the regions we serve. When managed responsibly, this growth can benefit all Xcel Energy customers,” Aguayo said.
Data centers and the effects on everyday utility customers played a part in the PUC’s approval last year of Xcel’s plan for new power sources as it phases out coal plants. Xcel originally called for 14 gigawatts of new power over five years and said residential rates could shoot up by 50% in 2031 compared to 2024.
The PUC noted that potential data-center customers accounted for 62% of Xcel’s projected energy growth. While the commission’s decision more than halved the volume of power to roughly 6,000 megawatts — 6 gigawatts — it was still the largest acquisition of new generation ever approved by the commission.
There are a lot of variables involved, but a 1 gigawatt facility could power approximately 340,000 homes.
Xcel has said the surging demand for power is being driven by the electrification of homes, businesses and transportation and the computing centers that house the physical foundation for all things digital. The Minneapolis-based company has also made it clear that it expects a substantial portion of the growth in its data-center customers to be in Colorado.
To prepare, White said the PUC has “been looking at data centers for a while now and watching how other states are handling these.”
Colorado lawmakers are considering bills on data centers: one to provide developers tax incentives and one to impose requirements.
A third measure, sponsored by Colorado Springs Republican Rep. Ken DeGraaf, would allow such large-load customers as data centers to build or provide their own power source. Under House Bill 26-1246, the power provider wouldn’t be regulated by the PUC but would have to meet local, state and federal regulations.
The PUC’s decision on Xcel’s plan for more power sources contained the agency’s first set of guidelines for data centers. The commission endorsed such provisions as requiring potential large customers to sign service and interconnection agreements before they’re included in a utility’s load forecast; minimum-term contracts; and exit fees if the customer ends its service before the end of the contract.
“The question for the commission was do you build for what you think that demand might be and allow Xcel to move forward with that sort of frame or do you say we will build it when we know you’re coming,” White said. “They landed more on the latter.”
Erin O’Neill, the PUC’s deputy director of fixed utilities, said there are stories of large users of electricity driving up utility customers’ bills. “That is very much what we’re trying to avoid here.”
The proceedings on rates for large customers will consider, among other questions, what portion of the costs should be allocated to them, based on their characteristics and the risks or benefits they bring to the system, O’Neill said.
Oregon passed a law in 2025 that required a new classification for high-use customers. Virginia, the nation’s data center hot spot, is considering legislation to shift more of the cost of service to the large computing centers.
“The commission is just being very cautious and taking the time to make sure that we are doing this right and creating those protections, allocating those costs correctly,” O’Neill said.
Some data center developers are “doing a lot of shopping around,” figuring out which states offer the best financial benefits, she added. “That’s just business. They’re very large loads.”
During hearings on Xcel’s plan for new power, some parties in the case pointed out that the company had seen requests from large users, such as data centers, withdrawn during the proceedings.
One of those parties, Western Resource Advocates, is concerned about data centers’ impacts on ratepayers. The filing on rates for large-load customers “is absolutely a critical proceeding” in exploring protections for customers, said Clare Valentine, a senior policy adviser at WRA.
The PUC took a good first step by directing Xcel to plan for growth of large-load users only if the businesses make reasonable commitments, Valentine said. She said other policies to consider are data centers’ share of the expense for new distribution and transmission facilities and their effect on the state’s ability to meet its goals for using clean energy.
White said the PUC will look at the risks and opportunities of new and larger data centers in Colorado. She said higher loads can spread costs over a larger amount of electric sales and reduce the average rates for existing customers.
Another potential opportunity is incorporating more renewable energy on the system, White said. Wind power is often curtailed at night, when the wind blows more, because the demand isn’t as high. But data centers use electricity around the clock.
The centers could help jump-start emerging technologies such as geothermal energy, White said. Under what’s called a clean transition tariff, large customers pay a premium for power from new technologies.
“But these benefits will not materialize without proper, detailed planning and oversight and guardrails for existing customers,” she said.
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