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Appetite for data centers fuels fears of high electric demand, rate hikes in Michigan

Posted By: The Detroit News on October 19, 2025.  For more information, please click here to read the source article.

Technology companies have set their sights on vast swaths of land in Michigan in their race to build data centers — energy-hungry facilities that power artificial intelligence, movie streaming, web browsing and other online tools.

Leaders of both DTE Energy and Consumers Energy, the state’s two major regulated, investor-owned utilities, have told shareholders that multiple large data centers have expressed interest in building in Michigan. If built, those data centers would significantly increase demand for energy and lead the companies to build more electric sources, the company leaders said.

As utility leaders field inquiries from the tech sector, environmental groups and some ratepayers fear rapid data center development could send their electric bills skyrocketing and hamper the state’s transition away from fossil fuels.

“There is a real risk here that if it’s done improperly, residential customers will pay for the AI boom, to support power needs (of tech companies), without a clear benefit,” said Daniel Abrams, senior associate attorney at the Environmental Law and Policy Center.

“This is a really important moment in time.”

Tech company executives, other consumers and analysts noted that data centers are critical to powering increasing demands in the digital economy and can fuel the creation of good-paying jobs.

“States that can effectively plan, manage, and mitigate the risks of data center growth stand to unlock millions, perhaps even billions, of dollars in direct and indirect growth. At the same time, they can create high-paying jobs and establish themselves as leading digital-infrastructure hubs,” according to an August report by management consulting firm McKinsey & Co.

Already, there are at least 50 data centers operating in Michigan, according to Data Center Map, an online database tracking the facilities. More are in various stages of development.

At least three data centers are planned in Washtenaw County alone, including a $1.25 billion “high performance computational facility” proposed by the University of Michigan and Los Alamos National Laboratory. There is another in Saline Township that was approved after its developer, Related Digital, sued the town over officials’ initial decision to oppose its rezoning request.

Another facility is proposed in Livingston County’s Howell Township. The Livingston County Planning Commission is scheduled to hear a request to rezone 25 parcels from the developer in November, township zoning administrator Jonathan Hohenstein said. The company behind the development told the township it would disclose itself once a plan is approved, according to its rezoning request.

A case before Michigan’s energy regulators could set the course for the construction of new data centers across Michigan.

Consumers Energy asked the Michigan Public Service Commission for permission to add provisions specific to data centers to the tariffs, or contracts, the company drafts with industrial customers. The company wants to require new data centers to operate for at least 15 years, use at least 80% of the energy they say they will use and pay a fee for ending contracts early.

Those measures would help avoid a scenario in which Consumers Energy builds out its grid to service a promised data center that only operates for a year, leaving the company with power-generating infrastructure that nobody needs, but everybody has to pay for.

“This proposal is designed to protect customers from potential stranded costs associated with data center loads,” Consumers spokesman Brian Wheeler said in an emailed statement. “Consumers Energy is planning to serve data centers on MPSC-approved, cost of service based rates, which will ensure they pay the costs of providing service to them.”

Environmental groups said Consumers Energy’s proposal doesn’t go far enough to protect ratepayers and ensure the state continues its movement toward powering the grid with clean energy. In contrast, an industry group representing data center owners and operators contended the proposal would pull the rug out from under the burgeoning industry and send development to other states.

The “extreme recommendations … would force large load customers to bear an intolerable level of risk,” wrote the attorneys for the Data Center Coalition, a Virginia-based group of data center owners and operators, in a September filing to the Public Service Commission.

Environmental groups have also raised concerns about data centers’ water use. Computers get hot, and cooling them requires using either water or electricity. The Alliance for the Great Lakes, a Chicago nonprofit that advocates for Great Lakes protection, issued a report in August that said large data centers can use each day between 1 million gallons — about as much as 12,000 Americans use in a day — and 5 million gallons.

If data centers use water to cool their computer systems via evaporation, that means the water does not necessarily return to the watershed. Other cooling methods release contaminants or use more electricity, according to the report.

The Alliance for Great Lakes recommended that the states conduct water demand studies to understand their supply, require data centers to disclose their expected water use and report the amount of water they actually use.

“Without careful planning, it could have unintended consequences, like depleting groundwater availability in existing private drinking water wells and wells used for agricultural irrigation,” the report stated.

Centers may require doubling of power supply

The potential expansion of electricity demand as a result of data center development is staggering. The facilities need power to operate their computational equipment as well as keep the facility cool, a task that can also be done using water.

Consumers Energy alone has fielded so many inquiries from data center developers that the utility would have to nearly triple its peak load — the amount of energy it takes to supply its customers at times of maximum demand — if each request came to fruition. In its application for an amended tariff, Consumers said the company had fielded inquiries that totaled more than 15 gigawatts of electric load. This means the peak load would reach 23 gigawatts, up from Consumers’ current peak load of about 8 gigawatts.

DTE Energy CEO Joi Harris told shareholders in July that the company is in “advanced discussions” with multiple large data centers for more than three gigawatts of new load and is in “ongoing discussions” with multiple other data center operators for an additional four gigawatts. The utility’s current peak load is approximately 10 gigawatts.

Data center developers want to take advantage of the exemption on sales and use taxes Michigan lawmakers approved last year, which lasts through 2028, Harris said.

It isn’t likely that every tech company inquiry about locating a data center in a utility’s service territory will lead to a data center actually coming online. Analysts agree that tech companies are probably sending inquiries to many utility companies in multiple states. Still, even a few data centers could reshape a utility’s operations by surging demand for electricity.

A surge in demand means a surge in the development of energy production and storage, which requires a surge in money.

The stakes are high. Data centers use exorbitant amounts of energy, so adding one to a utility’s service territory is expensive. The Michigan Attorney General’s Office estimated Consumers Energy would have to spend nearly $500 million to serve a new 100-megawatt data center, according to filings submitted to the Public Service Commission.

The costs are largely in two categories: building enough new power sources to supply the data center, which state attorneys estimate would cost approximately $400 million, and connecting the data center to Consumers’ transmission grid, which they estimated would cost $46.5 million and $96 million.

That brings the final estimated tally for a single, 100-megawatt data center to between $446.5 million and $496 million.

Those estimates are for a hypothetical 100 megawatt data center. Consumers Energy announced this summer it had signed an agreement to connect a data center that could add up to 1 gigawatt of demand — an order of magnitude larger than the one state attorneys estimated would cost almost $500 million to put on the grid.

The Natural Resources Defense Council said a 1-gigawatt data center would demand as much energy as almost 1 million U.S. homes.

That’s why the details in the tariff case being hashed out before the Public Service Commission are important, said Lee Shaver, senior energy analyst for the Union of Concerned Scientists, a Massachusetts nonprofit that advocates for science-based public policy.

“The other regulated utilities are going to be paying attention, and they might file something similar,” Shaver said. “Data centers are also watching.”

DTE Energy has not filed a tariff case but is monitoring how other utilities and public service commissions address data center rates, spokesman Ryan Lowry said.

DTE has excess capacity and could begin to serve some data centers quickly with its mix of electricity from renewable sources, natural gas and battery storage, Lowry said. The company could have to build new energy generation sources depending on data center demand, he said.

DTE plans to retire the coal-fired Monroe Power Plant in 2032. The company is exploring options for replacing that baseload power by expanding its nuclear power fleet, which currently includes just the Fermi 2 plant in Frenchtown Township, as well as expanding its use of natural gas paired with carbon capture and sequestration, Lowry said.

Data center groups object to contract terms

Environmental groups, including the Union of Concerned Scientists, want to ensure large data centers don’t affect the cost or reliability of electricity in Michigan or extend the use of fossil fuels to power the grid, Shaver said. They, along with the Michigan Attorney General’s office, consumer advocacy groups and a data center industry group, are among those who have intervened in Consumers’ data center case before the MPSC.

The environmental groups are pushing the Public Service Commission to require Consumers to factor clean energy into their agreements with data centers and require Consumers to prioritize serving data centers that supply some of their own clean electricity and can limit the amount of power on days when demand is high. That will help limit how much electricity Consumers would have to supply on peak-demand days.

The groups also are advocating for the commission to require data centers to generate some of their own clean electricity or pay for the electricity sources utilities build to serve them, Shaver said.

“If the utilities aren’t doing a good job allocating costs in their rates, every time they file for increased rates, that fixed portion of residential customers’ bill is going to go up, and they’re going to be subsidizing a data center,” Shaver said. “That becomes a huge issue if a data center doesn’t materialize. Utility builds all the infrastructure, then the customer never comes, then everyone else is left holding the bag.”

The Michigan Attorney General’s Office similarly is pushing the commission to require more stringent terms for data centers. The Attorney General’s Office wants Consumers’ tariffs to apply to smaller data centers than the utility company proposed and to require data center developers to pay more of the cost of project planning, new energy generation and connection.

State attorneys also estimated what it would cost Consumers to serve a new, 100-megawatt data center — nearly $500 million, according to filings submitted to the commission. Consumers’ proposed tariff terms would not guarantee that a data center customer makes up for those upfront costs, the state attorneys argued in their initial brief.

Under Consumers’ proposed tariff amendments, the guaranteed revenue from new data center customers would not meet even the non-complete cost estimate outlined above,” the Attorney General’s Office wrote.

The Data Center Coalition noted in its September filing that the terms Consumers proposed are “a striking departure from the status quo.” Other industrial customers are not obligated to agree to such terms, the coalition said.

While the coalition’s attorneys said they generally agree to making those commitments, they said Consumers, the commission staff and environmental groups’ proposals go too far and would make Michigan an outlier compared with other states.

“This would discourage data centers and other large loads from locating in the Company’s service territory, undermining the legislature’s clear intent when it enacted a sales and use tax exemption for data centers late last year.”