A Texas-based subsidiary of electric utility Xcel Energy Inc. has submitted a tariff proposal to the Public Utility Commission of Texas (PUCT) to protect existing customers from higher bills while shifting more responsibility onto large electricity users such as data centers.

This proposed large-load tariff, titled Docket 60332, was submitted by Southwestern Public Service Co. (SPS). It outlines clear rules to ensure large electricity users pay their fair share without shifting those costs onto other residential and business customers.

If approved, the tariff would outline specific cost responsibilities that large customers would take on to justify these massive projects. This includes the electrical infrastructure such as electric transmission, substations, interconnection upgrades and new generation facilities.

Data centers and other major industrial users would be subject to these commercial terms under the proposed tariff. The regulations aim to secure firm customer commitments with safeguards that reduce affordability risks, particularly residential. 

Long-term commitments from these large customers also would be required for 15 years or more, backed by security “exit and termination charge” provisions if a project is delayed, scaled back or not completed.

Even if electric usage ramps up gradually, Xcel stated large customers would still contribute to minimum monthly payment requirements for the electric infrastructure constructed and available to serve them.

“When large customers fund the infrastructure needed to serve them, additional electric sales help spread existing fixed grid costs over a larger sales base,” Xcel Energy said in a company release. “This can help keep all customer bills lower over time.”

This request awaits a decision from the PUCT, which timeline stretches into 2027 based on Texas’ utility law 180-day rule pattern.

Xcel Energy has successfully advanced large-load tariffs in other states, including Minnesota, Colorado and Wisconsin. The utility noted that it intends to file a similar tariff request with the New Mexico Public Regulation Commission in the near future.

“We know many of our customers are concerned about the scale of electricity needed to serve larger data center customers. These projects can drive economic opportunity in the communities we serve, but it’s critical that growth is handled the right way,” said Brad Baldridge, interim president of Xcel Energy – Texas, New Mexico. “These rules make sure data centers and other large customers pay for the power they use and any necessary infrastructure so that it’s planned and built responsibly.”

Xcel views this measure as an antidote to manage the rising wave of data center power demand that is tightening grid capacity on the broader grid and escalating financial pressure on consumer wallets in the process.

As utilities respond to these growing demands, tariff structures are beginning to diverge across regions and regulatory frameworks, making them increasingly difficult for customers to interpret and compare, according to Energy and Environmental Economics, Inc. (E3). The energy consulting firm highlighted in a May analysis that tariff design can lead to materially different electricity bills, even with the same 25 MW data center load profile.

These results vary significantly in annual costs, E3 added. Some tariffs emphasize peak demand charges, while others rely more heavily on charges tied to total energy consumption. Market structure, however, influences customer exposure to price risk.

In deregulated markets such as Illinois and Texas, where grid operators usually control pricing, customers tend to face greater exposure to wholesale market prices during events of surge demand from hyperscalers and AI data centers.

By utilizing these tariff measures, Xcel seeks an outcome similar to vertically integrated utility territories that control generation, transmission and distribution, where the utility owns and operates the entire supply chain.

Some of these vertically integrated utilities include Duke Energy of the Carolinas, Dominion Energy, Florida Power & Light (FPL) and Southern Co., the parent company of major regional providers like Georgia Power and Alabama Power. 

Similarly, Xcel Energy views localized tariffs as helping ensure that the deregulated utility and its everyday retail customers do not fully absorb the financial burden of grid demand spikes and massive infrastructure expansion.