With New Law In Effect, Data Centers Shouldn't Mean Higher Electric Bills For The Rest Of Us

By Brian Martucci, Minnesota Reformer

March 30, 2026

The Minnesota utilities set to power two proposed Google data centers near Rochester and Duluth say the massive computing facilities won’t raise regular customers’ electricity bills.

There’s good reason to believe them, at least in the near term.

That’s because Gov. Tim Walz signed a law last year creating a separate class of “very large” utility customers separate from residential, commercial and most industrial customers. In practice, most will be data centers. The service agreements between these facilities and utilities like Xcel Energy must cover the full cost of their electric service and any system upgrades needed to serve them reliably; avoid burdening other customers if the facilities downsize or close; and comply with Minnesota’s carbon-free power standard.

The public is about to get more insight into the first such arrangement developed under the new law. Xcel plans to file the service agreement for Google’s Rochester-area data center “in the coming weeks,” a utility spokesperson told the Reformer.

Meanwhile, in a separate proceeding, the Minnesota Public Utilities Commission will decide whether to approve the proposed framework — known in industry parlance as a “tariff” — that it ordered Xcel to develop for the new “very large” customer class. A spokesperson for the commission said that could happen in mid-May, subject to change.

The two Google projects would be among the first Minnesota data centers to exceed the minimum threshold for “very large” customers, which is of 100 megawatts — enough to power 50,000 to 100,000 homes. A Meta facility under construction in Rosemount will also reside in the “very large” category. At least seven other big data center projects are in the works across the state, according to the Star Tribune.

The data center law and the commission’s order aim to forestall the affordability concerns — and political blowback — that large-scale data center development elsewhere has wrought.

In Oregon, an early data center hub due in part to its abundant and relatively cheap hydropower, rates paid by customers of Portland General Electric have risen 50% over the past five years. Democratic Gov. Tina Kotek signed a similar ratepayer protection law there last year.

Virginia, the country’s largest data center market, is among the states considering laws this year that would shift more costs onto tech companies after an independent study showed data centers pushed up residential utility rates there. In Georgia, a fast-growing data center hub, voters in November overwhelmingly voted out two regulators seen as overly cozy with Georgia Power, the state’s dominant utility.

Back in Minnesota, some environmental and ratepayer advocates who frequently clash with Xcel are optimistic that the utility will do more or less what lawmakers and regulators asked of it.

“I like the way the large load tariff has been going,” said Will Kenworthy, senior Midwest regulator for Vote Solar, one of several nonprofits and state government units that called the proceeding “one of the most consequential to ensuring the affordability of electricity for Minnesotans” in a March 6 letter asking regulators to expedite a vote on it. Quick consideration — ideally by May 1, the letter said — would reduce the risk of a dispute over whether the very large customer tariff covers the forthcoming Xcel-Google agreement, they said.

“We want to get that tariff approved so everyone knows the rules before these individual projects come before the PUC,” said Annie Levenson-Falk, executive director for the Citizens Utility Board of Minnesota, a ratepayer advocacy group that signed onto the March 6 letter. CUB Minnesota was instrumental in pushing for the protections that passed into law last year.

Xcel’s proposal would require contract terms of at least 15 years “to ensure the continuity of both the load and the service,” it said in the filing. A data center customer would also need to put up significant financial collateral; agree to pay at least 75% of the “contracted capacity” for power even if it ends up using less; plug directly into Xcel’s transmission network to reduce the need for new grid infrastructure; and pay a hefty exit fee if it shuts down before the contract expires. And, any customer that agreed to ramp down its operations during periods of high power demand would qualify for discounted rates reflecting the “avoided cost” of added stress on the grid.

In filings over the past several months, outside groups have urged the commission to strengthen some of these provisions. For example, CUB said Xcel should extend its minimum contract term with the expected “asset lives” of the infrastructure it builds, which it says can stretch 30 years or longer, i.e., extending the contract term from at least 15 years to at least 30.

But the biggest sticking point may be an unresolved disagreement over exactly how Xcel plans to calculate the expense of serving new data centers — something that could determine how its agreement with Google and possibly future data center companies affect other ratepayers.

The land earmarked for a large proposed Google data center campus in Hermantown, Minnesota, just outside of Duluth, is shown Friday, Oct. 24, 2025. (Photo by Nicole Neri/Minnesota Reformer)

“We haven’t actually seen the agreement yet, and until we do, the devil will be in the details,” Kenworthy said.

Xcel’s tariff proposal includes an “incremental cost test” that the utility says would ensure data center customers paid more than the total costs they incurred, including for any new power plants and lines needed to serve them while maintaining grid reliability.

Ellison raises questions about “opaque” process

In a response filed last fall, Minnesota Attorney General Keith Ellison’s office called Xcel’s proposed process for forecasting those costs “opaque” and inherently uncertain.

Xcel’s proposed protections for ordinary ratepayers are “helpful,” but “contract provisions cannot fully protect other customers unless (Xcel) ensures that new very large customers are covering their actual — not hypothetical — costs,” Ellison’s office said.

Data center developers and users have also pushed back. The Data Center Coalition, an industry group, said Xcel’s inherently uncertain forecasts could leave data centers on the hook for costs that should be borne by other customers.

But the Data Center Coalition reiterated that it “fully supports cost-based rates and fully supports the goal of ensuring that large customers as a class or subclass pay Xcel’s full costs of serving them,” the group wrote.

Bloomington-based Geronimo Power, a renewable energy company that hopes to attract a data center customer to a “powered land” project it’s developing in southwestern Minnesota, agreed with the “consensus” that data centers should pay their own way while urging flexibility for data centers that use onsite power generation. Facilities with “behind-the-meter” power — like onsite solar, for instance — wouldn’t require as much new grid infrastructure but would also likely generate less revenue for the utilities serving them, Geronimo said.

Google wants a more thorough study

For its part, Google asked the commission to scrap the test entirely and determine how much big data centers should pay through a standard regulatory proceeding known as a rate case. It said that would allow the commission to more thoroughly study service costs as they’re incurred and reconcile data centers’ past payments to Xcel with actual costs, a process known as “truing up.”

Google’s deal with Xcel relies on a “Clean Energy Accelerator Charge” that Xcel says will cover the full cost of bringing nearly 2 gigawatts of carbon-free power online — the rough equivalent of two large nuclear reactors. In an email, Xcel spokesperson Theo Keith said the arrangement was crafted to avoid raising costs for customers while keeping Xcel on track to meet its clean energy obligations.

“We see this partnership as a model for how energy companies can work with data center developers to protect customers, advance clean energy and bring new investment to states and communities,” he said.

The resources Google is paying for include “the largest battery project by gigawatt-hour energy capacity announced to date in the world,” Xcel says. It would be among the first commercial-scale grid batteries that can provide multiple days of power in a single cycle, something power system experts and Xcel have said is critical for reliability as more renewable energy comes online.

Batteries, but for residential and business customers, too

Kenworthy of Vote Solar signaled that the back-and-forth over the incremental cost test may not be the last time groups like his tussle with Xcel on its data center plans, however.

Google’s deal with Xcel includes $50 million to help the utility build battery installations in areas where the grid routinely comes under stress, which Xcel says will help reduce overall system costs. But Xcel will own those batteries, at least to start — a key point of contention for groups that want Xcel to open the program to residential and business customers too. Xcel says it may do so in future phases of the program.

Kenworthy said Google should use its heft to support greater deployment of customer-owned solar and batteries, which are more common in California, Texas and other markets.

“If we see the agreement and there’s not some of that in there, we would be very disappointed,” he said.

The Minnesota Reformer is an independent, nonprofit news organization dedicated to keeping Minnesotans informed and unearthing stories other outlets can’t or won’t tell..