New Brattle Report for ESIG Quantifies How Large Loads Affect Electricity Rates

A new report prepared by The Brattle Group and the Energy Systems Integration Group (ESIG) examines how data centers, manufacturing facilities, and other large electricity users affect rates for existing customers. The analysis finds that outcomes depend on available generation and transmission capacity, market structure, forecast accuracy, and how tariffs and cost allocation are designed.

The report, Impacts of Large Loads on Electricity Rates: A Quantitative Assessment, developed through ESIG’s Large Loads Rate Impacts Task Force, models a 500-megawatt (MW) large load with a 15-year contract across four prototypical utility and market settings: the Southeast, MISO, PJM, and ERCOT. The study compares the additional revenue from the new customer with the additional costs of serving it to assess when existing customers’ rates could rise or fall.

Key findings include:

• Available system capacity can create rate benefits. When existing generation and transmission infrastructure can accommodate new demand, a large customer helps spread fixed costs across greater electricity sales. In the modeled Southeast utility scenario, sufficient capacity lowered existing customers’ rates by approximately 6% on average over the contract term compared with rates without the new load.
• Forecast errors can increase customers’ exposure to costs. If a large load arrives late, uses less electricity than expected, or leaves early, existing customers may bear the costs of infrastructure built to serve it.
• Tariff protections can substantially reduce those risks. In the modeled Southeast utility scenario that combines adverse forecast outcomes, an 80% minimum billing demand reduced the rate impact on existing customers by 52%. Additional cost allocation measures may be needed when new infrastructure costs exceed the system’s average existing costs.
• Customer-provided capacity and flexibility can limit new investment needs. Generation and demand flexibility can reduce the capacity a utility or market must supply, but these resources must be incorporated into planning to avoid duplicative investments.
• Market structure shapes both impacts and solutions. Regional markets can spread a project’s costs more broadly while exposing customers to load growth elsewhere. Effective protections may therefore require regional coordination alongside customer-specific tariffs.

The results illustrate potential outcomes rather than forecasts for individual utilities.

The report was prepared by Managing Energy Associate Long Lam, Energy Research Associate Natalie Northrup, Principal Ryan Hledik, and Energy Specialist Oliver Grocott of The Brattle Group, and Trieu Mai and Debra Lew of ESIG.

Read the full report below.