Large Energy Users Want Power. Here’s How to Protect Other Ratepayers from the Costs.

The report analyzes 65 state-level tariffs to identify mechanisms that protect ratepayers from the costs of surging demand from large energy users. It highlights five key safeguards: minimum contract terms, minimum monthly billing demands, collateral requirements, exit fees, and capacity reassignment. The author argues that while these tariffs provide a foundation for fair cost allocation, they should be paired with broader strategies like grid flexibility and optimized planning to ensure reliability and affordability.

• Regulators and utilities are increasingly using large load tariffs to create distinct rate classes for large energy users, which improves transparency regarding the costs of serving these customers and the revenue they generate. Eligibility for these tariffs is most commonly defined by total capacity in megawatts, though some tariffs include aggregation clauses to prevent customers from splitting facilities into smaller loads to avoid the tariff.
• To mitigate stranded asset risks, tariffs are incorporating minimum contract terms and minimum monthly billing demands. Contract lengths range from 1 to 20 years, with Kentucky Power recently approving a 20-year minimum for loads of 150 MW or more. Minimum monthly billing demands—often set as 75–90 percent of contracted capacity, a historical peak, or a fixed floor—ensure customers pay a baseline amount even if actual usage is lower.
• Financial safeguards such as collateral requirements and exit fees are used to protect ratepayers from defaults or early contract terminations. Thirty-seven of the 65 reviewed tariffs required collateral, such as bank letters of credit or cash deposits; for example, Dominion Energy’s GS-5 tariff requires $1.5 million in collateral per megawatt of contracted capacity. Thirty-one tariffs included exit fees, such as AEP Ohio’s requirement for a fee equal to 36 months of minimum charges for termination after five years.
• Capacity reassignment is a less common safeguard, appearing in 12 of the reviewed tariffs, allowing customers to transfer contracted capacity to other qualified users. This mechanism helps limit stranded assets by finding replacement users for grid capacity. For instance, Appalachian Power Company and Wheeling Power Company allow the reassignment of up to 20 percent of contracted capacity without penalty.

APA

RMI (2025). Large Energy Users Want Power. Here’s How to Protect Other Ratepayers from the Costs. https://rmi.org/resources/large-energy-users-want-power-heres-how-to-protect-other-ratepayers-from-the-costs/

Chicago

RMI. Large Energy Users Want Power. Here’s How to Protect Other Ratepayers from the Costs. 2025. https://rmi.org/resources/large-energy-users-want-power-heres-how-to-protect-other-ratepayers-from-the-costs/.

Wikipedia

{{cite report |author=RMI |title=Large Energy Users Want Power. Here’s How to Protect Other Ratepayers from the Costs. |date=7 November 2025 |url=https://rmi.org/resources/large-energy-users-want-power-heres-how-to-protect-other-ratepayers-from-the-costs/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025large, author = {{RMI}}, title = {{Large Energy Users Want Power. Here’s How to Protect Other Ratepayers from the Costs.}}, institution = {RMI}, year = {2025}, month = nov, url = {https://rmi.org/resources/large-energy-users-want-power-heres-how-to-protect-other-ratepayers-from-the-costs/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }