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The Electric Utility and Data Center Interface – Things to Consider

Mission critical and data center site selectors and operators must be aware of the many utility variables that will impact the site location decision.

Will Steffens, Principal, Sugarloaf Associates LLC (Q1 / Winter 2013)

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As many are aware, electric capacity, reliability, cost, and quality play an integral role in the site location and operation of a mission critical facility such as a data center. Mission critical site selectors and operators should also be aware of the many utility variables that will impact your site location decision. The following areas should be evaluated:

Redundancy — power supplied from two or more sources

Quality — “dirty power” can include sags, dips, harmonics, and other “noise” on the power delivery system

Capacity — adequate power necessary to operate the facility

Reliability — outages

Tariffs — published terms and conditions to provide electric service that include costs, reserve capacity, excess facility charges, refunding, etc.

Policy — internal policies and procedures applied to the approved tariffs and including service and design policies

Incentives — many states and utilities have financial and conservation incentives that may impact data center development

Other services — utilities may have services that may be valuable to data center operations; these may include substation maintenance or ownership

How Utilities Impact the Data Center Site Selection Decision
Each of the above will have a unique impact on a site selection decision and future operations. As a result of many years in the utility sector and assisting with over 10 million square feet of data center development, I can provide just a few examples of how utilities can and will impact a data center site selection decision:

1. Capacity: An end user identifies a site and determines the availability of 10mVa of capacity and agrees on a lease with the owner. One day prior to signing the lease, the user meets with the utility and is advised that only 5mVa of capacity is available and additional capacity will cost $2 million to $5 million.

2. Policy: A site search is conducted that covers two utility areas. Each utility has different distribution limits on their system, with one allowing for greater flexibility for site selection due to the availability of more capacity at a lower voltage. This lower voltage will eliminate the need for a costly customer-owned substation.

3. Tariffs: Adjacent utilities have two significantly different policies on reserve capacity and excess facility charges. One utility charges a monthly fee for both reserve capacity and excess facilities, while the other allows the user to pay up front for excess facilities and has no policy to charge for reserve capacity.

4. Policy: Some utilities will provide only one line with the second redundant line considered “premium,” while other utilities will provide a second line due to system design. The cost of the “premium” line is paid up front with the first line subject to refunding. The other utility will refund the full amount because the redundant line is required for system operations.

5. Tariffs: In some areas, utilities will provide an option for a customer-owned substation or will own and operate the substation and include the cost in the monthly billing. This allows the mission critical/data center operator to defer capital and allows the cost of the substation to be an operating expense.

6. Policy: Refunding for cost to provide service will vary from utility to utility. Some will require all the costs up front, while others will require deposits. Some utilities provide no opportunity for refunding, while others provide a range of refunding over a 4- to 10-year period based on revenue generated at the site.

7. Tariffs: Deregulated states allow for greater flexibility to purchase energy via third-party providers. Data center operators need to develop a least-cost strategy for their commodity purchases that include both retail and wholesale energy purchasing options.

As illustrated, the interface with the electric utility starts early during the site selection process and continues for the lifetime of the facility. This relationship is critical for both the operator and the utility. Mission critical/data center companies recognize that electricity is a critical raw material/commodity and that capacity, reliability, cost, and quality must be properly managed to avoid unnecessary business losses and to manage growth.

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About the Author

Will Steffens, Principal, Sugarloaf Associates LLC
Will Steffens has over 34 years of utility experience with Public Service Electric and Gas Company (PSE&G) serving time in the company’s gas distribution, marketing, and customer operations, with most of his career focused on providing assistance to large customers. During his tenure at PSE&G, Steffens founded PSE&G’s data center practice. This effort was directly responsible for the attraction of over eight million square feet of data center development in the state of New Jersey. Projects included Credit Suisse, Digital Realty Trust (multiple locations), Cervalis, Savvis, Barclays, Dupont Fabros, Goldman Sachs, NASDAQ, Verizon, Nomura, Equinix, Telx NY Internet, Russo, Sentinel, FiberMedia, QTS, SunGard, IO, and Datapipe. This assistance included utility rate, tariff, policy, power availability, and site selection assistance. Prior to focusing on the data center sector, Steffens worked closely with state/local governments, trade associations, and real estate professionals to attract biotechnology/technology, pharmaceutical, food, and logistics companies to New Jersey. He is a member of and has served on various committees and boards for the following organizations: New Jersey Technology Council (NJTC), Industrial & Office Real Estate Brokers Association (IOREBA), CoreNet, Economic Development Association of N.J., National Association for Industrial and Office Parks (NAIOP), 7x24 Exchange, and the Northeast Economic Development Association, and was a founding member and chairman of the NJ Biotechnology and Life Science Coalition.

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