Planned rate relief in limbo after feds rejects MDU North Dakota crypto center complaint

A Montana Dakota Utilities plan to not charge its customers a second year in a row for strains on the power grid related to a cryptocurrency data center in northwest North Dakota was complicated last week after federal regulators rejected a complaint and request for refund from the utility.

The added fee of $7.40 per month on utility bills, which started in April 2024, is set to last for two years.

The company said in regulatory filings that it had intended on wiping or lowering the charge next year if it secured a refund at the Federal Energy Regulatory Commission.

But FERC officials said MDU did not provide enough evidence that the Southwest Power Pool (SPP) had improperly charged the utility for grid congestion in the northwest, and therefore MDU could not recoup millions which got passed on to ratepayers earlier this year. SPP is a regional transmission organization (RTO) that manages part of the power grid.

The ruling

MDU is a member of a separate RTO, the Midcontinent Independent System Operator (MISO), but it has a contract with SPP to use some of SPP members' lines in northwest North Dakota.

In February 2023, Mountrail Williams Electric Cooperative, a member of Basin Electric, had started providing service to the 200-megawatt Atlas Power Data Center near Williston. The connection was approved after a study was conducted by SPP. MDU had no say in the decision. As cooperatives, Basin and Mountrail Williams are not subject to rate regulation by the state PSC, so there was no state oversight of the data center connection. The data center's demand is set to grow to around 700 megawatts.

Months later, a power line in northwest North Dakota began experiencing strains. SPP responded to this by sending charges to MISO to incentivize it to turn on more power - a mechanism called a market-to-market. That was on top of charges MDU had already incurred under the contract, which it did not object to.

MDU argued the market-to-market charges were improperly applied because it did not have any local generation that it could turn on in the area. It further claimed that the strain was caused by the data center, and therefore a local problem, not a regional one involving MISO, and in turn MDU too.

The utility, which was joined by MISO in its complaint, wanted SPP to end the market-to-market coordination for the line and issue a refund for the charges coming from the mechanism's use. In past comments, an MDU spokesman compared the charge to paying a toll twice for driving once on a highway.

But SPP argued that the market-to-market agreements are the right tool to handle the strain, pointing to studies which say it is appropriate to deploy the mechanism on the line. It also says that while the data center has increased local demand, MDU customers in the area also pose a significant draw on power.

FERC said MDU and MISO did not provide enough evidence that SPP acted unreasonably when it declined to stop using the market-to-market mechanism, so the charges could not be refunded.

The rates

The costs from the SPP charge got worked back into MDU customers electric rates through fuel cost adjustment charges, which appear as a line item - or a rider - on electric bills separate from general rates.

North Dakota's Public Service Commission approved the rider in April, but allowed MDU to split it up over a two-year period.

This is not typical. It was done in part to relieve sticker shock, but also because MDU expected at the time to be at least partially successful in its FERC challenge, allowing the utility to get the money back and lower or completely wipe the charge from consumers in the second year.

The charge has two elements; one for the cost of the fuel sources, and a surcharge, which covers over- or under-collection of electricity purchases, which includes the congestion fee.

The fuel source cost can change month to month - in April, it was $5.79 for the average customer, making the whole rider $13.19. The surcharge remains the same month to month.

PSC attorney John Schuh told the Tribune, "The denial of MDU's complaint results in no refunds to Montana-Dakota Utility customers. The cost impacts from the MISO congestion charges and market-to-market coordination are already currently reflected in Montana-Dakota Utility customer rates. For a residential customer, it is approximately $7.40 per month though March of 2026 when the balance is depleted."

MDU did not address questions on how the decision would impact the second year of rates or whether the utility would file a challenge to the FERC order.

"We're reviewing the order and our options," said MDU spokesman Mark Hanson.

Addressing the issue

This summer, MDU and Basin implemented a market mechanism to cut electricity to Atlas Power when the demand on the grid was too high.

Separately, Basin says its planned buildout of new power generation and transmission in northwest North Dakota will help address myriad congestion issues.

These are not just coming from data centers. Much of Basin's North Dakota service territory is located in oil- and gas-producing areas, and the industry has high electric demands, too.

Still, in recent regulatory filings, Basin says demands from cryptocurrency data centers in its service territory are set to grow to 1,000 megawatts over the coming years, while another 5,000 megawatts of new manufacturing is likely to join it, as well. For reference, North Dakota's largest coal-fired power plant can produce around 1,100 megawatts of power.

Basin's service territory is expansive and includes nine states, so this will not all be concentrated in North Dakota.

Data centers can serve a lot of purposes, not just crypto. Cloud computing and artificial intelligence operations also require huge data facilities.

In regulatory filings, however, Basin singled out cryptocurrency data centers as uniquely challenging for utilities to handle, citing what it said were fluctuating power demands and the potential for crypto companies to move quickly to other locations when market conditions change. The co-op sought a special charge for serving large power demands which could be wiped within five years for all huge power uses besides crypto centers. The intent of that charge was to avoid building out energy infrastructure that ultimately becomes stranded if large projects do not pan out. That request was ultimately rejected by FERC in a separate case.

State officials are bullish on data centers, hoping to use the state's vast sources of coal, gas and wind to power them.

The data industry can provide an immediate revenue source for coal plants which have become more costly to run because of regulatory and economic pressures.

While the state produces a lot of gas and wind, both industries face export constraints in North Dakota, which causes producers to lose money. Local use, could mean more immediate benefit to power producers and possibly lower rates for utility consumers, if built in the right spots.

The MDU-powered Applied Digital data center in southeast North Dakota provided for a refund of about $1.70 per month for consumers, since it puts local wind power - which would have otherwise been stranded - to use.

Reach Joey Harris at 701-250-8252 or .

Energy/Environment Reporter