District details process to assess and contain data center impacts
The Modesto Irrigation District is moving to ensure that local ratepayers do not shoulder the costs if large data centers require significant upgrades to the electric system, MID officials told the board Tuesday.
Jack Rodgers, MID's pricing and risk management administrator, said the district has received inquiries about "large-load" projects since 2018, with proposals ranging from 25 to 400 megawatts. Rodgers said MID defines a large load as 5 megawatts or more.
Rodgers described a multi-step process intended to protect MID customers: an initial meeting with account representatives, a paid large-load study by the prospective customer, and then a binding service agreement that lays out the responsibilities for system upgrades and their costs so those expenses are not passed to households and existing businesses served by the district.
- Initial inquiry: early meeting between MID account reps and the potential customer.
- Large-load study: paid for by the developer to assess power-supply and system upgrade needs.
- Service agreement: typically spans 10 to 15 years and incorporates rates and cost allocation for upgrades.
“Data center developers are looking for sites near major metropolitan areas, where rates for available electricity are affordable,” Rodgers said, explaining why Modesto has been a focal point for proposals aimed at supporting artificial intelligence infrastructure rather than cryptocurrency operations.
“Our process is designed so local ratepayers are not stuck with the expense,” Rodgers said.
Financial protections and risks
Though developers would normally fund system improvements, MID staff warned of scenarios where projects fail, leave the region or the developer goes out of business, potentially exposing the district to unpaid costs.
To guard against that risk, Rodgers told the board MID could require upfront collateral from data center developers and hold those funds to cover potential defaults. He said the district would hold millions, or tens of millions of dollars in reserve if necessary.
Board member Janice Keating said she supported creating additional safeguards; the discussion Tuesday indicated the board is weighing policy language and financial terms it would require before committing to power delivery for large-load customers.
Scale, water and electricity considerations
Rodgers noted that inquiries for large data centers vary widely in size and impact. The new generation of data centers, he said, is notable for large energy and water demands, a particular concern in a region that plans for both power and resource constraints.
| Item | Detail |
|---|---|
| Large-load threshold | 5 megawatts |
| Inquiry sizes since 2018 | 25–400 megawatts |
| Service agreement term | 10–15 years |
| Potential collateral | Millions–tens of millions of dollars |
Officials said the paid large-load study evaluates what upgrades would be required to deliver the power and assigns the cost of those upgrades to the developer. The contract would then incorporate those costs and the rate structure for the developed site.
Local context and next steps
Modesto residents have seen renewed attention to large industrial and technology uses of land in recent years, and the MID presentation underscores the utility’s effort to balance economic development interest with the protection of current customers. The district’s approach focuses on upfront technical and financial analysis to ensure transparency about system needs and costs.
While MID has not announced any finalized contracts, the board discussion Tuesday highlighted the tools available to the district — from requiring paid studies to demanding collateral and multi-year service agreements — to mitigate the risk that expensive system upgrades become a burden for local ratepayers if a developer defaults.
As Modesto continues to attract interest from data-center developers seeking affordable power near metropolitan markets, MID’s policy choices in the coming months will shape how much responsibility those projects must assume for their infrastructure impacts.
