David Lapp on the Case Against Forcing Residential Consumers to Pay for Skyrocketing Data Center Costs

On March 4, corporate leaders from Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and xAI went to the White House and signed something called the Ratepayer Protection Pledge. 

The companies behind the nationwide buildout of data centers, which has triggered grassroots outrage across the country, agreed to “cover the cost of all power delivery infrastructure upgrades required for their data centers, ensuring such expenses are not passed to American households.”

Of course, it was all smoke and mirrors. 

In reality, the companies are seeking to offload the costs of that massive energy build out onto the backs of residential consumers across the nation.

And earlier this month, David Lapp, the People’s Counsel in Maryland, called them out on it.

In a complaint filed with the Federal Energy Regulatory Commission (FERC), Lapp alleged that PJM Interconnection rules for assigning regional transmission costs driven by data centers violate the Federal Power Act and will unfairly inflate Marylanders’ electric bills. (PJM, which stands for Pennsylvania, Jersey and Maryland, is the largest regional transmission organization in the United States. It acts as an air traffic controller for the power grid, coordinating and monitoring the supply and delivery of electricity across 13 states – and the District of Columbia.)

Lapp said that PJM’s rules for allocating $22 billion in transmission costs have unlawfully assigned Maryland customers responsibility for $2 billion in capital expenditures – costs that will be recovered in rates for decades and that will drive up Maryland customer bills by $1.6 billion over the next ten years alone.

“Without FERC action, Maryland customers face paying billions for transmission infrastructure that PJM is advancing to benefit data centers,”  Lapp told Corporate Crime Reporter in an interview last week. “PJM’s cost allocation rules are broken. Maryland customers have neither caused the need for these billions in new transmission projects nor will they meaningfully benefit from them.”

The world’s largest data center complex is near Ashburn, Virginia. It’s called data center alley, which handles roughly 70 percent of global internet traffic. Because of the energy demand, some are projecting blackouts and brownouts in the DC region. 

What kind of pressure is data center alley putting on the regional market?

“If you look at PJM’s projections of data center load growth, it’s massive. It’s in the neighborhood of over 80,000 megawatts over the next twenty years. PJM today is over 160,000 megawatts. That’s a fifty percent increase. And that 160,000 megawatts covers a vast PJM region – from Delaware to Illinois, parts of North Carolina, up into New Jersey and over to Ohio. And that 160,000 has developed slowly over more than 100 years as residential customers got refrigerators and industries developed.”

“The regulatory model is based on geographically dispersed growth and gradual growth – modest growth rate that is spread out across the region. Data centers completely break that paradigm. They are massive. In the next five years, PJM is projecting about 30,000 megawatts of data center growth in just five years. That’s like adding almost three new Marylands to the load over five years.”

“Generation cannot be built that fast. Transmission cannot be built that fast. If we treat data centers as if they are normal customers, you will have reliability issues and massive cost issues.” 

“The existing system has been built and paid for by existing customers. And we should not be bearing the brunt of these data centers, which are being built by some of the wealthiest corporations in the world. Data centers should be kept outside of the current regulatory model. But the data centers want to shift the infrastructure costs onto the backs of the current residential customers.” 

“Exelon is one of the larger utilities in Maryland. And they are telling their investors about these massive upcoming expenditures for data centers. They announced just a little while ago that they planned to spend $12 billion to $17 billion on transmission over the next ten years. Exelon owns Pepco in DC and Baltimore Gas & Electric and Delmarva Power in Maryland. It also owns Commonwealth Edison in Chicago.” 

“Utilities make money by spending money, if they can get regulators to approve their plans. They stand to benefit from these projections of massive data center load growth, because they can build the infrastructure and bill it to their captive customers and generate huge profits.” 

“So we have data centers profiting, utilities profiting and generation companies also profiting from tight supply markets that are driving up costs because generation can’t be built fast enough to serve these data center loads. They are collecting windfalls.” 

“Three different major industry players stand to benefit from not just real data center growth, but also from forecasted data center growth, no matter how phantom the growth might be. We have done an analysis that shows that there is no way that these 80,000 megawatt data centers can be built in the projected time. There are not enough computer chips to build that many data centers within PJM. And customers are paying for that projected load growth, even if half of it never arrives.” 

You say that “Maryland customers have neither caused the need for these billions in new transmission projects nor will they meaningfully benefit from them.” We all go online and use artificial intelligence. Aren’t we meaningfully benefitting?

“If there is a shopping mall, and you shop at the shopping mall, I don’t consider that a meaningful benefit to you. From the perspective of utility regulation, we don’t take that into account when we decide who pays the costs of that commercial shopping center. We are looking at the specific cost drivers from the infrastructure that is being built.”

A consumer would meaningfully benefit from a transmission line that brought electricity to their home?

“Yes. If Amazon, Microsoft and Google can avoid paying the appropriate costs that they should be paying for all of the infrastructure that is being built to support their data centers, they have no incentive to reduce those costs. If they are going to be subsidized by residential customers across Maryland and the region, there is no incentive to reduce costs. If these data centers are going to be built at all, they should be taking on all of the costs.” 

Senator Bernie Sanders would put a moratorium on the build out of these data centers. Another way is to do what you are talking about – get rid of the corporate welfare and have the data centers pay their own way. 

“We know that industry is always going to be several steps ahead of even the most effective regulators. And this data center boom is happening quickly. And our regulatory structure was not created for this situation we are now facing. We could use a pause to figure out how to get the rules right for this new situation.”  

“We are trying to figure out as quickly as we can how to address all of the cost implications from the energy use that is being driven by the data centers.”

Are other states joining in this effort to push back against offloading of data center costs onto residential consumers?

“Yes, on many issues we do work with some other states. Some states are more active than others. But every state has different levels of resources. Different offices bring different political perspectives.” 

What is your staff and budget?

“We have 28 positions and a budget of about $8 million. And we are up against the utility industry in the courts, at the Maryland Public Service Commission and at FERC. And the industry has tremendous sway in the state legislature as well. They have a legislative agenda. They make political contributions. They have their lobbyists. We are at odds with the industry on legislation.” 

“Since the Public Utility Holding Act was repealed by Congress in 2005, there has been massive consolidation in the industry. One of the reasons utilities were broken up back in 1935 was because of their political power and influence over the political process.  And now we are seeing that consolidation back again. And the legislative agenda is being largely driven by Exelon. They have a lot of influence in terms of what happens in Annapolis.”

This past week, you did get some national press on your FERC challenge to the data center costs. What are your chances at FERC to get a good outcome?

“We have had some success at FERC when we have challenged excessive utility returns on equity. Utility profits are set by regulators. But we also have had complaints outstanding at FERC that FERC has sat on and never addressed.”

“We have one really important one that we filed about a year ago that challenges up to $5 billion in costs that are driven by a PJM rule that PJM itself agreed was fundamentally flawed. That complaint has been sitting at FERC for about a year and FERC hasn’t done anything with it. We believe we have strong grounds in that case.”

“In a different case, we raised a mistake that PJM made that cost customers $180 million. Everyone knew that this was a mistake in the way they ran one of their markets. They made a mistaken assumption. And PJM initially tried to fix it. We filed a complaint and PJM denied our complaint. We appealed to the DC Circuit Court of Appeals. And we won that appeal in January. The DC Circuit said FERC erred by dismissing our complaint. That paves the way for $180 million in refunds to the customers on the Delmarva Peninsula. That was a victory.”

“We have had some success at FERC and PJM. But we have had more than one complaint that FERC has been sitting on and not addressing. Even the FERC commissioners now are talking about affordability. But they are sitting on these cases where Maryland customers are paying costs that are unlawful. FERC needs to address those cases.”

“These big companies went to the White House last month – Amazon, Microsoft, OpenAI and they committed to what they called a ratepayer protection pledge. They said that companies will pay for new power delivery to upgrade their data centers, including adequate network upgrade costs to insure that these expenses are not passed on to the ordinary household.” 

“One thing that we point out in our complaint is that to fulfill this pledge, they would need to support our complaint. We are saying in this complaint what a lot of politicians are talking about with respect to data centers – data centers shouldn’t be driving up costs for regular households.”

  What’s next on your agenda?

“We are looking to elevate the issue of the utilities returns on equity. In a rate case, the regulator sets the profit levels of the utility. Utilities are monopolies. They do not operate in competitive markets. In a competitive market, a corporation has to earn its profits by winning over consumers through low prices, innovation and service. Utilities have captive customers. And regulation is supposed to provide what competition can’t provide, because the companies have a monopoly. Regulators set their profit levels. Utilities are low risk businesses. They have captive customers and regulators protect them from competition.” 

“But utilities actually get much higher profits than what companies get in competitive markets. FERC allows them returns generally ten percent or higher. You can look at benchmarks put out by JP Morgan and Blackrock. Those benchmarks are in the neighborhood of five and a half percent or seven percent, if it’s really high. But utilities consistently get authorized returns set by regulators at ten percent. In Maryland they are about nine and a half percent. That’s extraordinarily high. So utilities consistently get excessive profits. And that’s harming consumers. In the last couple of rate cases, we have argued that these returns are excessive. And we advocate for much lower returns on equity. And one of the ways to address rising energy bills is to lower utility profit levels.” 

[For the complete q/a format Interview with David Lapp, see 40 Corporate Crime Reporter 20(12), May 18, 2026, print edition only.]