Vermont Legislature SmartTranscripts:

[Speaker 0]: We're live.

[Rep. Kathleen James (Chair)]: Alright. Welcome, everybody. It is House Energy and Digital Infrastructure on Thursday, February 12. And we'll go around the room and introduce ourselves and then turn it over to you for the record. We are continuing our discussion of h seven twenty seven, an act relating to sustainable data center deployment. I'm representative Kathleen James from Manchester.

[Rep. R. Scott Campbell (Vice Chair)]: Scott Campbell from Saint John's Grace. Chris Morrow, Windham, Windsor Bennington, Michael Southworth, Caledonia two. Christopher Howland, Rutland four.

[Rep. Dara Torre (Clerk)]: Dara Torre, Washington two. Laura Sibilia, Windham two.

[Speaker 0]: Great. Jane Pilbara, South Wales. Austin Gauteng, UP Dicker.

[Rep. R. Scott Campbell (Vice Chair)]: Dana Lee Perry with The Crassie Group.

[Speaker 0]: Alright.

[Rep. Kathleen James (Chair)]: For the record

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: for the record, Shannon Loiselle with Vermont Electric Power Company, and I'm accompanied by my colleague, Mark Scarada, I'm Velco's general counsel, and the subject matter expert around federal, energy regulatory commission proceedings and, some of the issues that we're seeing, with, data center topic of conversation within the federal, context. So, and I'll I'll allow you to introduce yourself when you're right. So to start with,

[Rep. R. Scott Campbell (Vice Chair)]: we know

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: the committee has heard from some other utilities and the Department of Public Service on h seven twenty seven. Most of what we share today is going to align with that testimony. It might sound a little familiar. The department did a really excellent job of covering most of what we were going to touch upon today. So hopefully, our testimony will add a little bit of color, and we're obviously here to answer any questions that haven't been answered already. Our testimony today will add the perspective from transmission planning and the interconnection side. I wanna flag just a few key points at the outset, and then I'll hand it over to to Mark, and Mark can walk through some of the details, and we're here to answer any questions. So number one, and many of you already know that Velco is a transmission utility. We do not have retail customers in the same way that a distribution utility would have. We're federally regulated by the Federal Energy Regulatory Commission or FERC. And when it comes to interconnection and tariffs, right, those are the the rules that that we are following. The federal rules are evolving. As you heard, FERC is taking up a few proceedings to find a way to solve for these issues in terms of grid reliability and prices for customers, expensive rates for ratepayers. Data center, the interconnection discussion is rapidly evolving, and there's obviously a heightened focus both from the regulator and utility side. To date, there are no current requests for data center interconnection to Velco's system, and there's no standardized load interconnection process within ISO New England today. That's important for us because we follow their process use. Do have a pause? Okay. Yeah.

[Rep. Kathleen James (Chair)]: Because I wanna understand that a little bit better.

[Speaker 0]: Yeah. I was just gonna ask you to maybe repeat the standardized interconnection and just explain that

[Marc Sgarrata (General Counsel, VELCO)]: a

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: little Absolutely. And this is just an intro to to tell you what you're about to hear, and we'll walk through this in a little bit more detail. Sounds like

[Speaker 0]: Okay.

[Marc Sgarrata (General Counsel, VELCO)]: That's yeah. I'll I'll address that.

[Rep. Kathleen James (Chair)]: Okay. On we go. Alright.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: So Mark will highlight that process. Wholesale wholesale pathway is the only pathway for connecting to Velco's inter transmission system, and there are some caveats there that Mark will walk through. And then as always, reliability first. The customer that is coming, a large load customer that would be coming to interconnect to Vermont or New England, would be required to go through very comprehensive planning studies to understand and determine what upgrades would be required to do no harm to the grid. So those are really the kind of the six main messages that we were coming with today. So with that

[Rep. Kathleen James (Chair)]: There were six? There were. Okay. Okay. You'll maybe you could submit written testimony I'd happy. In retrospect. Okay. Great. So Wrote down one main thing. Maybe

[Marc Sgarrata (General Counsel, VELCO)]: I put all together. Okay.

[Rep. Kathleen James (Chair)]: Alright. So I'll hand it over

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: to you, and if you wanna

[Marc Sgarrata (General Counsel, VELCO)]: So I'm Marc Sagrada, Seamus. I'm Velco's general counsel. I've been at Felco for eighteen years. Before that, I was across the parking lot at the attorney general's office for about a decade. I worked for Bill Sorrelle. I was their lead water lawyer and one of their appellate lawyers. I love that job. I live around the corner from here, and I love this job. It's a really great book. It's a great place to work. I'm really happy to be here with all of you. I have got summaries of some of the testimony that you've heard already, and I've heard a little bit about some of the testimony you got earlier today. So I apologize if I'm repeating things other folks have said, but I think the perspective I'll bring today is how does the federal framework fit into all of this, if at all? I guess I want to start with the piece that Shana led off with, which is Velcro's essentially mostly a creature of federal law and regulation, and there is an aspect of cooperative federalism when it comes to energy law. So interstate electrons, the transmission electrons, high voltage is essentially regulated by FERC, by the Federal Energy Regulatory Commission. At least the rates and the planning and the reliability aspects, that all falls on in the federal bucket. And what had been reserved to the states is, for us at least, a citing authority, which is different than your distribution utilities. Those electrons are even though this is not true as a matter of physics, those electrons are deemed to stay in state, and the rates that the distribution utilities charge are governed by state law and subject to the PUC, and they also have citing authority. So there's this this divide of jurisdiction between state and federal law, and that comes into play here Because if someone wants to become a customer of the electric grid, they want to take service in Vermont, and this is true for New England and for many swaths of the country, they take the service from the distribution utility and it's subject to state law. It's either a state approved tariff or a state approved contract that they take that service to. So the distribution utility is providing that service to them. The distribution utility in turn is taking transmission service and passing along those costs. It's called bundled service for the customer. The customer's getting their distribution charges, their energy charges, and their transmission charges altogether. Another way of saying this is quite a while, Shane has said it, is that, Vulcan doesn't have any retail customers. We don't care how big you are. You you can't take service from us unless you are a distribution utility because we provide a wholesale service to utilities to provide service to an end user. So data centers would be end users. So that's one of the reasons why in the region there's not a system set up for data centers to take service directly from a transmission company, and that's why the federal government is starting to look at this now. Yes?

[Speaker 0]: I do wanna stop there.

[Rep. Kathleen James (Chair)]: Does that mean they can't do it, or does it mean there's not a process in place if they want to do it? I need to understand

[Marc Sgarrata (General Counsel, VELCO)]: Under state law in Vermont, you cannot take retail transmission service. Vermont does not allow for retail transmission service, and that is true in most of the states in New England with some narrow exceptions. I'll give you an example. In Massachusetts, you can't take retail service as a retail customer, end use customer. You're not passing it on to somebody, using it for your own purposes. You cannot take that service directly from the ISO New England. You have to take it through an Eversource distribution utility or a natural grid distribution utility. There is a I'm sorry, but there's actually one couple one one exception to that is they have carve out for things like Amtrak and the the mass Massachusetts Transportation Authority. Mhmm. They have they're allowed to take service, but that's that's an exception.

[Rep. R. Scott Campbell (Vice Chair)]: We got that. Global boundaries.

[Marc Sgarrata (General Counsel, VELCO)]: Yes. This is a great this is like the footnote to all this is that GlobalFoundries found itself in kind of a unique situation. And if if folks are familiar with that, that's obviously a a a what we would call a large load. They they're taking 50 or more megawatts of power off the system, and they used to take it take their distribution and transmission service through Green Mountain Power. And a few years ago, Green Mountain Power was taken out of the mix, and we were set in the same situation where Velco could not provide retail transmission service directly to GlobalFoundries. GlobalFoundries created a self managed utility, essentially a distribution utility of one to accept the power, be subject to state regulation like the rest of the utilities, and then it essentially resells that power to GlobalFoundries. That's basically, and that is one of the scenarios. Great question because it's kind of gets to the punchline here, is one of So all other things being equal, a data center would be a customer of a distribution utility in whatever geography that territory that that distribution utility has. So if it was here, it'd be Green Mountain Power. If it was a few miles down the road, it'd be Washington Electric Cooperative.

[Rep. R. Scott Campbell (Vice Chair)]: And what's GlobalPoundries' load roughly?

[Marc Sgarrata (General Counsel, VELCO)]: I think it's 50. Yeah. 50 megawatts, something like that. Yeah. It's pretty big.

[Rep. Dara Torre (Clerk)]: So,

[Rep. Kathleen James (Chair)]: all things being equal, a data center would typically be a customer of the distribution utility and have to go through all of the state laws and the state regulatory But GF feels like a loophole or an end around. So could a data center How does one go about trying to become the next

[Marc Sgarrata (General Counsel, VELCO)]: global foundries. I don't know if it's apples to apples, and that's probably a better question for the Department of Public Service, frankly. It wouldn't be one that Velco would would answer. But I think there is a potential pathway at least that if a data center wanted to take transmission service and say, did not wanna take service from Green Mountain Power, just as an example, because for many reasons, they wanna take out the middle person. They don't wanna have the energy efficiency charges. They don't wanna be dealing with renewable portfolio standard or whatever reason they wanted access to buy their own power and not have to have the distribution utilities do that searching in the marketplace more than they wanted direct access to wholesale energy market. The only way I can think of conceivably they could do that would be the same way that global boundaries did. It would have to be another utility setup, a self managed utility. I think that probably covers most of what I would say under at least the existing landscape, which is, again, if you're a retail customer, regardless of whether you're a home, a business, or a data center in Vermont, in most of the states, take retail service from a distribution utility. Let me just say as a little bit of an aside, there are places where a data center could connect to the transmission system, not go through the whole distribution system, and that's physically possible. There's all kinds of protections in place before anybody interconnects with your generator or load to make sure, as Shane alluded to this, there's all kinds of studies that are done to say if your load or your generator, you want to tap into the transmission system, you have to prove to the ISO that you're going to do no harm, essentially, And or if there is gonna be harm, that you're gonna pay for the equipment that and holes and wires that need to be in place to avoid a dip in reliability, and you have to pay for that. So there's protections around reliability and and cost.

[Rep. Kathleen James (Chair)]: Okay. So what's interesting to me is that what this is a newer topic for me, but so we're hearing that that DPS is looking at sort of ratepayer protection and impacts on ratepayers, as well as grid reliability. Velco has the lens of grid reliability and load. And so it feels to me like alright. Good. What what what I'm seeing is, you know, different entities looking at this from their own particular, perhaps more narrow viewpoint. And so we either wanna make sure that we have a protective mechanism around every single possible viewpoint or that somebody, and maybe it's gonna maybe it's gonna have to be the legislature, is taking a holistic 360 degree view at how we protect everything.

[Marc Sgarrata (General Counsel, VELCO)]: I think when it comes to the grid itself, that is everybody is in alignment with that. And I would say that extends all the way up to the the current federal administration. Like, they don't want an unreliable grid team either. This is a engineer's kind of mindset. The an unreliable grid serves no interest regardless of your political persuasion. So right now, for at the behest of the DOE, FERC is undertaking a rulemaking. I'm sure folks have probably heard about this, but this rulemaking would essentially try to find a way to do what I just said was not possible under state law. It would be to shift jurisdiction that currently sits with the state, the ability to regulate retail rates, and move that, at least for data centers, for data center retail service to allow the federal government to make those decisions instead of the state. So I Do you have any questions?

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: So

[Speaker 0]: in that case, we would have we would still have citing authority.

[Marc Sgarrata (General Counsel, VELCO)]: Yes. They've made that very clear in the proposed rule that the that citing would still be reserved to states. And

[Speaker 0]: our environmental regulations and water, like, of that two fifty would still come into play.

[Marc Sgarrata (General Counsel, VELCO)]: Yes. All the v five

[Speaker 0]: Yeah. Components. Yes. But what would be cut out is So you're not buying it now. You're not accessing through the distribution utility. Therefore, you are not subjected to the energy efficiency charge Any of this. Potentially the gross receipts tax, potentially the renewable energy not potentially, the renewable energy standard. So you're connecting right to the main. Yes. And so that is then putting you into are you then competing with the utilities for power?

[Marc Sgarrata (General Counsel, VELCO)]: You could be. You could be for sure. And that's happening in some other states. For example, in Puget Sound Puget Sound Energy was distribution utility looking to buy a sole a big solar facility as part of their own renewable portfolio standard, and they bid on this project. It was already built up and running, And Microsoft just came in and said, well, this outfitted you so they could have that for their data center.

[Speaker 0]: So now to get too far down that road, you would have to meet our environmental regulations.

[Marc Sgarrata (General Counsel, VELCO)]: For the siting, yes. You would have to meet all the water and Even

[Speaker 0]: aesthetics with you this rule in place.

[Marc Sgarrata (General Counsel, VELCO)]: Yes. Either yes. Yes. Because before the laws changed, right, like I read this bill which essentially moves citing of the data center itself into the PUC and under section basically on like a two forty eight, but it's essentially act two fifty today. I think, right, it would be if the data center came in today, I think they would have to do the data center itself, the building, under act two fifty, and then the interconnection would be a state regulated

[Speaker 0]: And I think the EC has recommended that you keep it in February.

[Marc Sgarrata (General Counsel, VELCO)]: In February. Oh. I didn't

[Speaker 0]: I didn't department. Sorry. We'll get

[Marc Sgarrata (General Counsel, VELCO)]: you You may have mentioned that to me, but I don't I don't know

[Rep. R. Scott Campbell (Vice Chair)]: if I

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: But the inter interconnecting to if if they would be inter interconnecting to a distribution utility, if you have to build any type of facilities to interconnect, then they'd have to take local service, from a distribution utility. That would be part of a February application.

[Speaker 0]: So there'd be both? Yes. And so what you're talking about and this federal rule has not come into place yet. No. No. They're working on there's a way to do it. Yes. So if that federal rule comes into play, our environmental rules still hold.

[Marc Sgarrata (General Counsel, VELCO)]: Your citing rules

[Speaker 0]: still Citing rules still hold. Yes. But the connection

[Marc Sgarrata (General Counsel, VELCO)]: The connection will be in the rates and terms that the that the data center is paying for electricity are gonna be governed by whatever FERC thinks is just and reasonable reasonable. Even if if it was done under federal law, the PUC may say that don't that does not seem fair to me. That seems like just giving example. Like, if there was a sweetheart deal under this that, you know, regular retail customers were paying a higher rate, for example, than than the data center, the the PUC would not be able to intervene and and regulate that.

[Rep. Kathleen James (Chair)]: And sorry. What about the res? I missed what you said about the res would be knocked out or still relevant?

[Rep. R. Scott Campbell (Vice Chair)]: Knocked

[Marc Sgarrata (General Counsel, VELCO)]: out. Would if you were taking service through of course, the details are not going to yet federal because it hasn't been made final yet, but conceivably what would happen is if you're taking service under federal law, there is no renewable energy standard in federal law. The rate that the data center would pay under a federal energy tariff would presumably not include, not have a renewable portfolio, renewable energy standard component to it.

[Speaker 0]: So something that is now kind of clicking in for me is we can likely protect ourselves from environmental impacts through our robust environmental processes. And right now, we have the ability to deal with, rate pressures that could result

[Marc Sgarrata (General Counsel, VELCO)]: You have to control the rate structure essentially.

[Speaker 0]: And emissions in many ways. However, if this federal rule were to come into place, there would be rate pressures that we would not potentially be able to through competition.

[Marc Sgarrata (General Counsel, VELCO)]: I'm not Tisha, it really remains to be seen how even the rule itself doesn't say like here's what the rate structure would be for a data center. It just basically says that the federal government would determine.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: I wonder if you if you could highlight a little bit about the proceeding and the advanced notice of proposed rule making process. And it's not just this is a a proposed advance and a proposed rule making that the Department of Energy send to FERC asking them to consider these these new rules. And part of it is this federal jurisdiction over transmission level in connection, but there there are other principles within their proposal, including curtailment.

[Marc Sgarrata (General Counsel, VELCO)]: Yeah. It's a it's a little bit messy, but this this proposed rule, first of all, it's it's a little bit of an anomaly. Most times, federal rules kind of, like, crawl at a snail's pace because there's a lot of process in the beginning, lots of comments because what you're trying to do is make it airtight against litigation. Basically, so it was a lot of process, just like the state rules are done. This one came out in the a letter came out in the fall from DOE directing FERC to get a rule on the books by the April that would allow data centers to interconnect at the transmission level and if needed, the ISOs, like ISO New England and PJM, etcetera, to develop tariffs to allow them to do that. And that doesn't exist today because of the thing I told you before, which is that the states have had historically jurisdiction over. So as you can probably imagine, a lot of the comments that came in were but they said a bunch of other things too, which which were not controversial. Like, if upgrades are required to the transmission system, the data center should pay for them. We should ensure that there's reliability. Those kinds of things. But the controversial thing is moving the goalposts or moving the not that goalpost is the right word, but moving Referee. The jurisdictional line for yeah. Yes. Exactly. Changing the the referee to the federal referee. Yeah.

[Speaker 0]: Where would the electric bill come from? And who would the dish center pay?

[Marc Sgarrata (General Counsel, VELCO)]: The data center would pay the I in our case, the ISO knowing and they would come up with some kind of Today, it's like the distribution utility pays what's called an RNS, a regional network service. That's the traditional, basic transmission service. They would get something like that. I'm not sure how it would be constructed, whether it would be based on their particular usage or some other thing, but they would pay that directly to the ISO New England so there would be no The distribution utility would not be getting any money.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: And then what? What happens to them?

[Marc Sgarrata (General Counsel, VELCO)]: Well, the ISO uses that money to help support the rest of the transmission system. Regionally. Yes. So I guess I should say there's two different charges here. We're talking about the transmission service, which is the charge for the privilege of using the transmission system. They would have their own contracts presumably to buy energy.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Power, okay.

[Marc Sgarrata (General Counsel, VELCO)]: Power, maybe this kinda gets to Shane's point, which is some of the data centers are also talking about colocation. This is a kind of term of art around data centers, which is you have a data center and bottle. They're a 20 megawatt data center and they put a 20 megawatt generation facility there. So they say, we're connected to the grid, but we don't really need you. We're gonna be on here. But in emergencies, we need you. And then there's this whole question of, Well, should they be paying just when they need us? Or should they be paying because the transmission infrastructure is there all the time. Like, should they be paying a fair amount of that? That's an open question, and that will have to be meted out in rulemaking as well.

[Speaker 0]: So if the if this rule passed and we had a data center in Vermont and they were connected to the transmission system through the federal rule, the data center would still have to purchase power. Correct. And are they limited in Vermont law? Like, would they have to purchase power from a Vermont utility? No.

[Marc Sgarrata (General Counsel, VELCO)]: It would be a wholesale. They would be buying it off the wholesale transmission system, which is federally regulated, which is open access so they can

[Speaker 0]: Could they buy power from a Texas utility?

[Marc Sgarrata (General Counsel, VELCO)]: No. I don't think so. Think it would be within ISO.

[Speaker 0]: I It have to be within

[Marc Sgarrata (General Counsel, VELCO)]: the I said I said really Yeah. I I say that, but I think there's probably ways they might be able to buy from, say, Hydro Quebec or some other aspects. That's probably that's outside of my area of expertise since VELCA doesn't buy your cell tower.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: And so just in terms of completing the thread of the federal process, after the advanced notice of proposed rulemaking and timelines are very uncertain right now. This is this is a little we haven't seen quite the style of an that is a proposed rulemaking happening in the way that it's started with the data centers. And after they've completed the the getting all the comments that they have from stakeholders, it goes into a more formal process, which I believe does have formal rules in terms of timeline. Correct?

[Marc Sgarrata (General Counsel, VELCO)]: Well, this they're expected to and they've been directed to issue a final rule by the April. Whether that's realistic or not, I don't know. But if they follow that mandate, they will issue a final rule. It'll be published in the federal register, and it'll usually, there's a lag time of thirty to sixty days before it becomes effective. And that that would and the rule would say it wouldn't the rule wouldn't say, like, after those ninety days, you wouldn't be able to connect your data center. It would the rule would require the regional transmission operators, the ISOs, to develop tariff language and come up with these processes and contracts, for lack of a better word, within a certain number of days. Then when that became effective it would be months.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Okay.

[Marc Sgarrata (General Counsel, VELCO)]: I don't know exactly how long they would give them, but a typical time frame is you issue a final rule, and then you get six months to come up with language six months to nine months to come up with language that you have to file a FERC. FERC has to accept it, make sure it complies with their directives, and then it you would have an effective date on top of that would be a little bit further up. That's assuming no litigation and a court doesn't get involved and say, for example, stay the rule, which is a possibility here, especially for this one. It says like a big jurisdictional rule, and you're gonna have a bunch of states coming in, the

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: rules Every state.

[Marc Sgarrata (General Counsel, VELCO)]: Yeah. The rules from FERC are typically, if they're challenged, they're challenged in the in the DC federal court in the District Of Columbia. There's this rule known as the 13.2 rule for the legal conocente, which is that that court has a higher incidence of overturning agency rules than other courts do. I'm not saying this one I'm not judging or handicapping this one in particular, but it could be subject to challenge there. But if that didn't happen, I think what you're looking at for this particular rule, if it was issued in April, sometime next year, we would be seeing data centers potentially applying under a new set of tariffs that the ISO would issue. Again, that's all Speculative.

[Speaker 0]: So I think Vermont is considered sorry.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Am I right? I'd love

[Speaker 0]: to be okay. Think Vermont is considered to be and and New England to be not that attractive because of our rates. But so does this in any way change that if there were that federal

[Marc Sgarrata (General Counsel, VELCO)]: Well, what I would say is I'm not an expert in the construction or planning of data centers, but the things they look for are low latency fiber connectivity. That's like they have to happen. They have to have access to water. They have to have access to land that is near reliable power. And then I won't tell you where I heard this because I can't give you the attribution, but I did hear today somebody say who's somebody who's valued whose input I trust that what they have heard is that the data centers really don't care about the rates that much. I don't know if that's true, but that's what they have said. I don't care about the rates that much because they're making so much money out of these things that that's not their biggest concern.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: But they do care about the the generation sources being reliable and available and ample.

[Marc Sgarrata (General Counsel, VELCO)]: Yeah. Reliability is really important to them because they're usually running twenty four seven.

[Rep. Dara Torre (Clerk)]: So the different ISOs will have different tariffs? Some will be more attractive?

[Marc Sgarrata (General Counsel, VELCO)]: Possibly. That's possible. Yeah. They'll all have to conform to the general rule, but there's a the federal government FERC allows for what they call regional variability because the regions have different interests sometimes.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: So within the PJM territory, which is in those Mid Atlantic states, it's one of the biggest ISOs in the country. There is a FERC opened a proceeding specifically for PJM because this is the the hotspot of data centers and the issues, these critical issues that are coming up in terms of the capacity being there for all load users and the impacts to ratepayers. And so there's this proceeding, the advanced notice of proposed rulemaking, which is, including inclusive of all stakeholders and ISO New England, the New England States, Committee on Electricity. Ratepayer advocate types are very engaged in that process and submitting comments and and tracking and monitoring in the same way that we are for the group reliability purposes. But at the same time, FERC sees that the issue within PJM is really what needs to be to be fixed. And so they've opened an additional proceeding specific to PJM where they're asking them to prove to us that your tariffs are just and unreasonable, and if not, come up with a tariff that is just and reasonable. So these two proceedings are happening in parallel. And speculatively, I would say that one might aid the other in terms of what comes out of this conversation around PJM.

[Marc Sgarrata (General Counsel, VELCO)]: The the PJM proceeding actually has resulted in a an order for PJM to develop a couple of new ways, new tariffs. The tariffs are just essentially pro form a contracts that are the used in the electric world so everybody's operating off of the same terms. Have and PJM was a little bit narrower. They weren't talking about all data centers. What they were trying to do is figure out how to fast track data centers that didn't have some of the baggage that data centers have generated. Like if you're a data center, you're 50 megawatts, that creates a problem for squeezing the energy market because you have existing customers and existing generation. And if you add somebody who's gonna take more, obviously, like, it tilts the supply and demand in a way that can cause price constraints. So what they have said, listen. If you're not gonna gonna be one of those data centers, if you're gonna be a data center that brings your own generation

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Mhmm.

[Marc Sgarrata (General Counsel, VELCO)]: Or if you're gonna be a data center that is willing to be curtailable, like, we you allow us to turn you off in times of need, then we're gonna fast track you. And Bert has said to PJM, we want you to start working on those pro form a contracts to allow that to happen. So that's what I'm

[Rep. R. Scott Campbell (Vice Chair)]: ask about that because that that seems like those two things, like the principle of possible positive benefits to our power grid in our situation is bringing your own power and and and flexible. Yes.

[Marc Sgarrata (General Counsel, VELCO)]: Bringing your own power is great. If I I would say, like, that is a good solution. Bevel in the details. If you're taking an existing resource and kind of stealing it from the pool that's out there, not so good.

[Rep. R. Scott Campbell (Vice Chair)]: Well, but but

[Marc Sgarrata (General Counsel, VELCO)]: flexible curtailment. But me Cretailment, yes.

[Rep. R. Scott Campbell (Vice Chair)]: Is is another another another thing. And and those seem like the the major two benefits, I can't I can't think of anything else off from what I've heard so far. Those elements would be well, this speculation, I guess, at this point, but would those be would those be negotiated or regulated at the FERC level or Yes. At the FERC not the ISO level.

[Marc Sgarrata (General Counsel, VELCO)]: Well, if you're asking if, so FERC would say to the ISOs come up with a tariff that will allow a data center with its own generation, give it a pathway. Mhmm. Come up with a pathway for that for that generation to come on quicker. I think that's part of what's going on Okay. In this what we're expecting to come out of this proposed rule. The same thing's happened in PJM kind of on a piecemeal basis. I think this this proposed rule is gonna say, come up with a plan to integrate data centers and essentially bypass state jurisdiction and the rates. Also, make it a fast track for the ones that are less problematic because they bring their own energy.

[Rep. R. Scott Campbell (Vice Chair)]: So a a person that is saying that you can fast drive permitting if you

[Marc Sgarrata (General Counsel, VELCO)]: have If you help solve

[Rep. R. Scott Campbell (Vice Chair)]: the problem. As opposed to to restricting data centers to that that kind

[Marc Sgarrata (General Counsel, VELCO)]: of Yes. They're not restricting data centers to

[Rep. R. Scott Campbell (Vice Chair)]: That's not not what they're trying to do.

[Marc Sgarrata (General Counsel, VELCO)]: And it's not clear to me. I don't know enough about data centers to know whether curtailability is really in the business model. I It doesn't seem like it. To me, it doesn't seem Yeah. It wouldn't either, but I don't know enough. I haven't not run a data center, so I don't know if you can be subject to turning on and off. Yeah. Yeah. Oh, good. I I feel like this testimony might be more confusing and more, raising more questions than it's answering for the committee,

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: but Well,

[Rep. Kathleen James (Chair)]: that's just our way. So

[Speaker 0]: did you have more are you still working your way through your comments?

[Marc Sgarrata (General Counsel, VELCO)]: I think I've covered the federal piece. I'll just say that is for us, that's the game changer. I think that's a game changer in Vermont and in New England if it comes here, potentially. Against the backdrop of let's remember that no one has been knocking on Velcro's door today. We wanna connect the data centers. Haven't heard of that. There's been what we would call people maybe kicking the tires or sniffing around in Vermont and in New England, but there's nothing that's been real. The first thing that happens if somebody wants to interconnect load to a transmission level or even the distribution level is they have a they literally have a conversation to decide, is it plausible? And then they they wanna go further than that. They have a feasibility study where they actually look crunch some numbers. Oh, this is this is this is worth studying further. And if they got really serious, and we we don't have anything that's approached this in New England or in Vermont specifically. You would conduct a a system we would conduct a system impact study to say, okay. This sounds very real. Let's see if we plugged you into the system here. What upgrades will we need to the system to make sure it's reliable? And I will say there's not a process dedicated to integrating load that way and studying load that way in New England, but they'd have a proxy for that. They already have a system to study generation coming in. It's not apples to apples, but what they would do is if there was, say, five generators wanting to interconnect in a particular area and a data center wanted to interconnect, they would study them all together.

[Speaker 0]: ISO.

[Marc Sgarrata (General Counsel, VELCO)]: ISO would study them all together, but the host transmission company would really lead the study, but it would be done together. They would look at them. First of all, they would make sure they're all real. By real, I mean they have skin in the game. They have developed plans. They own property. They're not just sniffing around. They're not gonna waste people's time because these studies cost money. So they're gonna study this stuff, see, okay, all these four or five things come onto the grid around the same time, what upgrades are we gonna need? And then they would allocate the cost of those based on who's getting, benefiting the most out of it.

[Speaker 0]: Yeah. So

[Marc Sgarrata (General Counsel, VELCO)]: it's a little more complicated than I'm describing, what I'm just saying was there's just one center most likely it's gonna be that the studies are gonna involve some dynamics.

[Speaker 0]: So Commissioner Johnson this morning was talking about the need for a tech technical conference to kind of establish the baselines for Vermont around this issue? I'm presuming that Velka would participate

[Marc Sgarrata (General Counsel, VELCO)]: in such a Absolutely. Yeah.

[Speaker 0]: And would the ISO also participate in something like that?

[Marc Sgarrata (General Counsel, VELCO)]: I think if they were invited, they would at least be in the room. They would certainly wanna know Yeah. We I mean, as I'm sure commissioner Johnson made clear, the department and Velco and the ISO all have great relationships. We collaborate and talk. That's not true in every state, by the way. That is true in Vermont. We have very good relations with them and try to work collaborative collaboratively.

[Rep. Dara Torre (Clerk)]: Torre? Yeah. I was wondering if the studies you're describing are are what is called cluster studies.

[Marc Sgarrata (General Counsel, VELCO)]: Yes.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: It is. Exactly. Yes. Which is new. Right? It is a new process. They just are now completing their their first interim cluster study.

[Rep. R. Scott Campbell (Vice Chair)]: Well, one thing so I I I guess takeaway that I'm that I'm getting is the only leverage point that we have in in Vermont is is. Is that is that

[Marc Sgarrata (General Counsel, VELCO)]: Well, not right. Currently, you have Well, I mean rate making of I mean, have no. It's the rule goes through, you would potentially lose that lever of retail rate authority over a a data set. Yes. You would lose that. Would have you would have site. That's been the yeah. The transmission level, that's all you would have left would be Yes.

[Rep. R. Scott Campbell (Vice Chair)]: Right.

[Marc Sgarrata (General Counsel, VELCO)]: Trans it would be the site y.

[Rep. R. Scott Campbell (Vice Chair)]: That's what I thought you said. I just wanna make sure. Yes. And then and the other question is how data centers in Virginia are connected now? At at what level are they connected? Are they connected to the to the, transmission level? Or they connect I don't

[Marc Sgarrata (General Counsel, VELCO)]: I don't know the answer to that question. Well,

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: PJ PJM has a different construct than ISO and Windham in terms of how distribution utilities and transmission operate. We are vertically integrated in Vermont. So I I don't know the the difference of why one way works better than the other, but it's not an apples to apples comparison. Sure. So

[Speaker 0]: I always think about you all as our most kind of conservative, careful on or or in terms of the energy sector. What are you most worried about?

[Marc Sgarrata (General Counsel, VELCO)]: With respect to data center?

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Yeah. Yeah.

[Speaker 0]: Yes. Please narrow your

[Marc Sgarrata (General Counsel, VELCO)]: Yeah.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Because I still have.

[Marc Sgarrata (General Counsel, VELCO)]: Geomagnetic disturbances. No. Well, you went first.

[Shana Louiselle (Vermont Electric Power Company - VELCO)]: Well, I I think that first and foremost, right, reliability is our our number one goal, and it's our core responsibility. I will say that Belco also plays another role being a voice at the regional stage and understanding that there, you know, are some implications with not just reliability of the grid, but how it could impact rate payers. And so and I'm not saying that this is my largest worry. I'm just I'm I'm making the point that those conversations from a state to state level and having more collaboration with all the transmission owners so that we're and ISO New England, that we're finding the right answer that works for New England, regardless of what comes out of this ANOBER proceeding. I think at the end of the day, keeping the lights on is is our biggest job. And so if there were anything happening that takes away from the reliability aspect, that would be from a grid operator perspective, the biggest concern. But knowing that we have these procedures and mechanisms in place that are very comprehensive studies that have to take place, and it's not just, does it work with the current system? It's also, does it work with the current system that's significantly under stress? Because as we've just seen over the past two and a half weeks, extreme weather plays a pretty big role in terms of the resource adequacy and understanding how the grid can operate. I don't know if you have something to add to that.

[Marc Sgarrata (General Counsel, VELCO)]: Well, I wouldn't want to be on record in a newspaper. At a Under what they will do. Date, I'm not concerned with reliability because that's our number one job. That to me feels relatively secure and not threatened that much by the post FERC rule. The thing I feel I'm channeling, when you're asking Velco, but we're owned by the distribution utilities, so I'm channeling the distribution utilities here, I would be very concerned about state jurisdiction being whittled away. I think once you lose it for data centers, you may be losing it for other things. And eventually, all you're gonna be left with is siting, which isn't gonna be really have you're not gonna have that much skin in the game, and that's, where the state can be most protected, both ratepayers.

[Rep. R. Scott Campbell (Vice Chair)]: Thank you.

[Rep. Kathleen James (Chair)]: I'd love to give committee members a break for me on floors, just to recover. So, our folks okay. Thank you so much for joining us. You're welcome. We'll Thank go offline. Yeah. Appreciate

[Speaker 0]: it. Peace. Thank you.