Six Provisions Every Large Load Service Agreement Should Include

Your legal team just handed you a draft large load service agreement. It covers the basics—load requirements, interconnection points, service voltage. But does it protect your ratepayers if that hyperscale customer shuts down the facility in year four of a twenty-year infrastructure investment?

Utilities across the country are learning that standard large-power tariffs and generic service agreements are not built for the scale, speed, or risk profile of large load customer. These customers — large load customers, crypto mining facilities, EV charging hubs, hydrogen electrolyzers, and large industrial loads — can draw hundreds of megawatts, require custom transmission and distribution infrastructure, and carry the kind of financial and operational uncertainty that demands contract language written specifically for the situation.

Regulators in multiple states have begun requiring specific protections as a condition of approving large load agreements. But even where regulators have not yet acted, a well-constructed agreement is a utility’s first and best line of defense against stranded cost exposure, credit losses, and ratepayer harm.

Here are six provisions that every large load service agreement should include—and why each one matters.

The Core Six

Provision 1

Minimum Bill and Take-or-Pay Requirements

A minimum bill provision establishes the floor of what the large load customer must pay regardless of actual energy consumption. A take-or-pay clause goes further, requiring payment for a specified minimum quantity of power whether or not the customer actually takes it.

These are not punitive provisions—they are cost-recovery tools. When a utility builds dedicated infrastructure to serve a large dedicated load, the carrying costs of that infrastructure continue whether the large load customer operates at full capacity or stands idle. The minimum bill ensures that the customer—not other ratepayers—bears the fixed cost of infrastructure built specifically for them.

Regulators in multiple states have explicitly required minimum bill provisions in approved large load agreements, particularly for large load customers and crypto mining facilities where load curtailment risk is high. The structure of these provisions varies: some are tied to a percentage of contracted demand, others to a fixed dollar amount. Utilities should model the minimum bill against actual infrastructure carrying costs to ensure the floor is set at a level that provides meaningful cost recovery rather than symbolic protection.

Provision 2

Security Deposit and Credit Assurance Requirements

Data center developers often arrive at the negotiating table with impressive capital commitments on paper. But a utility extending hundreds of millions of dollars in infrastructure investment is, in effect, extending credit to that developer. Creditworthiness provisions ensure that extension of credit is secured.

Security instruments can take several forms:

• Irrevocable letters of credit from creditworthy financial institutions
• Performance bonds backed by surety companies
• Cash deposits held in escrow
• Parent guarantees where the developer is a subsidiary of a financially stronger entity

The size of the security requirement should be calibrated to the utility’s at-risk investment and the term of the agreement. A security deposit sized to cover six months of minimum bill payments may be appropriate for smaller load agreements. For a large dedicated-infrastructure customer, the security requirement should reflect the full cost of dedicated infrastructure that cannot be repurposed if the customer exits.

Security agreements should also specify conditions for drawdown, replenishment obligations if the instrument is drawn upon, and requirements to refresh or replace instruments that approach expiration during the agreement term.

Provision 3

Early Termination Fees and Exit Provisions

An early termination provision establishes what the large load customer developer owes the utility if it exits the agreement before the contracted term ends. This is distinct from the minimum bill—the minimum bill addresses ongoing monthly obligations while the early termination fee addresses the cost of winding down a relationship built on long-term infrastructure commitments.

A well-constructed early termination provision should address:

• The calculation methodology for termination fees (typically tied to remaining contract value, unamortized infrastructure costs, or both)
• A declining fee schedule if the fee reduces over time as infrastructure is more fully depreciated
• The utility’s obligation to mitigate damages (and limits on that obligation)
• Treatment of dedicated assets that cannot be redeployed to serve other customers

Termination fees should be structured to make the utility whole, not to penalize the developer. But “whole” in this context means full recovery of infrastructure investment, lost margin on contracted load, and any incremental costs associated with the exit—not just a nominal administrative fee.

Provision 4

Infrastructure Cost Assignment and Ownership

When a utility builds substations, transmission lines, or distribution infrastructure specifically to serve a large load customer, the agreement should be explicit about how those costs are assigned and who owns the assets.

The most ratepayer-protective approach assigns dedicated infrastructure costs directly to the large load customer rather than socializing them across the rate base. This can be accomplished through:

• Upfront contributions in aid of construction (CIAC)
• Direct billing of specific infrastructure costs in the rate structure
• A dedicated infrastructure rider that isolates the cost recovery

Ownership provisions matter as well. If the utility retains ownership of dedicated infrastructure, the agreement should specify what happens to those assets upon termination. If infrastructure can be repurposed for other customers or integrated into general rate base, that should be defined. If it cannot—and some specialized substation configurations genuinely cannot—the termination fee calculation should account for the stranded value.

See our companion article on Dedicated Infrastructure Riders for a deeper discussion of how these cost-recovery structures work in practice.

Provision 5

Load Profile and Ramp-Up Obligations

A large load customer that ramps to full load six months after the scheduled commercial operation date creates real costs for the utility—carrying costs on infrastructure built and ready to serve load that has not materialized. The agreement should establish enforceable milestones for load ramp-up and consequences for failure to meet them.

Load profile provisions should address:

• The timeline from commercial operation to full contracted load
• Interim minimum bill obligations during the ramp period
• Load factor expectations (large load customers typically operate at high load factors, and below-expected load factors create their own financial exposure)
• Notification requirements if the developer anticipates missing ramp milestones

AI inference workloads are creating new load profile complexity that utilities need to understand. Traditional batch-processing large load customers had relatively predictable load shapes. AI inference loads can be highly variable, with sharp demand spikes that stress distribution infrastructure differently. Agreements serving AI-focused facilities should include provisions addressing load variability and the utility’s rights if actual load profiles diverge significantly from contracted expectations.

Provision 6

Assignment, Change of Control, and Successor Obligations

Data center assets change hands. Development companies sell completed facilities to long-term investors. Operating companies merge or are acquired. The agreement must address what happens when the entity the utility signed the agreement with is no longer the entity operating the large load customer.

Assignment and change of control provisions should require:

• Utility consent prior to any assignment of the agreement or change of control of the facility owner
• Successor creditworthiness requirements at least as strong as the original developer obligations
• Replacement or refresh of security instruments upon assignment or change of control
• Continuity of minimum bill and early termination obligations through any transfer

Without these provisions, a utility could find itself holding a long-term infrastructure commitment to a financially weaker successor entity that inherited none of the risk management obligations of the original developer. That outcome serves neither ratepayers nor sound utility risk management.