Large Loads Are Coming: 5 Cost-Recovery Safeguards Before You Connect One

The call comes in, and it sounds like good news. A developer wants to connect a large new load to your system—maybe a hyperscale data center drawing 300 megawatts around the clock, maybe a hydrogen plant, an EV battery factory, or a crypto operation. The new revenue looks transformative. But before anyone celebrates, the real question for a utility or cooperative is simple: if this goes wrong, who pays?

Large loads are the biggest shift in utility planning in a generation. Data center hyperscalers get the headlines—U.S. planners are forecasting roughly 90 gigawatts of data center peak growth by 2030—but the same risks apply to any outsized single customer. These loads demand custom infrastructure, ramp on compressed timelines, and carry a financial profile that standard large-power tariffs were never built to handle. Get the cost recovery right and the load strengthens your system. Get it wrong and your existing members absorb the cost.

Here are the five safeguards every utility and cooperative should have in place before connecting a large load.

The Top 5 Safeguards

Safeguard 1

Make the New Load Pay for Its Own Infrastructure

When you build a substation, transmission tie, or distribution upgrade specifically to serve one customer, those costs should follow that customer—not get socialized across the rate base where every other member quietly picks up the tab.

The cleanest tools are contributions in aid of construction (CIAC), direct facilities charges, and dedicated infrastructure riders that isolate the cost recovery. The starting point is a defensible cost-of-service study that shows exactly what serving the new load costs, so the assignment is grounded in numbers, not negotiation.

Safeguard 2

Set a Minimum Bill or Take-or-Pay Floor

The carrying cost of dedicated infrastructure does not pause when a customer runs below capacity or idles a facility. A minimum bill establishes the floor the large-load customer pays regardless of consumption; a take-or-pay clause goes further, requiring payment for a set quantity of power whether or not it is taken.

These are not penalties—they are cost-recovery tools. Model the floor against your actual infrastructure carrying costs so it provides real protection rather than a symbolic number. Regulators in several states now require minimum bill provisions as a condition of approval.

Safeguard 3

Require Credit Assurance Up Front

A utility extending hundreds of millions in infrastructure investment is, in effect, extending credit to a developer. Secure it. Letters of credit, performance bonds, cash deposits in escrow, and parent guarantees all work—sized to your at-risk investment and the term of the agreement.

Impressive capital commitments on paper are not the same as a creditworthy counterparty. Spell out drawdown conditions, replenishment obligations, and the requirement to refresh instruments that expire during the contract term.

Safeguard 4

Plan for the Exit and the Stranded Asset

Large loads move. Facilities get sold, technologies shift, and a twenty-year infrastructure commitment can outlive the customer that justified it. An early termination provision should make the utility whole—covering unamortized infrastructure, lost margin, and any specialized assets that cannot be repurposed for other customers.

Stranded-cost exposure is also a credit story. Rating agencies watch concentration risk closely, and a single large load gone bad can pressure your numbers. Strong exit terms are part of protecting your utility or co-op bond rating.

Safeguard 5

Take It to the Board and the Members

A large-load agreement is a governance decision, not just a finance one. The board needs to understand the commitment, the protections, and the consequences of getting it wrong before it signs—and members deserve to know that a new customer will not quietly raise their rates.

Public board meetings, workshops, and clear communication build the record that regulators and members will look for later. This is the same discipline behind sound rate setting—see our article on board responsibility for the bond rating.