Private BUSINESS Use
Modernizing Outdated Treasury Regulations
How outdated Treasury regulations penalize public power for protecting customers from data center costs.
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Private Business Use Materials
Fact Sheet
Treasury Regulations Penalize Customer Protections
Explains how outdated Treasury regulations prevent public power utilities from securing long-term commitments from large-load customers, putting existing ratepayers at risk.
Explains how outdated Treasury regulations prevent public power utilities from securing long-term commitments from large-load customers, putting existing ratepayers at risk.
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Case Study
The Three-Year Trap
Quantifies the billions in potential customer costs and financing penalties public power utilities face under Treasury’s three-year contract restrictions.
Quantifies the billions in potential customer costs and financing penalties public power utilities face under Treasury’s three-year contract restrictions.
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Regulatory Text
LPPC's Proposed Regulatory Text to Treasury
Outlines LPPC’s proposed changes to Treasury regulations allowing long-term large-load contracts that protect existing customers without triggering private business use.
Outlines LPPC’s proposed changes to Treasury regulations allowing long-term large-load contracts that protect existing customers without triggering private business use.
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The Issue
Outdated Treasury regulations force public power to choose between protecting families and serving America’s growth.
LPPC member utilities represent more than one-third of expected new data center interconnections in the U.S. through 2030.
Federal policy asks for long-term commitments. The White House Ratepayer Protection Pledge commits AI companies to pay for the power and infrastructure they request, whether they use it or not. The House passed the Ratepayer Protection Act (H.R. 9340) 417 to 3, codifying the pledge's principles as a standard for utilities and state regulators. The Bipartisan American Affordability and Jobs Act (S. 5653), the Senate’s permitting reform bill, goes further: it requires every electric utility, including public power, to apply these protections to data centers of 20 megawatts or more.
If enacted as written, complying with federal law would itself create private business use under Treasury’s regulations for public power.
Treasury should act before the bill becomes law.
Restrictions:
Treasury regulations treat large-load contracts with minimum payments lasting more than three years as private business use, potentially jeopardizing the tax-exempt status of bonds across a utility's system.
Unintended Consequences:
Public power must choose between short-term contracts that expose existing customers to stranded costs, long-term commitments that trigger costly taxable refinancing, or declining to serve new economic development.
Reality:
Large-load requirement contracts are standard utility service, not private ownership. Customers receive no ownership or priority rights to generation facilities, and their commitments ensure they pay for the capacity they request.
Our Position
LPPC urges Treasury to modernize its regulations so public power can secure long-term commitments from large-load customers, protect existing ratepayers, and support economic growth.
The Regulations are Treasury’s, and so is the Fix
No statute limits these customer contracts to three years. Treasury considered exactly this question in formulating its 1972 regulations and decided that contracts with demand charges or minimum payments are not private business use. Congress endorsed that approach in 1986. Treasury’s current regulations, finalized in 2002, reversed it, though no new law required it and these contracts remained common.
Public power has proposed regulatory text that would allow longer contracts with large-load customers, if those customers pay their full cost of service at arm’s-length, or generally applicable rates and no facility is built for their exclusive use.
We’re either going to get reforms of regulation at Treasury or at some point our utilities are going to have to say, I’m sorry I can’t build for you.
Tom Falcone
President, LPPC
What’s at Stake
Public power utilities are meeting massive load growth today, and the Senate aims to take up S. 5653 when it returns in November. If Congress acts first, customers could pay more for their energy, because federal law would require protections that Treasury’s regulations currently penalize.
LPPC members face 97 GW of large-load requests across 13 utilities. Without long-term customer commitments, residential bills could rise 17% to 32%. Requiring those commitments under current regulations could impose $4 billion to $6 billion in additional financing costs.
Under Treasury’s current regulations, public power has only three options when a very large customer asks for service, and each one costs the communities it serves:
Option 1: Limit Contracts to Three Years
Public power utilities risk shifting billions in stranded infrastructure costs to existing customers if large-load customers reduce demand or leave.
Option 2: Require Long-Term Commitments
Protect existing customers by requiring large loads to pay their full cost of service, but trigger private business use penalties and costly refinancing of tax-exempt debt.
Option 3: Decline to Serve
Turn away new data centers and industrial development, costing communities critical investment, jobs, and tax revenue.
