(The Center Square) – Cleco plans to build a new natural gas power plant as part of a broader deal to supply electricity to Applied Digital’s massive data center in Rapides Parish, according to testimony filed with state regulators.
The $3.6 billion data center is expected to use as much as 430 megawatts of electricity, making it “the largest single load ever served by Cleco Power.”
Applied Digital would pay the full cost of the power lines, substations and other equipment needed to connect the data center directly to Cleco’s electric grid.
That work includes building a new substation at the data center, upgrading existing substations and improving transmission lines in the area.
Applied Digital would also pay the full cost of a separate, 10-year agreement that Cleco says is needed to make sure enough power is available when the data center begins operating.
Under that agreement, Cleco plans to buy 370 megawatts of power capacity from the Tenaska Frontier Generating Station, a natural gas plant in Texas.
But Cleco is also proposing a much larger, long-term investment: a new 756-megawatt natural gas power plant.
Applied Digital would not pay the full cost of that plant.
Instead, Cleco says it needs the new plant even without the data center because some of its older power plants are expected to retire and the utility will need more reliable power in the years ahead.
The new plant would serve all Cleco customers, not just Applied Digital, and is expected to operate for about 30 years.
Cleco argues, however, that adding such a large new customer will make the plant much cheaper for everyone else.
The utility estimates Applied Digital will pay nearly $3 billion in non-fuel charges over 15 years. That money would help pay for power plants, transmission lines, storm costs and other expenses that are normally spread among Cleco customers.
“Absent the Customer taking electric service, the revenue requirements associated with this necessary generation investment would have been borne entirely by existing customers,” Cleco regulatory strategy director Austin Finn said in testimony.
Cleco estimates revenue from the data center could cut by more than half the amount existing customers would otherwise have to pay toward the cost of the new gas plant.
The company also projects the deal will provide more than $700 million in net financial benefits to existing customers over the first 15 years.
Under the expected level of electricity use, Cleco estimates the data center alone will generate more than $2 billion in base-rate and other utility revenues over that period, not including some capacity charges.
Cleco is not promising that everyone’s electric bill will simply fall once the data center opens.
Instead, the utility says Applied Digital’s massive electricity payments will help lower costs for existing customers by covering a larger share of storm, grid and other expenses, while reducing the rate increase expected from the new gas plant.
The company says the project will also bring major economic benefits to Central Louisiana.
Construction is expected to employ about 1,000 workers at its peak. Once operating, the data center is expected to support about 200 permanent jobs with a median annual salary of $92,000, along with more than 200 additional jobs at nearby businesses.
“The Project could also catalyze long-term economic activity in Rapides Parish by anchoring a digital infrastructure cluster that can attract suppliers, contractors, and complementary investment for years to come,” Cleco President and CEO Bill Fontenot said.