Data centers want a closed-door deal. Nevada’s electric utility is suing to stop it
Nevada’s largest utility company, NV Energy, is suing a data center company over potential impacts to residents’ electric bills. It’s a unique twist in the nationwide data center boom that has generally seen utilities and tech firms’ interests aligned.
The lawsuit, first reported by the Nevada Independent, is about how decisions are made regarding the speed at which NV Energy will build new power resources to serve large loads, who pays for it and how much it costs. Rather than the typical regulatory process through the Public Utilities Commission of Nevada (PUCN), Tract, a data center development company, wants to push the decisions into a closed-door legal arbitration between Tract and NV Energy.
In NV Energy’s complaint, the power company argues that the PUCN, a three-person board appointed by the governor, should make the decision. NV Energy accused Tract of trying to push costs onto other utility ratepayers — a claim Tract disputes.
“Large-load customers should bear the costs required to serve their projects and should not shift those costs onto Nevada families, small businesses, and other existing customers,” NV Energy wrote in a lawsuit filed last week in Washoe County, Nevada. “No private proceeding can force other customers to subsidize Tract’s project, and NV Energy remains committed to resolving these issues before the regulators charged with protecting all Nevada customers.”
What are the Tract data centers?
The lawsuit names two Tract data center projects: Peru Shelf and South Valley, proposed by the Colorado-based company. Located about 20 miles east of Reno, they have a combined capacity to consume 2,025 megawatts of electricity — enough to power about 800,000 to 1.5 million homes.
Tract has purchased more than 12,000 acres near Reno and currently has five projects in the same part of Nevada that could use 5,455 megawatts of power once built, according to the company’s website.
In a statement to the Nevada Independent, Tract said, “NV Energy seriously misstates the issues, the facts and the contracts NV Energy signed, and is laced with inflammatory rhetoric clearly intended to distract from the real issues.”
The company said it is committed to paying a “fair share” of costs for energy infrastructure and new power sources.
“We have never sought or received any special treatment, and we remain committed to creating jobs and supporting economic growth in the state,” Tract said.
To power the new data centers, Tract is planning to build two behind-the-meter gas and diesel power plants that connect directly to its facilities rather than the regional power grid. But at fewer than 400 megawatts combined, that’s not nearly enough power.
The behind-the-meter power plants are a temporary solution while NV Energy invests in new sources of electricity.
Nevada’s power supply under pressure
“Nevada is very much still in the process of determining its rate structure for large load customers,” Kerrian Conroy, a research associate at the utility watchdog nonprofit the Energy and Policy Institute, told Straight Arrow.
NV Energy’s 2026 integrated resource plan, which sets long-term priorities for the utility, is currently under review at the PUCN.
In the plan, NV Energy said it needs 52% more electricity supply statewide than it forecasted just two years ago, with data center growth as the primary driver. The utility will have to add 22,000 megawatts of new power generation — more than double the state’s current peak power demand — to match requests by new facilities to connect to the grid.
Data centers currently consume 5% of the state’s power, but by 2046 they are projected to consume 64%.
Who pays for it?
In many parts of the country, utility companies and data center developers work together because their business models are innately symbiotic. Data centers need power, and utility companies can earn more money by adding more customers. NV Energy — like other regulated monopolies in the utility industry — is allowed to charge a predetermined profit margin on all new infrastructure projects.
The PUCN’s job includes approving agreements on how much customers will pay for infrastructure investments NV Energy makes. In the utility world, it’s called a tariff. The utility companies typically borrow money to build large projects and the structure of the tariff is intended to ensure the utility recoups the money, plus the approved return on equity.
The details matter when it comes to ensuring data centers pay a fair share of costs. Consumer advocates nationwide have called for safeguards like minimum contract lengths and separating large loads into their own customer class.
While Conroy is often critical of NV Energy, she agreed that state regulators should oversee the Tract agreement. That way the public can see what’s happening, and other interested parties can intervene.
“There’s already public outcry across the country, including in Nevada, about the lack of transparency in these deals,” Conroy said. “There is a concerted effort to figure out what tariffs work where and how to deal with large load growth, and there are a lot of unanswered questions about how it should be done.”
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Ella Rae Greene, Editor In Chief
