Eminent domain carve-out proposed for AI data center power plants

Nebraska’s public power utilities could not use eminent domain to acquire privately owned power plants built to serve certain large-scale electricity users under a bill heard Feb. 5 by the Natural Resources Committee.

Niobrara Sen. Barry DeKay, who sponsored LB1261 at the request of Gov. Jim Pillen, said the measure was drafted in collaboration with utilities to help them meet “unprecedented” challenges in providing electric service to industrial customers such as data centers.

“These large industrial companies offer a significant economic potential,” DeKay said, “but their large energy demands and expedited expectations for interconnection could place extraordinary pressure on the Nebraska electric utilities and electric customers.”

The bill would prohibit a consumer-owned utility in Nebraska from using eminent domain to acquire a privately owned electric generation facility under certain conditions.

The exemption would apply only to a facility that is built to provide electric service to an industrial customer at a single site with projected new electric load greater than 1,000 megawatts. Among other requirements, the facility also would have to receive approval from the Nebraska Power Review Board.

Under the proposal, DeKay said, the private supplier would enter into a long-term power purchase agreement or other contract with a public utility for retail or wholesale electric service. The contract would preserve the utility’s exclusive right to serve retail customers in the relevant service area and prohibit the industrial customer from reselling electricity, he said.

The bill also would require the industrial customer to pay for any electric system upgrades or other costs needed to provide their service.

The requirements would apply to contracts to serve new industrial loads entered into with consumer-owned utilities on or before Dec. 31, 2031.

Kenny Zoeller, director of the governor’s Policy Research Office, testified in support of LB1261. He said the narrow exemption to public power’s eminent domain authority would ensure that private energy developers can finance power generation projects for artificial intelligence data centers, sustainable aviation fuel facilities and manufacturing plants.

Javier Fernandez testified in support of the measure on behalf of Omaha Public Power District. He said LB1261 would help Nebraska’s public power utilities meet surging demand from large industrial customers at a time when the wait for natural gas turbines, transformers and other large electrical equipment has grown from 18 months to five years or more.

Fernandez said the proposal would allow customers with access to equipment to build their own power plants more quickly while insulating a public utility’s ratepayers from the risk of such a large capital investment.

“We believe this bill will facilitate valuable partnerships between public power districts and private generation developers while maintaining public power’s role and strengthening our ability to serve Nebraskans,” he said.

Testifying in opposition to LB1261 was Ken Winston of the Nebraska Chapter of the Sierra Club. He said development of large data centers and their dedicated power plants could threaten Nebraska’s water resources and increase electricity costs for public utility ratepayers by raising demand for natural gas.

The committee took no immediate action on the bill.