Kentucky.

Tonight I'm Renee Shaw, and we thank you so much for joining us this evening.

Is our topic is a hot one.

Data centers.

They're centralized facilities that house computer servers, storage systems and computing infrastructure.

Some even call them the brains of the internet.

And thanks to streaming services and AI, they're needed now more than ever.

Data centers require huge amounts of energy and water, and critics say they don't produce that many local jobs.

That's why many Kentucky towns and counties don't want them, and why local governments are passing moratoriums blocking them, at least temporarily.

So to discuss data centers, we're joined in our Lexington studio by state Representative Adam Moore, a Democrat from Lexington state representative Josh Bray, a Republican from Mount Vernon, Ted Smith, an environmental health researcher at the University of Louisville.

John Bevington, vice president of customer services at LG&E and Ku energy LLC, and Byron Gary, senior attorney at Kentucky Resources Council.

Of course, we do want to hear from you tonight.

You can send us your questions and comments by X, formerly Twitter at Pub Affairs KET.

Send an email to KY TONIGHT at ket.org or use the web form at ket.org/ky tonight, or you can simply give us a call at one 804 947605.

As we mentioned at the top of our program, the debate over data centers has turned into a debate over economics and the environment.

Supporters point to billions of dollars in investment and new jobs, but critics worry about energy consumption, water use, environmental impacts and whether local residents will bear the costs.

As lawmakers consider statewide regulations, counties and cities across Kentucky are taking very different approaches.

KET Toby Gibbs tells us more about that.

>> From the Ohio River in western Kentucky to the Appalachian foothills in the northeast.

Proposed data centers are reshaping local debates about growth, infrastructure and energy.

In Hancock County, the Maryland based company Terra Wolf plans a major data center project at a former aluminum smelter site along the Ohio River.

The company recently announced a 20 year lease agreement with the artificial intelligence company anthropic, in what Terra Wolf describes as a multibillion dollar partnership.

The facility is expected to begin operations late next year, but the project has also sparked opposition.

More than a thousand people have signed petitions raising concerns about energy demand and environmental impacts.

Farther east, Terra Wolf is proposing what would be the largest data center in Kentucky at East Park Industrial Center in Boyd and Greenup counties.

The nearly 300 acre project has drawn hundreds of residents to public meetings.

Many residents questioned the lack of early transparency, environmental impacts and water use.

>> We don't trust these people, and what they did was just wrong.

They need to.

Our community should be able to to know about this and make decisions.

They made decisions without us.

That's not what we elected them to do.

>> Company officials say the facility would use a closed loop cooling system, consume relatively small amounts of water, and operate without increasing utility costs for existing customers.

Supporters point to the possibility of billions of dollars in investment, significant tax revenue and hundreds of construction jobs.

>> This is the start of a relationship we want to be in this community for for 15, 20 years, and we're not going to be good neighbors unless we get to know one another.

>> Meanwhile, local governments across Kentucky are hitting pause.

In Boyle County, fiscal court leaders approved a one year moratorium on data center applications, while officials study how the facility should be regulated and where they should be located.

Edmonson County, Scott County and Cave City have also enacted temporary moratoriums as local leaders examine potential impacts on water supplies, electrical infrastructure and land use.

Cave city's moratorium is now facing a legal challenge from the Kentucky Industrial Alliance, which argues its proposal should be reviewed under zoning rules that existed before the pause was enacted.

Another legal dispute is unfolding in Simpson County, where county and city officials are battling over who has authority to regulate a proposed data center development in Franklin.

>> They don't believe that the county has the ability to implement that ordinance, and we believe we absolutely do have that ability.

>> And in Lexington, city leaders recently approved a short term moratorium through October after learning a Texas based company had purchased buildings on the former Lexmark campus.

Mayor Linda Gorton has expressed concerns about limited job creation and the potential for higher utility costs, calling for strict controls.

The debate is also reaching Frankfort.

Some state lawmakers and the governor have emphasized that Kentucky ratepayers should not shoulder the cost of new power generation needed to serve data centers.

A bill to regulate data centers was introduced during the 2026 Kentucky General Assembly, but failed to make it out of committee.

Energy planners say the challenge is balancing economic opportunity with consumer protections for Kentucky.

Tonight.

I'm Toby Gibbs.

>> Thank you so much, Toby Gibbs, for setting that up for us, and it's going to be a good way to segue into our discussion and.

Mr.

Ted Smith, I want to start with you first.

Even though you are at the University of Louisville, you are not speaking for the University of Louisville.

And you will probably reiterate that throughout tonight's conversation.

I want you to kind of pick up a little bit on what you heard Toby Gibbs say in that report.

And in our conversation last week when we talked about this issue, you made the point that data centers are going to exist and they are already here, and it just depends on where you want them.

We're not going to be able to escape this.

Give us your overall perspective about where we are in this debate so far.

>> Yeah, sure.

And thank you so much for having me tonight.

My pleasure.

So, I mean, we've had data centers for 50 years in this country.

And so it's a little bit surprising to a lot of people that we're now talking about data centers so much.

And I think it is because we've hit this sort of threshold issue about the scale of these operations.

And now there are real concerns at multiple levels.

And, you know, I've gotten involved as local communities have been concerned about their health and health impacts.

And so some of these facilities are just really, depending on how they're designed, you know, could be hazardous for community health.

And really thinking carefully about that local control element.

And so with these moratorium, with these ordinances, you see the struggle to try to figure out what is what is safe and healthy and, and really, how should we proceed knowing that prosperity and health don't have to be at odds.

But if we're not careful, you know, you really can't have one without the other.

>> And as you articulate this, this is not necessarily an argument against data centers.

>> I mean, I think technological progress will continue.

I think, you know, as a society, we've really become, you know, fully embedded with all of this stuff.

And I think it's produced some real economic value.

And so now the real question is how do we live with it?

And I think, you know, there are choices that we make.

I mean, there's a ridiculous amount of money in this sector right now, right?

$700 billion in data centers this year.

It's not clear to me, and it's not clear to many communities that are affected why we can't value health protections, harm reduction as part of that.

And, you know, the other issues are very important issues, too, around price protection, around the energy, you know, concerns about water.

All of that is important.

It seems to me that there's enough money in the system right now that we could be working on solutions for that, and I hope we do.

>> You've also mentioned in our conversation that Kentucky's topography and geology kind of make Kentucky very attractive for these.

Explain that to our viewers.

>> Well, I mean, there have been many sort of high profile experiments around the world putting data centers underwater, you know, finding innovative strategies for energy around hydrogen cells.

You know, we've seen the Small nuclear reactor conversation develop.

So I think it's a it's an evolving landscape.

And I think there are there are places that they will be more welcome than others.

Let's sort of put it that way.

And I think I'm always surprised that many of these site selection firms just hadn't considered the population nearby at all.

And I mean, I could, you know, I could give you a map of Kentucky and I could list lots of places that they're not likely to be successful at the local level.

And I'm a little disappointed that we're not, you know, being proactive about this and really thinking about are there places in the Commonwealth we have an abundance of water.

That doesn't mean we should abuse it, but are there innovative strategies?

We have abandoned coal mines.

Are there things that we could be learning right now uniquely in Kentucky?

So, I mean, maybe that's a little Pollyanna ish, but, you know, I'd like to think that we should be trying to avoid sort of obvious pitfalls while we're doing this work.

>> Representative Bray, I mean, this is a conversation that you were involved in last year, and we know that in 2025, if I get my year straight, that the Kentucky General Assembly did pass some incentive package for for data centers.

So is that a wise move then?

And where do you see things now?

>> So last session filed House Bill 593 effectively.

I referred to it as the Ratepayer Protection Act.

Candidly, artificial intelligence is probably the national security issue of our time, of my lifetime, at least.

It's provides a tremendous opportunity.

Ted I say you all use artificial intelligence quite a bit.

I mean, it's going to be what cures cancer one of these days with that, you know, data centers are an essential piece of it.

And House Bill 593 tried to address the issue of if data centers are going to come to Kentucky, we want to make sure that we've got the right guardrails in place to make sure that our energy prices don't go up.

It provided three ways a data center could come in.

They could bring their own generation, they could pay for it up front so that they're writing the check.

They're the one taking the risk.

Or they could purchase the power on the open market to where Kentucky ratepayers aren't taking the risk of investment.

Because, you know, that's one of the biggest concerns we hear about data centers.

People are scared to death that their electric bills are going to go up.

So on February the 6th, we filed House Bill 593, worked on it for over a year.

It passed out of committee unanimously on the 26th, sent it to the Senate on the fourth.

Actually, on the same day President Trump signed, had Big Tech signed the Ratepayer Protection Pledge, which pretty much worked hand in hand with what we were trying to accomplish in the House.

Bill 593.

It's just common sense, as far as I see it, that, you know, when big tech puts data center somewhere, we want to make sure that Kentuckians energy bills are going to be protected.

>> So electric cooperatives in Kentucky were on board with your House Bill 593 that got absorbed into a Senate bill.

I think it was 197.

But, Mr.

Bevington, I understand the LG&E and KU were somewhat critical of that measure.

Can you tell us why you were opposed to Josh Bray measure?

>> Well, I wouldn't say that we were critical.

I actually think we, you know, applaud Representative Bray and the House's initiative to to look at ratepayer protection in the course of this.

And that's we agree with that.

It's frankly why we offered up in a rate review session that we had the extremely high load factor tariff offering where, you know, it is it is precisely for this this reason to protect all the rest of our customers, to prevent cost shifting from investments that we need to make in our system, cost shifting to residential customers.

In that case, a few facts about that.

And again, first of all, again, we agree and applaud that initiative.

We just don't think there's a one size fits all approach.

We have a very different operating model than East Kentucky Power, and a lot of the other utilities in the state.

We're not part of a regional market of energy.

We plan for and build for the needs of our customers now and into the future.

So every three years, we go through what's called an integrated resource planning process, where we're looking at what is the adoption of electric vehicles look like?

What is the adoption of data centers look like in Kentucky?

You know, so, so we're planning for the system needs, and we've been doing that for 100 years.

And we've been doing, you know, doing that very well for 100 years.

Frankly, if you look back at the 1920s when we built Ohio Falls, the thought process at that time was that that was going to generate enough power to supply the entire city of Louisville's energy needs today.

The amount of capacity that that thing can put out is the equivalent to about 22,000 homes.

And so, you know, we've evolved as the world has evolved and as new large customers have come online with us, whether that be large auto automotive assembly plants or steel mills or what have you, we, we have an obligation to serve them and we've built to serve them.

But we've also looked out for our customers and the way that we've offered tariff services and, and to prevent cost shifting to our residential customers.

That's why we have one of the lowest electric rates in the nation, certainly in Kentucky, and why I think we've been an attractive place for economic development over that time span.

So again, I wouldn't say that we were critical.

We're right alongside.

We just don't think there's a one size fits all approach, particularly when each of our operating companies does things a little bit differently.

>> Mr.

Gary was what Representative Bray had proposed good enough for you, and do you believe that even existing rules, if there are any existing rules, are tight enough?

>> Sure.

So I think that Representatives Bray Representative Bray proposed bill would have been a great first step.

I think that that pledge to protect ratepayers is definitely important.

I think the devil is really in the details and how that works out down the line to, for example, the the extremely high load factor tariff that Mr.

Bevington mentioned.

That's just one piece of making sure that existing ratepayers don't end up footing the bill for new infrastructure that's built.

Right now, LG&E is constructing two new gas plants, buying into a new gas pipeline, building new transmission infrastructure.

And unless they have those load forecasts right, unless they know exactly how many folks are going to end up taking service under that tariff, the rest of us could end up eating some of that.

>> And if you will, because you mentioned some alphabets there or some letters, I want you to kind of give us the acronym there.

>> E, h, l, f that extremely high load factor tariff, the one that Mr.

Bevington was referring to that covers data centers.

So having that tariff structured right is just one piece.

I think there are some important protections in that tariff, but making sure that that load forecast is accurate is another piece.

Making sure that we have the right way to serve them is another important piece of protecting ratepayers.

You know, the elf has certain rates in place already and making sure that those incremental revenues to LG&E are sufficient to cover all those incremental costs for all that infrastructure I was mentioning is another another piece there.

And making sure that we have that balance on both sides of the equation is a really tricky thing to do, I think.

I applaud LG&E for taking that step step with rate e elf, but I still think there are important protections that we could see going down the line.

>> And Representative Moore, you may agree with that.

What would you like to see when it comes to data center regulation?

>> Well, I was very much on board with Representative Bray's bill last year.

And again, it was a great first step forward, as you were just saying, Byron.

And I think we were coming at this from a logical perspective.

We were seeing that utility rates were increasing and we already know how tight it is out there financially, economically, we want to save our constituents money if we can.

We want to protect them if we can.

And that's what Rep Bray and and I and others had tried to do with ratepayer protection legislation.

And I think it makes sense from a logical perspective.

Now, as time has gone on, as I look through things again through the rear view mirror, it seems to me that people want more than that because we heard it, I think in Toby Gibbs Toby Gibbs portion about the lack of transparency.

There's this idea that when deals are being made behind closed doors, even if nothing nefarious is going on, it gives a presumption that maybe something is.

And so as we got into this looking at ratepayer protection, it turns out that our constituents want more transparency.

They want more local control.

And as we look forward to 2027, I think that we as a legislature should take a more holistic view of rep Bray ratepayer protection, but also that transparency, that local control, that >> The nondisclosure agreements that we've read about that doesn't sit well with you.

Perhaps at some county officials may have entered in.

>> There are certain things that, of course, are going to be whether it's patent pending, if it's a unique rack configuration, but the amount of land that you need, the amount of water that you need, if there's going to be a heat plume, if there's going to be a noise that comes out of the center, I don't think you need to hide that information because that's not going to be industry secrets.

That's something that the community that you want to be a part of, that you should be trying to cooperate with, they should be able to have access to that information.

And I think if we start talking about those and get those out into the open, shine a little sunlight in there, then we're going to have a more cooperative relationship.

When data centers do want to locate in our communities.

>> So last week, I spoke with Eric King of the Energy Planning and Inventory Commission, or Epic as it's called for short.

We talked about Epic's role in this debate.

How many data centers are online and in the pipeline, and what policy discussions could lie ahead.

Eric King, thank you so much for your time.

>> So let's give our audience a primer on what is epic.

Define that for us.

>> Sure.

Epic is the Energy Planning Inventory Commission.

It was created in 2024 by our Kentucky legislature.

Back then, you saw downward pressure on our coal fleet.

There were questions about reliable and affordable electricity, the adequacy of our grid.

You transition that we are seeing a demand, a surge in demand, unlike we've ever seen before.

I believe the Kentucky General Assembly knew then what we know today.

In other words, they were seeing things around the corner about how our energy economy was changing and changing quickly.

The coal fleet that I just mentioned has been needed now more than ever on the coldest days of the year and where we see now here in July, the hottest days of the year, that fleet is being called upon.

So they've indicated in many ways in keeping a lot of those plants going and thriving for reliable and affordable power.

But looking towards the future, I think that they made a very strategic move in creating good policy to create an energy planning function for our state.

As you know, the complexities of our energy grid can't be overstated, particularly in Kentucky.

>> And where it's really coming to bear is with all this conversation that's happening all across the state and indeed across the nation when it comes to hyperscale data centers, data centers have always been or been around for a long time.

Right.

But what makes hyperscale so much of a kind of a lightning rod term, and certainly caused a lot of conversation in cities and counties across the state.

>> It certainly has, not only in Kentucky, but around the country, because energy has become synonymous with our national security.

So our energy policy is in every discussion.

It's the core of most discussions, not just in manufacturing, but also economic development and prosperity.

So as you look at Hyperscaler, we can define that in many ways.

But the standard is that it's anything over 100MW as far as what we call power pool, or it's energy consumption.

And typically around 12 or 10,000ft█!S.

So you're talking about a space that's filled with chips that are communicating to their particular customer and supplying that data where it sends out and communicates for, for the purposes of that company.

So our economy has really embraced this new innovation, but not just with AI.

We can talk about other energy consumers, but it is certainly energy intensive, not just for the chips themselves, sometimes for the water that's being used to cool the chips off as they're functioning.

But just to level set there, I guess that's how you would define more or less a hyperscaler.

>> So what is it?

The Kentucky General Assembly is looking to epic to do and to help them inform perhaps future policy.

>> Absolutely.

So I think, you know, it's one is to recognize that our energy system is complex.

And I say complex, meaning that we're regulated State all of our utilities are vertically integrated.

They are directed to serve territories that's assigned to them by law.

So if you live in a particular territory, that utility must serve you.

So we're the territories are from east to west.

So we're complicated in that the utilities serve for their systems at a fair, reasonable and just price as they adjudicate that through the Public Service Commission.

But the PSC is the regulator.

But there has not been a statewide view of energy adequacy across the entire state.

So our directive is to come with this independent analysis.

So we're not a utility.

We're not the PSC, we're not the governor's office.

>> And you're not for or against data centers.

>> And we're not for or against any type of consumer.

Those are local governmental decisions that will be made.

But what we're doing is putting all the territories where the utilities have planned for their systems.

They know their systems better than anyone.

It's to put those pieces together and say, as a state, do we have enough adequate supply to meet the demands for the future?

>> There are pluses and minuses of data centers.

Can you spell out for us what are the benefits of these large hyperscale data centers, and what are the drawbacks or concerns?

>> Sure.

And I'll just hit it on again.

Our our grid in Kentucky behaves like a system.

Whatever happens in the East will invariably impact what's happening in central Kentucky and Western Kentucky.

So there are many benefits to upgrading particular lines, updating infrastructure.

You're going to hear a lot about the revenue.

You're going to hear a lot about improvements to roads and bridges and schools and all the benefits on that side.

But there are honest questions that people have.

We've recently done a paper that observed these things in our state, and they deserve the confidence that if one of these users does, in fact, move forward.

So the local officials, the county and the city have decided to move forward with something.

Citizens deserve the confidence to know that we can have this economic development that brings those upgrades and new investments, but we can also maintain reliability and affordability and keep from all these spikes in prices.

>> How many hyperscale data centers already exist in Kentucky, and how many do we know would like to.

>> Be sure?

>> We've done a recent analysis.

There are a handful that that exist or I guess would meet that threshold, but there are around 35 technically in the pipeline, the public domain pipeline that we've seen.

Again, you can find all this information out through the Public Service Commission where they've disclosed this information.

But, you know, we're looking on the horizon in terms of trends.

We've had affordable, reliable electricity as a whole, as a state that's allowed for our industrial base to prosper in Kentucky.

We want to keep that advantage.

So if a community wanted to cultivate a relationship with the data center and that community is accepting of it, we want to make sure that those rates remain the same.

They are protected and that Kentucky can still compete.

>> In that report really compares Kentucky's electric electricity regulatory environment with actions by two other states, particularly Ohio and Virginia, that have previously seen a surge of hyperscale data center development.

Tell us about what both of those states are doing, right or wrong, and what Kentucky can glean from their experiences.

>> Sure, we can learn a lot.

I think Kentucky is in a position to where we can learn the mistakes done by other states.

That's the purpose of planning.

Planning is your ability not to foresee the future or predict it, but it is to eliminate, if not de-risk or lower the chances of mistakes.

So we created what's called a meta analysis.

Observations in other states of Virginia, which was the epicenter for data center right outside of DC.

In that area they call data center alley.

And so, you know, we we saw the potential spike in that state because of the concentration of data centers and how that materialized over time, what that meant for residents, what that meant for industry.

And we saw lessons learned.

So they had to react.

Their legislature, they filed several bills that would combat and put some kind of placeholder to standardize the metrics for utilities to meet in order to protect ratepayers.

We looked at Ohio that already had sort of a mechanism of protecting customers, how that worked, the durability of that over time.

I think it's important to note many of those states and those states today are going back and revisiting the frameworks and policies that govern cost allocation and, and setting the rates in that state, because this is changing, accelerating so quickly.

So Kentucky does have the advantage.

And the report points out that's that's the advantage Kentucky has.

We're not reacting to a crisis.

We're seeing interest.

We're at the beginning of the interest in data centers.

So these conversations in Frankfort are happening at the highest level of our state government from our General Assembly.

>> And that kind of leads to this next question about how some would say Kentucky is actually being reactive and not proactive, because these conversations are swelling across communities, and there's non-disclosure agreements that some county officials have taken some heat for, for being engaged in without getting community input.

How do you see what's already happening in comparison to where you hope we can be?

>> Well, I hope, I hope that folks will get the information that they're looking for.

But more importantly, I think folks in Frankfort and our Senate and in our house, they are asking the right questions, which I think begins the process of understanding whether or not a community does or does not want these.

Now you're going to have communities that say, we don't want these in our backyard, and that's perfectly fine.

That's their prerogative.

But there are county level officials and city level officials that are trying to understand this, but they're not alone because people around this country are are watching this acceleration of development and what that means for their economy, what that means for energy consumption and the energy system itself.

>> And the environment.

>> And the environment and the environment.

But there's so many complexities to this problem that local officials are looking for questions to ask the developer, to ask the utility.

How can they ensure that a 500 megawatt data center does not?

That cost is not being borne on residents there.

They deserve to have that confidence.

>> Right.

Well, thank you for your time.

Is there anything else you'd like to share with us?

>> No, just that again, I think, you know, data centers is the topic of today.

Epic is sort of promoting this idea of energy planning.

We want to look at 15 to 20 years.

I'll throw I'll throw a technical term at you called resource adequacy.

That's kind of the umbrella of what we're trying to do at epic, which is essentially managing uncertainty in the energy system.

It's easy to ask that question of how much demand will we we need relative to supply or vice versa.

We're getting we're getting an analysis that's forecasting, forecasting over 100 scenarios about what that might look like and how we plan for that as a state, not just a territory, but entire across the entire 120 counties in our state.

So that's our long term goal, is to come up with an energy strategy, an energy plan for our state.

And we're looking forward to having those discussions of getting stakeholders together, but also commenting on topical issues like data centers.

I know this won't be the last time.

I'm sure we discuss this, but it's very important we get this right, and that's what I hope people take away.

>> Well, Eric King, thank you so much for helping us all understand it a little bit better.

Thank you Renee.

Thank you, Mr.

Bevington, I want to come to you and ask, just kind of taking off from that conversation.

Some people wonder and question, will data centers affect the electric reliability for average everyday consumers and their homes?

What say you about that?

>> Yeah, I would say no, that's not the case.

We are obligated, as I said earlier, to serve our customers and our customers needs.

And, you know, we're in a fortunate position as a supplier of energy to, you know, not only data centers, but the entire, you know, business community in the Commonwealth.

And so anytime any kind of business wants to show up, we have to we have to go through the typical long term long range planning process.

We look at the infrastructure that we have.

We study that infrastructure to make sure that any new business that wants to come and operate here isn't going to negatively affect everybody else.

So, so there are systems and processes in place to make sure that that doesn't happen.

And as I said earlier, that's why we take a long term view of, of resource adequacy as, as Eric just mentioned in his video segment with you.

You know, another thing that I think is important to understand and why we're trying to get ahead of this is because we want to enable economic growth in the Commonwealth.

As I said, we've been doing that for 100 years.

It takes a long time to build a new power plant, much longer than it takes to build a warehouse that's going to, you know, house computer equipment and things of that nature.

And so, again, we have to balance the projections of what we think will come based on interest that we're seeing from the business community.

Plan for that ahead and make sure that that reliability and that safety in our system continues on for all the rest of our existing customers.

>> Any comment about that before I go?

Yes.

Representative Moore.

>> Yes, because as you're talking about adequacy load forecasting, how much are we going to need as we look towards this future landscape of more data centers and more AI?

During the video segment and the interview, Eric was talking about looking at Ohio and using that as a resource to, to look at and learn lessons from.

So we just had a legislative conference about a week ago, and I attended an energy session there, and they were talking about Ohio and that the original load forecasting was that the state of Ohio was going to need 30GW of new electric generation just to meet data center need.

And that has come down, come down, come down to 5.8GW.

Essentially, they've reduced it by 80%.

So that's why I worry about rushing into certain things.

If they've had to reduce theirs by 80%, I would hate for us to have to overbuild over permit over site.

And then now we're left with these abandoned sites that local communities have to deal with afterwards.

>> Yeah.

Are you concerned about overbuilding?

>> I am concerned about overbuilding.

I think there are other concerns around this as well, aside from resource adequacy.

One of the concerns that other areas that have had data center buildout concerned about is just the voltage regulation.

These are a completely new sort of load on the system.

They can come on and off within seconds, and that can cause problems with flicker and other issues on the grid.

This isn't to say LG&E hasn't accounted for that, but there are there every angle of this, more complexities, but specifically with resource adequacy, I think, and that sort of voltage regulation and other issues, one way for data centers to actually contribute to reliability of the grid is to contemplate what we call demand response, so that when the grid is stressed, we know who is available to turn off, who can lower their need on the system so that the system can make up that that resource adequacy for everybody else.

And that's something we have seen in some areas.

It's something that is contemplated in the contract for the Tarawa facility in Hancock County that was mentioned earlier.

When there is an emergency on the grid, that's that's one situation where that facility would be required to turn off potentially.

So there's a lot of complexity and other ways to look at this and perhaps not need to overbuild quite as much new fossil fuel infrastructure.

>> So there are some questions from some viewers that we want to get to, and then we can go back to some of your other thoughts.

This is from Martin Rivers from Lexington.

He asks, quote, what do your guests have to say about positive use of AI data centers?

The need for updating our power grid, with or without data centers and national security issues related to China.

>> This is the biggest national security issue of my generation, for sure, because a lot of what we're seeing online now, a lot of the negative discourse, I feel like and Chairman Guthrie in the House feels the same in.

>> In Washington House.

>> Yes, yes, in, in DC is a lot of the disinformation.

A lot of the things we're seeing is coming directly from the Chinese because we are in a race with China.

And the question right now is, is who do we want to control the future of AI?

Do it America or the Chinese?

And, you know, it's unfortunate that it's kind of got to that point, but the stakes are so high because of this is going to be the next industrial revolution.

When you look at just quantum computing, what that's going to mean with AI.

If the Chinese beat us there, it's a scary landscape when we look at, you know, trying to onshore manufacturing back in the United States, it's going to take AI and automation to do that there.

This is the future of our economy, but we've got to have good things in place.

We've got to make sure that we don't Overbuild one of my biggest concerns is what happens when, you know, chip capacity or chip efficiency improves, and all of a sudden, a gigawatt facility only needs 500MW.

That's why I really like the idea of these data centers pre-paying for, for their generation.

If if we've got improved transmission, let them pay for it, you know, and they've all signed the pledge.

When I talk with the big tech companies that we think of the fortune 50 companies, they all say we want to pay for pay for this upfront.

So it's kind of crazy that, you know, the tech companies that you kind of envision, you know, that you would want Kentucky to do business with when they're offering to pay for this upfront that we wouldn't do that is is kind of crazy.

>> You know, that does seem kind of like a no brainer.

Why wouldn't you just go along with that since they're agreeing to pay it?

>> And that's part of putting that into statute, because it's one thing to have a smile on a handshake and say we've made a deal, but by putting it in statute, can we actually put some teeth in there so that when a data center looks to a community and says, we want to build here, the community knows it is in statute, it is in state law that it's going to be done within that framework, and it's not based on a handshake agreement that someone has made with a fortune 50 company.

>> Yeah.

>> Renee, if I could, if I could, just because the caller asked about, you know, what do these things bring?

What are some of the positive developments of this?

And since we were talking about sort of, you know, paying for infrastructure up front and things of that nature, I think it's important for, you know, LG&E and KU customers to understand that with this extremely high load factor tariff that we talked about earlier, they need to hear some of the details about it.

So I think it's kind of important to lay that out.

What what that tariff requires our data center customers to do is sign a 15 year contract.

That's the first case, right?

So a normal everyday retail customer of ours, they don't have to make a commitment more than a year or two in the largest case.

Now we're asking for them to commit to a 15 year contract.

If they break that contract early, they have to pay an exit fee that is equal to the amount of remaining bills that they have for the remainder of that 15 year term.

There's also a component of that high load factor tariff that asks them to pay for 80% of what they project they're going to use, whether they use it or not.

So we agree with what Representative Bray just said.

You know, if if chip efficiency happens and maybe they can do more compute within those buildings than if that's to be the case.

But again, regardless, they have to pay us 80% of what they say they're going to use regardless.

And the last really important piece is that tariff asks these data centers to give us up to a year, and in some cases, two years worth of billing to ensure that if they happen to go away, we have a a fund that will pay for what we thought we were going to get.

And again, I think it's also really important for customers to understand, and this is the complexity of the energy business that is really hard for a lot of people to understand, and I get it.

But to boil it down in my eighth grade math teacher would be really proud of me right now because I'm going to talk a division equation here to simplify things enough.

If you just look at at a math equation, the numerator being the cost to run the system and the denominator being the revenue that the system operates with, right?

Anytime the numerator goes up and the denominator does not, rates are going up higher in this case.

And to the caller's question, what do these things bring?

They bring an extremely high amount of revenue that benefits the rest of the system and actually could, in the case of LG&E and KU, put downward pressure on rates for residential customers as time goes on.

So I think there's some complexity in that.

And a lot of people don't understand that when they're behind the screen and they're searching social media about these things.

But I think those are some very important factors that customers need to understand in the grand scheme of this conversation.

>> Are you satisfied with that, Mr.

Gary?

>> Well, I think the point that still needs to be made, returning to the beginning statement that I made, the load forecast accuracy really matters.

LG&E already has approval to build roughly $3 billion worth of new infrastructure, not to mention the fuel costs, the pipeline costs, the transmission costs, etc.

but to my knowledge, don't have any of those contracts signed yet.

That's not to say they won't, and that could end up paying for it.

But there is still real concern that if they don't materialize, or if they do materialize and go bankrupt, and all we have is that 1 or 2 years of security, that it might still not be potentially enough to, to protect the rest of us.

So I think as Representative Bray and Moore said, it's really important to get out ahead of this.

And I think that's sort of what Mr.

King was referring to as well, making sure that there is adequate regulation in place.

And that's important not only for the electric system, but there was talk about NDAs and local impacts earlier, making sure that communities are prepared before they get that proposal from a, you know, multibillion dollar company, make sure that they have local planning and zoning or, you know, whatever regulations in place.

We have a model ordinance for both counties with planning and zoning and home rule counties to make sure that those new facilities are adequately regulated to get out ahead of that before, before a facility comes in and nobody's heard of it and it's already approved.

>> Yeah.

So similarly, this viewer has this comment and question quote.

I never heard anyone talk about the baseload for electricity required by data centers.

And would this not protect other ratepayers?

No one ever mentions what local, state or federal taxes that might be generated by data centers on an ongoing basis, not just the construction phase.

So can we answer that?

Representative Moore.

>> Let's then let's be transparent.

And instead of them coming in and having a predatory nature of people with NDAs coming into a community, let's be open with it where the customer wants to come in and say, I would like to put a data center here, and these are your benefits.

So Kentucky right now they have a nuclear or nuclear ready energy program where essentially communities can say, we want to be there on the cusp when we start bringing nuclear power into Kentucky.

Now, what that means is you require public education, public hearings, a local vote.

Could we apply something like that to hyperscale data centers so that there is this sunlight, there is this transparency, and that way they can come in and make their case.

We want to do this with you and hopefully for you, we're the benefits are there, but that is not happening right now.

I think there's an avenue that we could do that based on that nuclear ready community program.

I'm pursuing that right now, but I think that is one idea that I'm open to, to your Aulds discussion on too, but but something that we can do to make sure that there's more trust there.

>> Yeah.

Mr.

Smith, what are your thoughts on that?

>> Yeah, I mean, I think I think that's such an excellent point.

>> You know, really, I think this has been handled maybe because of the speed of the business itself as a completely reactionary framework.

And what we really need to do is be able to advertise community by community, what communities are willing to have.

I do think that the energy pricing thing maybe is a source of confusion, because I see it really only at the point of the construction of the data center.

If you actually look at the distance of communities that would then be affected by these energy price concerns, they're much larger than those areas, right?

So I think there's a fundamental confusion about what the local community is upset about.

And, you know, I think it's helpful to have these conversations.

But if you don't advertise what kind of business you are willing to have in your community, you know, you are you're laying yourself open to this kind of reactionary, well, what's the best deal you can give me?

And that's really not a good position.

And you look at some of these model ordinances, you know, Jefferson County has one that they're working on and Chris, you know, released a model ordinance.

You know, this is an advertisement about what your community is willing to have.

And I, you know, I think this all gets a lot better if people aren't guessing or gaming because the values of the community really should be first and foremost.

>> And Mr.

Gary, to that point, Kentucky Resources Council does have this kind of model approach.

Can you share more about that?

>> Yeah, we have two separate model ordinances based on sort of a research of best practices from around the country that approach a number of different issues that data centers can raise locally, potentially.

These include things like noise regulating how much noise can be impact sites off site from the data center themselves requires a noise study up front, and then actual observations after the fact to make sure that those noise impacts aren't felt by surrounding neighborhoods.

It regulates the use of backup generation.

A lot of these data centers are proposing to use diesel backup generators, and if you think of the size of one of these data centers, the campground road data center, that is, I think, still the farthest along in LG&E KU is projected to be 525MW, potentially for a sense of scale.

If they operate at that 80% load factor, they would consume roughly the same amount of energy in a year as the entirety of LG&E existing customers.

Now, if they put that much diesel backup generation on site, that could cause potential significant issues for surrounding communities.

So it it regulates what sort of backup generation and make sure that they are using the cleanest possible and encourages things like, you know, clean energy and battery backup instead of those diesel generators.

It also includes regulations that would require use of closed loop water systems to minimize impacts on local water systems.

That really is a big deal depending on where in the state you are.

You know, a lot of the Eastern Kentucky water systems in particular, are already struggle to keep up with the demand and making sure they are producing clean drinking water, water for communities, as is.

There are other things addressed in that as well, so feel free to visit our website and check it out.

Yeah, I don't want to go on forever.

>> Robust.

Right?

Well, to to this point, Sherri from Jefferson County asked this question, are there any possible health ramifications that could impact people and animals that live in close proximity to data centers?

What about noise pollution?

How concerning is that?

Mr.

Smith, do you want to weigh in any further on that?

>> I mean, so we're we're in relatively uncharted territory with these very large data centers.

So if you were to go today and use the data center to do a search on epidemiological studies of health effects of exposure to data centers, there are no there's no evidence base for it.

And that really forces us to resort to kind of first principles.

So what are those components?

You know, if it's diesel combustion, we we know a lot about exposure to diesel combustion.

And we understand the health effects.

There are cardiovascular just mental health problems.

There's cancers.

So we understand the pieces.

So sound.

This is a little tricky because the sound these facilities make is low frequency sound.

So it's not like occupational usual clanging and banging in a manufacturing setting.

There's less evidence out there about long term exposure to infrasound.

But, you know, if you look at the communities, especially in Loudoun County and Virginia.

You know, those kinds of complaints, you know, are certainly something to pay attention to.

And if there are decisions that developers can make designing these facilities to minimize these things, it only follows then that we'll have less health consequences, right?

So I think these are very legitimate concerns that these community members are raising.

And I think the real answer there is to really start to box in what is going to be acceptable.

We have those kinds of guidelines for other kinds of industry, not so much for this.

And I think, you know, we sort of need to play catch up right now.

>> I want to ask you, Mr.

Smith, a term that you used when we talked earlier, and it's about local capture.

What does that mean?

>> Explain that.

So I spent several years working for one of the mayors of Louisville.

And, you know, it happened to be at a time when Airbnb, Uber and Lyft, the scooter guys, we're all moving in, you know, kind of at the same time.

And I remember having several meetings where essentially their corporate management said, you know, we can't be bothered with your local taxes and your local regulatory schemes.

You know, this is our deal.

This is what we do.

And you know what they're trained in business school to, to be afraid of is local capture.

So so if your business model gets caught up in a lot of jurisdictions all over the world, it can be very, very expensive for business, right?

And so, you know, what ultimately happened, I think we all understood like Airbnb in Kentucky has experienced a lot of local capture.

There's, you know, they pay, you know, a bed tax in, in Louisville, you know, for every unit that's, you know, rented.

So it is, I think it's part of the business model for these big, big tech companies to say, I don't want to deal with your little rules and all your little places.

The reality is, you know, local government is a pillar of our democracy.

If you if you mess with local control, it doesn't end well.

Right?

So, you know, I think we need to take a lesson from all these waves of technological innovation we've seen before and say, you know, let's let's figure out how you can be a good, you know, neighbor locally in our community, working the way we want to work with our values.

>> But does there need to start in Frankfort at the state legislative level, some type of overall guardrails and guidelines?

Is that?

>> Absolutely.

And that's what, you know, this interim because the Senate didn't take action on, you know, our the ratepayer protection bill going through it right now, you know, already probably had 20 or 30 meetings so far over the interim.

Just how can we improve on this?

Do we need to look at, you know, how citing minimum requirements for noise curtailment so that in case there's, you know, some kind of winter storm, the data center gets shut down to improve reliability.

You know, met with Eric King quite a bit.

Looking at what other states have done, particularly on data centers that bring their own generation.

And what would that look like?

Could that drive down rates if they bring their own generation?

So yeah, absolutely.

Going to have another bill ready to go first day of session when we get back and, you know, probably got 30 or 40 things right here that, you know, we're looking at actively making sure that if there are any kind of incentives and electric rates go up, can we call that back?

Just a bunch of different things that need to be addressed, honestly.

>> Yeah.

Representative Moore, your ideas?

>> Yeah, he's already hit a bunch of them.

But I think are there ways that we can do almost continuous monitoring of emissions that are coming out of our hyperscale data centers, whether that is gaseous emissions or liquid water emissions, are we going to be able to have continuous monitoring of the heat that comes off of it?

If that changes the local atmosphere and environment, the noise level that comes off.

You talk about the I lost the term, now I'm going to blink on TV, but there are different things that we could do, continuous monitoring of, and that way we could have annual assessments, annual reports, and that might help generate these studies in the future.

As we start to see what the impacts are on local communities.

We've seen one instance right now in Wolfe County, where the neighbors of a data center don't like the continuous hum that's going on.

And they they look through all the accounting of how much tax revenue has been brought in by that data center.

And the previous 18 months, it had brought in only about $11,000 of tax revenue.

Well, I mean, that's a fraction of the salary of a starting teacher out of college.

It's not enough to add one position that's going to help your kids.

So I do worry about some of those impacts.

>> Well, that is a question where we've heard about it doesn't really bring that much job, many jobs.

And how much revenue does it really generate for a city or county?

>> I don't think no two data center projects are alike.

You know, I've seen preliminary estimates on the one in Mason County.

I think they've approached that the right way.

Everything's been done in public.

You're looking at adding 400 new jobs.

You look at what's happened down in Louisiana.

Data center goes in down there.

Sales tax revenue doubles.

They're giving teachers a $50,000 bonus because they've got all this extra tax revenue in that one locality.

But those are with hyper scale companies.

But the ones that really concern me are kind of the speculators.

And that's the one that are causing the most issue all throughout Kentucky right now.

And that's one of the things, you know, the bill addressed by having a high application fee to make sure that when KU does their load study, that they're not doing it on somebody that may have 5 or 6 different options all throughout the state, that vastly shrinks the number of potential projects you have.

That's one of the things that, you know, the Epic report showed in Ohio was when they put a high application fee in.

All of a sudden, the project shrinked down because you're separating the wheat from the chaff at that point.

>> Right?

So this comment question from Sarah Lynn Cunningham, executive director of the Louisville Climate Action Network, and she says, quote, Mr.

Bevington spoke reassuringly about requiring data centers pay 15 years of usage.

However, LG&E routinely operates its power plants for 40 to 50 years.

How will consumers, including existing businesses that employ many more people than would data centers, be protected from paying for those stranded costs, as well as LG&E stockholders guaranteed profits?

>> Well, there's a lot to unpack in that question, for sure.

And again, when we when we think about sort of, you know, how rate making occurs and things of that nature, I think the reason that the extremely high load factor tariff requires a, a contract for 15 years is because essentially the amount of revenue that will collect from a data center over that 15 years essentially will pay for new generation.

We'll pay for the entirety of what that new generation costs.

And I think the other thing, again, we've had multiple questions from from viewers about the benefits of these things we sort of hate toward the negative, right?

Which is understandable because as, as Ted said, you know, there's a lot of new conversation to have about these things.

However, again, when new generation is built, new infrastructure is built in Kentucky that benefits everybody, right?

And in the case of brand new, most efficient generation, it's like buying a new car.

And all of our customers get to benefit from that for 30 or 40 years to miss Cunningham's question.

And again, if there if we have one data center that signs up for 15 years, all the revenue that that brings in benefits, the entire system pays for that new generation and that all the customers get the benefit of that for the remainder of its operating life.

While we might have to retire older units and things like that, those new generators that we're building are going to continue to operate efficiently for the benefit of our customers for the long term.

And again, these data centers are helping pay for, you know, that new, most efficient piece.

Otherwise, when we have to retire a unit, all residential customers are having to pay for that without the benefit of this additional revenue that these big companies bring to the table.

So again, that's just another piece of of the revenue benefit that that can be created.

>> Mr.

Gary, what's your thoughts on that explanation?

>> I've heard that explanation before at our hearing on the I believe, on the cpcn for the sorry, the Certificate of Public Convenience and necessity, the permission from PSC to build the two new gas plants that were mentioned in the back of the envelope.

Math seems to work out, but there are more intricate ways to assess how much needs to be paid in to make sure that the costs are covered as.

As Mr.

Bevington was mentioning earlier, that numerator and denominator, there's a lot more that goes into that numerator as well.

Aside from just the cost of a new gas plant.

So that's the upfront capital cost.

But there's also the operations and maintenance, the pipeline, the fuel, the transmission and other things.

So a really complete accounting, as I think that Representative Bray and Moore's bills would require, would be a good first step aside from from sort of not to denigrate the really complex math that LG&E put forward in their application, but that sort of back of the envelope.

And I think the other important thing to note here is as to, to health effects.

We talked a lot about the data centers themselves, but this new generation is primarily fossil fuel generation.

We already are a non-attainment area in Louisville for smog, and we are now building a two new gas plants actually, and extending the life of a coal plant.

So aside from the health impacts of the data centers themselves, the new generation could potentially have health impacts as well.

>> Well, certainly think about I'll give the representatives a chance to maybe give the final word here.

Representative Moore, we'll go with you first.

Maybe 45 seconds.

>> Sure.

As Rep Bray continues to work on our legislation this year, I think as we look at potentially stranded assets or decommissioning, potentially that filing fee goes in or the application cost goes into an escrow account for down the line decommissioning or retirement.

But the biggest thing is keeping that the lines of communication open.

I would love to work with you on this, and I hope people will, from across the perspective from KRC and from our utility providers working with rep Bray and myself and others to come to a solution that can work for Kentucky.

>> So this is going to be one of the big issues, if not the biggest issue.

Rep Bray of the session of 2027.

That's right.

>> Listen, I feel like because, you know, we didn't get something across the finish line last session, we're kind of behind the eight ball to where it's imperative we do this go round.

So it's extremely complicated.

But it's extremely important that we get this right.

>> And you're doing that work over the interim.

So hopefully perhaps you go in and even during the organizational session, you've already filed a bill and ready to hit the ground running and get it passed before March the 30th this time.

>> That's my intent.

You know, the Senate's been holding meetings already.

They've put together a work group.

Chairman Wheeler's leading that effort.

So very, very optimistic that we're going to get something done.

>> All right.

Something to keep our eyes on.

We report on it every single night, it seems on Kentucky Edition.

And we'll probably have more even tomorrow night, which we hope we'll see you again at at 630 eastern, 530 central for Kentucky edition.

And of course, Bill Bryant and a panel of working Kentucky reporters are going to be here on Friday night for comment on Kentucky at 8:00 eastern, seven central time, right here on KET.

This is the place where the hard conversations are had.

And hopefully you learned a little something tonight about data centers, and we'll keep following it as we go along.

Thanks for watching.

I'm Renee Shaw, take really good care and until I see you again, have a great rest of the week.