Part 4 of Philip Herold's series on FERC, interconnection, and data center load, analyzing the credit impact of hyperscaler requests on public power (municipals, cooperatives, and joint action agencies).

The Public Power Asymmetry

Public power operates on socialized cost recovery via tax-exempt debt amortized over captive ratepayer bases, without shareholder cushions or state PUC rate-case protections. Individual data center requests (e.g., 500 MW) frequently exceed system peaks, forcing utilities to either take on massive single-counterparty risk or risk stranding upgrades committed under socialization mechanisms like [[news-3216017|PJM Schedule 12]].

Contractual vs. Regulatory Defenses

Unlike IOUs, public power cannot rely on PUC rate classes. Instead, they must deploy bilateral contracts:

• Contributions in Aid of Construction (CIAC): Upfront cash, exposed to IRC §118 tax issues.
• Special Facilities Agreements: O&M and capacity allocations governed by state contract law rather than [[ferc|FERC]].
• Minimum Bill Provisions: Key hedge against behind-the-meter (BTM) gas turbine migration.

Proposed federal shifts like the POWER Up Act would give FERC jurisdiction, altering muni credit dynamics much like [[aneel|ANEEL's]] LRCap homologation altered Brazilian finance.