Looking back on 2023, Colorado’s energy transition seems vaguely quaint. We were busily making plans to shut down the last coal plants. Geothermal had entered the conversation as we looked to decarbonizw buildings.

Was anybody talking about load growth from data centers?

Well, yes. The giant QTS data center was being constructed in Aurora, just off I-70 and E-470. John Gavan, by then a former PUC commissioner, was sounding the alarm. He got Mark Jaffee to write a story for the Colorado Sun that October.

Suddenly, we were hearing concerns about resource adequacy at every turn.

Not everybody got the message, though. In the 2024 legislative session, a bill was introduced that would have created additional incentives for data centers on top of those adopted in 2018. Maybe my commentary dissuaded the state legislator and maybe not. By February 2024 I had emerged from my water projects to write about it: “Why data center tax breaks? They’re coming anyway.”

The legislator didn’t seem to understand why this feel-good economic development measure would face opposition. His proposal didn’t get even one committee hearing, though.

Then, in October 2025, Xcel Energy submitted its most recent iteration of an electric resource plan or ERP. It had been dubbed the Just Transition ERP, as it was supposed to help figure out the futures of Pueblo and Hayden after the coal plants in those locations closed. It really should have been called the Data Center ERP.

For many years, electric utilities kept building bigger and bigger coal-fired power plants, in the 1990s augmented by natural gas plants. They apparently had not gotten the memo from Amory Lovins from 1976 about energy efficiency. Somewhere in the early 21st century, they did. Demand growth flattened even as Colorado’s population continued to rapidly expand.

The 2024 ERP announced another — and very abrupt — shift. Xcel offices testified to dramatic increases in demand being forecast. Electric cars would be some of it, and electrified buildings another component. But 62% of the overall projected demand would come from information technology, i.e. data centers. Importantly, it projected that 72% of increased peak demand would come from data centers.

Keep in mind the difficulty posed by peak demands as we try to decarbonize. Peak demands pose a greater challenge to existing technologies. Think of the church built for Easter Sunday as opposed to a Sunday in August..

How real is this forecasted demand growth from data centers?

When the Colorado PUC commissioners recently wrapped up their 10- or 11-day hearing about Xcel’s ERP, they took turns with summation remarks reflecting on what seemed to me to be an extraordinary proceeding as reflected in how much new electrical generation Xcel said it needed, an almost shocking figure that I have somehow forgotten.

Eric Blank called out the dimensions of the case. “And I also can’t recall any case where there’s been so much uncertainty attached to virtually every part of the of the issue,” added Tom Plant.

On the other hand, we have utilities in Virginia keeping coal plants open because of all the demand from data centers.

Western Resources Advocates sees data centers as problematic enough to compile a 70-page report, “Data Center Impacts in the West: Policy Solutions for Water and Energy Use.” Written by Deborah Kapiloff, a policy advisor, along with Lindsay Rogers and Stacy Tellinghuisen, it takes stock of the situation in Colorado and the four other southwestern states that WRA tracks and issues recommendations.

In seven of the eight largest utilities in the Interior West, the report says, annual electricity sales grew approximate 1% from 2010 through 2023. Those same those same utilities — undoubtedly including Xcel — collectively forecast an annual increase of 4.5% from 2025 to 2035.

One crucial question is whether utilities can meet the demand for electricity from data centers without impacting other ratepayers. WRA points out that most data center companies — Google, Meta, Amazon, and others — have expansive financial resources, and many have company climate and clean energy goals.

“If these sources of new electricity prioritize corporate responsibility and sustainability commitments, they could help accelerate the clean energy transition and minimize use of scare water resources.”

What exactly does WRA propose? Topping the recommendations is  a “clean transition tariff.” In this, the data centers pay any incremental additional cost of the clean resource needed without impacting other utility customers. Regulators must determine which resources would be eligible under that tariff and ensure other customers are paying their full share of the costs.

Another idea is to adopt policies that encourage data centers to develop their own electrical generation and storage systems.

Still another idea is to create a new rate class for these types of customers. The report also recommends that states and utilities structure new rates or reform existing economic development rates in a way that targets customers whose loads support significant permanent employment.

What constitutes significant employment? WRA does not define that. Construction of hyperscale data centers generates many jobs, but the data centers themselves, not so much.

And what if the chef prepares a feast and the guests leave early — or don’t arrive at all8? WRA cautions that stranded assets could be a problem. It recommends that utilities develop robust contract provisions for data centers that will protect other customers having to subsidize them.

WRA also gives considerable attention to the water use of data centers. If utility predictions on data center growth comes to fruition, data centers in Colorado and four other states in the Southwest could have annual on-site consumptive use of 13,700 acre-feet in 2030 and 21,600\0 acre-feet in 2035. It has suggestions about what state regulators should be thinking about, some options to consider.

To me, the most interesting component of this report is the discussion of peak demand. “Data centers, where an estimated 40% of electricity demands for cooling, are likely to exacerbate summer energy peaks if they do not participate in load-shifting programs,” WRA says.

Where this report would have benefitted was in greater reporting of existing policies. For example, United Power, an electrical cooperative in Colorado, sits in a prime territory for additional data center growth. The chief executive, Mark Gabriel, says he routinely fields inquiries from data center developers. United’s policy is very simple: They will have to pay the cost for their new generation.

It’s probably too soon to say just how effective United’s policy is in causing data centers to get real, but I suspect it might have a way of dissipating uncertainty. Of course, United Power is unregulated, except by its board of directors, who in turn are elected by the coop’s members, otherwise known as customers.

The WRA report can be downloaded here.

Allen Best is a Colorado-based journalist who publishes an e-magazine called Big Pivots. Reach him at allen.best@comcast.net or 720.415.9308.