Calvert County commissioners received a detailed presentation from Southern Maryland Electric Cooperative (SMECO) officials regarding the growing impact of large-scale data centers on regional electricity demand, infrastructure, and consumer costs. The discussion highlighted both regulatory requirements and broader market pressures affecting Maryland’s energy landscape.
Rising Demand and Market Pressures
SMECO emphasized that wholesale electricity prices within the PJM regional grid have increased significantly in recent years, driven by a combination of factors including supply constraints, population growth, and rising demand from energy-intensive facilities such as data centers. Maryland currently imports more than 40% of its electricity, a condition that contributes to higher congestion and capacity costs.
Officials noted that capacity prices have surged dramatically—from approximately $49 per megawatt-day in 2020 to over $269 for the 2025–2026 delivery year, with projections reaching over $329 (currently capped) for 2026–2027. These increases are expected to continue in the near term.
Data Centers and System Impact
While SMECO clarified that data centers are not the sole cause of rising prices, they are a significant contributor to increased demand within the PJM market. Proposed data center projects in Southern Maryland alone could require approximately 1.1 gigawatts of power—exceeding the cooperative’s current peak demand of about 1 gigawatt on the coldest days.
This scale of demand prompted concern among commissioners about potential strain on the grid and long-term cost implications for residents. SMECO acknowledged these concerns, describing them as “very legitimate,” while emphasizing that demand growth must be matched by corresponding increases in generation and transmission capacity.
Cost Responsibility and Tariff Structure
A central theme of the presentation was SMECO’s position that large-load customers, particularly data centers, must bear the full cost of infrastructure upgrades required for their operation. Under Maryland law, developers are responsible for funding transmission and distribution improvements, as well as interconnection costs.
Additionally, SMECO is working to establish a dedicated “large load tariff” for data centers. This tariff would determine how such customers are billed and is intended to ensure that existing ratepayers are not subsidizing new high-demand users. The cooperative plans to file this tariff with the Maryland Public Service Commission (PSC) by September 1.
Officials also indicated that properly structured tariffs could generate additional revenue that may help offset distribution costs for current customers.
Regulatory Oversight and Limitations
SMECO clarified that it does not have unilateral authority to enforce cost-sharing measures beyond existing law. Regulatory authority lies primarily with the Maryland Public Service Commission, which oversees rate approvals and tariff structures. The cooperative stated it will continue advocating through PSC proceedings to ensure fair cost allocation.
Generation Shortfalls and Policy Challenges
The discussion underscored a broader issue: Maryland has retired significantly more generation capacity than it has replaced. Since 2018, approximately 6,700 megawatts of generation have been taken offline, while only about 1,600–1,700 megawatts have been added.
State officials have introduced incentives for new generation projects, including natural gas, renewable energy, battery storage, and potentially small modular nuclear reactors (SMRs). However, SMECO representatives cautioned that new infrastructure development faces long timelines due to permitting, supply chain constraints, and construction requirements.
Role of Batteries and Emerging Technologies
Battery energy storage systems were discussed as a potential tool for managing peak demand. These systems store energy during low-demand periods and discharge it during peak usage, typically providing power for 4 to 8 hours. While useful for grid stability, officials noted that batteries cannot replace continuous generation sources.
Community Concerns
Commissioners raised concerns about the financial burden on residents, citing sharp increases in household electricity bills. SMECO acknowledged the impact and reiterated that price increases are largely driven by wholesale market conditions beyond the cooperative’s direct control.
Conclusion
The briefing highlighted the complexity of balancing economic development with energy infrastructure limitations. While data centers present potential economic benefits, they also introduce substantial challenges related to power supply, grid capacity, and cost allocation. SMECO indicated that ongoing regulatory processes and infrastructure planning will play a critical role in determining how these challenges are managed in the coming years.
