Data center companies are waiting in line to connect to Colorado’s power grid as regulators craft rules for the state’s largest utility — rules that would become the most comprehensive standards in the Centennial State for the booming industry.
But environmental advocates and local leaders are crying foul over what they see as a potential loophole in those regulations, which are meant to keep the costs of power-hungry data centers from being passed on to regular ratepayers.
The Colorado Public Utilities Commission earlier this year asked Xcel Energy — which provides power to — to develop new rules to ensure that data centers and other businesses that require large amounts of power do not raise rates for residential customers and small businesses. The rules, once approved, will dictate how much data centers and other large-load customers will pay for power and how utilities will handle the cost of any upgraded or added infrastructure they need.
The rulemaking follows Xcel’s estimates that it will see extraordinary demand from data centers and other new large-load customers in Colorado. Data centers — which host banks of computer servers — have become more polarizing across the country as artificial intelligence and an increasingly online society have spurred the need for massive facilities that require large amounts of power.
“In Colorado, Xcel is the 800-pound gorilla in the room and dictates everything that happens with Colorado’s energy future,” said Eric Frankowski, the executive director of the Western Clean Energy Campaign.
The PUC rulemaking comes amid a void of statewide data center regulations. For three years in a row, Colorado legislators have considered bills that would offer varying combinations of regulations and incentives for the fast-growing industry. But they have never found enough consensus to pass a bill.
The onus has instead fallen to local governments. Some have enacted their own rules — while others, like Denver, have banned new data center development until officials can update their ordinances.
“Right now, the PUC is the only place left where Colorado can put real protections in place before the costs fall on ratepayers instead of on the companies creating them,” said Colorado Sen. , a Larimer County Democrat and sponsor of a data center regulation bill that failed in the most recent legislative session.
Dozens of smaller data centers have hummed along the Front Range for years. But the advent of artificial intelligence and the ever-expanding digital needs of modern life have spurred a boom in construction of new centers — and a wave of concern about their power and water use.
Xcel estimates that new requests from data centers and other large-load customers could require more than 1,900 megawatts of additional power by 2031 — enough electricity to power 2.1 million homes and a 31% increase to the utility’s current total power supply. A large-load customer is any entity that requires more than 50 megawatts of electricity, which is enough to power about 55,000 homes, .
Since the PUC asked Xcel to develop rules for data centers and other large customers, the proceedings have attracted the attention of a wide range of entities, including the city of Denver and the Colorado Energy Office, as well as environmental advocates who worry that the additional demand data centers would add to the grid could slow Colorado’s progress toward its clean energy goals. Some of the country’s largest businesses, including Google and Walmart, have tuned in.
A poll by the environmental advocacy group Conservation Colorado found that the vast majority of the state’s residents from all political affiliations — more than 90% — want commonsense rules to “protect ratepayers, communities, and our natural resources like air and water from unrestricted data center growth.” The advocacy group after surveying 800 likely voters in the state.
Dozens of Coloradans on Tuesday urged the PUC to enact strict rules on how Xcel should handle data centers’ power needs during that lasted more than three hours. is tasked with ensuring that power companies — many of which operate as monopolies in their market — provide reliable and reasonably priced services that align with state values.
The commenters tuned in from across the state, from rural Lake County to Denver. Retirees and young people alike spoke up. Doctors, teachers, elected officials and environmental advocates weighed in. For several, it was the first time they had ever participated in a public comment hearing.
Their message was unanimous.
“They must pay their own way for every single thing,” Deborah Jones of Lakewood told the PUC commissioners about data center operators. “No deals, no incentives, no loopholes, no backroom deals, no secret contracts. There must be complete transparency and enforceable regulations with significant penalties for any violation.
“Remember, itap your job to protect us, the people of Colorado.”
Loophole or needed alternative?
The rules proposed by Xcel are extensive and complicated, but one section has drawn skepticism and indignation from a wide range of people watching the proceedings.
Xcel executives have said in filings that they want an option that will accelerate approval for some data center customers and allow for more custom contracts than allowed under the rules being created.
“We recognize that certain large load customers have unique timing, development, or operational requirements that may not align neatly with standard processes,” Jack Ihle, Xcel’s area vice president for data centers and large loads, said in a filing with the PUC.
The option — dubbed “speed to market” by Xcel — has troubled environmental and clean energy advocates, who say it is more secretive and less restrictive than the rules under consideration in the proceeding.
“Xcel is basically trying to negate this entire proceeding with the speed-to-market proposal,” said Matt Gerhart, an attorney for the Sierra Club. “It defeats the entire purpose of this proceeding.”
Under the proposal, data center companies would be able to craft a contract outside of the new rules for large-load customers. The contracts would still be consistent with Xcel’s core principles, including cost responsibility and risk protections, Ihle said in his testimony. And contracts drafted under the speed-to-market rule would still be subject to approval by the PUC, which would have a 30-day window to decide.
But the contracts would not be available for review by other entities, like environmental and consumer advocacy groups. While such contracts are not generally available to the general public, groups including the Sierra Club and Western Resource Advocates regularly sign nondisclosure agreements to review contracts and provide input on PUC decisions.
The new large-load rules would allow those groups to weigh in on deals crafted under them, but those entities would be excluded from the speed-to-market process, Gerhart said.
“It will be a secret process where nobody gets to see the contract,” Gerhart said.
PUC staff expressed skepticism about the speed-to-market option in documents filed last week.
Contracts under the proposed option will likely take longer than proceedings under the regular large-load rules because they will require additional modeling and negotiation, Steven Dahlke, a senior economist at the PUC, said in a document. A fast-track option at the PUC level is unlikely to solve the real cause of delay for large-load customers seeking to connect to Xcel’s grid because it’s Xcel’s processes — not the PUC’s — that slow things down, according to a study conducted by PUC staff in 2025.
Rarely used option — but not at first
Xcel leaders said in their filed testimony that the speed-to-market option will eventually become the exception and not the norm.
But in the short term, many of the customers currently in the utility’s queue will use the speed-to-market option, according to testimony from Michael Pascucci, Xcel’s director of regulatory policy. Most of the data center companies in Xcel’s queue are looking to build in metro Denver, particularly along Interstate 25 and near Denver International Airport.
“I guarantee you there’s not one data center developer who’s not going to raise their hand and try for the secret contract,” said Frankowski of the Western Clean Energy Campaign, who called the speed-to-market option a “loophole.”
Brian Turner, a senior director at the clean energy trade organization Advanced Energy United, sees a path forward that provides an accelerated pathway for customers who pledge to source their power from clean energy. The “speed-to-market” option is not in the spirit of what the PUC is seeking through the rulemaking process, he said, but could be an option within the larger regulations.
Data centers’ power demands represent a real risk to clean energy goals in Colorado and across the country, Turner said. The millions of dollars in energy investment they could bring might fund transformative clean energy investment.
“The risk is real, but it can be navigated well so that data centers are not only not harming Colorado’s goals but meeting them cheaper and faster,” he said.
Xcel Energy officials disagreed that the speed-to-market option would allow customers to sidestep rules. Any deal would still require approval by the PUC, which would ensure customers are protected, said spokeswoman Lisa Andersen.
“A ‘Speed to Market’ agreement would still be subject to regulatory approvals, clean energy considerations and customer protection standards,” Andersen said in a statement in response to questions from The Denver Post. “It is not a shortcut around regulatory review, rather, it is a flexible path that still includes PUC oversight, customer protections and measures designed to protect our existing customers.”
A final public hearing in the proceeding is scheduled for October. The PUC plans to at the end of the year.
Climate concerns
Colorado’s data center industry remains relatively small compared to other states. — a fraction of the more than 670 in Virginia and the more than 500 in Texas, according to the company .
But the smaller industry doesn’t mean Coloradans aren’t paying attention.
Construction of a data center in a northern Denver neighborhood prompted protests and a citywide moratorium on new data center construction until city leaders can develop rules for the industry. Denver joined several other local governments across the state — including Jefferson County, Longmont and Saguache County — that have also enacted moratoriums on the industry while they craft codes.
During the public comment hearing Tuesday, Coloradans told the commission that they were feeling the affordability squeeze from nearly every angle — housing, inflation, gas prices.
Xcel has already raised its rates, and even higher prices fueled by data center growth are unacceptable, many said.
Holly Ryckman, a public school teacher who lives in Adams County, said some of her students’ families already cannot pay to heat their homes in the winter or regularly turn off their power to save money needed for other necessities.
“How is it that big companies can line their pockets when my students can’t even charge their cell phone once they get home?” she said.
Some commenters discussed the technical details of the complicated proposed rules — like exit fees and financial security requirements — but many focused on the larger picture. If data centers come to Colorado en masse, their power needs could lead to additional energy production through fossil fuels and delay the state’s transition to clean energy, commenters said. A delay in that transition means more greenhouse gas emissions and more impacts from climate change.
Grandparents and parents worried about the future their children and grandchildren would face. Parents are already keeping kids inside because of ozone, wildfire smoke and extreme heat, said Sara Kuntzler, the Colorado state director for an environmental advocacy group of moms based in Bozeman, Montana.
“Itap not hyperbole when I say that every single day I think about the world that we are leaving for the next generation, including my son,” said Andrew Pinkowitz, a Centennial resident and dad to a 2-year-old.
A coalition of 100 elected officials from across the state on Wednesday urging the body to demand regulations that protect current customers and ensure data centers will not derail progress toward the state’s clean energy goals.
The city council members, county commissioners and state lawmakers represent communities across the state, from Denver to small mountain towns like Leadville to rural Hinsdale County.
“Tech companies are some of the wealthiest companies on the planet, yet their energy needs will be subsidized by working families in mountain communities who see little benefit from these projects,” Summit County commissioner Eric Mamula said.
As regulators weigh new rules for Xcel, construction on new or expanded data centers continues along the Front Range.
billed as “AI ready” is set to be finished next year. A company called in Weld County to build , which could later be expanded to be much larger and power-intensive. In Aurora, the state’s largest data center continues to grow. When complete, the data center owned by QTS will have a maximum power capacity of — enough electricity to power all the homes in Lakewood.
Colorado is not alone in its search for sensible regulations amid the data center boom, said Turner of Advanced Energy United. Everyone is scrambling, he said.
“Colorado has the opportunity to be in the leadership position with what they do with this tariff,” he said.
