Serving Lucas, Ottawa, Sandusky and Wood Counties
Mark Frye, who serves concurrently as the mayor of Sylvania and the president of Palmer Energy, spoke at the Oregon city council meeting on Oct. 27.
Frye’s discussion centered on the impact of data centers, namely the future outlook of electric rates. He made a presentation and then answered questions from both council and the residents in attendance.
Council member Kathy Pollauf was instrumental in bringing Frye in to speak after hearing him speak in Lucas County around a month ago.
Palmer Energy, per its official website, is described as a leader in unbiased energy management and consulting. They have been working with the city of Oregon, as well as all of Lucas County and northern Wood County in regard to government community aggregation services for electric and natural gas supplies for participants in the aggregation programs.
“We've been doing this on your behalf for about 25 years,” Frye said. “And over the last 25 years, since third-party electricity supply was available, we've been able to save consumers who are participating in the program about 194 million compared to what they would have paid to Toledo Edison. A little over $70 million of that was related to the fact that we fixed the price a little over three years ago for the price of electricity, which at the time was a competitive rate.
“But fundamentally, with what was going on in the marketplace at the time, I recommended to the communities to sit down and look at a longer-term fixed price. And the communities agreed. You all agreed. And we were able to save about $70 million just in the past three years.
“The unfortunate reality is contracts end, particularly beneficial contracts. And that price at 6.3 cents per kilowatt hour ended in May of this year. So basically, in May bills you got 6.3 cents. June bills, if you were participating in the aggregation, it went up to 9.7. There's lots of different reasons for the jump, which I'll start to go into and expand on in a minute.
“Fundamentally, we fixed at an opportune time. The wholesale market for electricity and for what's called generation capacity both rose substantially over that same time frame. So, we had a long-term fixed price, and unfortunately, we reverted back to the marketplace conditions that naturally occur at the end of the contract. Had the prices been lower, obviously the prices would have been lower for participants. So, the benefit of this is substantial savings. The problem or the challenge with this is that it created a shock to everybody.
“To give you a sense for an average residential customer, that was a significant sum of, it's probably $20 to $25 a month in their electric bills if they're participating in the aggregation. Now I've had lots of people ask me this question … what happened? What's going on? Is this about data centers?
“Well, yes and no. It's a little more complex than that. To give you a feel of this, over 18 years, from 2005 until 2023, the amount of consumption of electricity in the United States went up three percent. Think of everything that's changed since 2005 until 2023. Smartphones and all of the Amazon centers and all of those things that were constructed and built, all of the homes that were constructed here in the city of Oregon — all of those things basically were balanced out against the conservation of electricity that you've done here in your facilities, you've done in your water and your water rec facilities, and that we've all done in our homes and businesses. They balanced each other out.”
Another significant change
“While that was going on, there was another significant change in the marketplace,” Frye said. “You all are ground zero for one of those significant changes. Bayshore, by and large, was shut down. It still has one small section of it that's still operational. Coal-fired generation stations were shut down over the last 15 to 20 years.
“And the reason for that, everybody blames the environmental requirements, but that's only part of that picture. The other fact is that this is just a matter of pure economics. The price of natural gas is low enough that it started to pressure the values that could be generated out of a coal-fired generating station. Coal-fired power plants — you put 100 BTUs of coal into the unit; you get 30 to 35 BTUs of electricity out of that unit. You put 100 BTUs of natural gas into the Oregon Clean Energy Center; you get about 60 to 61 BTUs of electricity out of it. So, just the laws of physics alone created substantial pressure on those coal-fired generating stations. The coal-fired generating stations had a much higher number of individuals who also worked there.
“All of these things, along with the environmental regulations that were part of this process created this swap out. So, Bayshore shuts down, Oregon Clean Energy Center opens up, and you end up at about the same position on a national level. Because of conservation, we got away with that, for lack of a better term.
“The challenge that we started to encounter about five to seven years ago was that we started to make a decision that the cost of renewable electricity was the right way for us to go on a national level. (I’m) not here to say that it was good or bad, I'm just giving you information for you to consider and to help you make decisions.”
Renewable energy
“We decided as a nation we were going to invest in renewable energy,” Frye said. “Fine. But as it stands, renewable energy is by its very nature intermittent. The sun doesn't always shine, the wind doesn't always blow. I'm sure many of you have driven past the wind turbines over at the high school at Clay, and sometimes they're turning and sometimes they're not. That's the nature of electric generation from renewable resources.
“Not a problem in the big scheme of life, except for one particular thing — data centers. You have very large and, quite frankly, somewhat unexpected generation requirements, or load, that is coming from these new data centers that are being constructed not just in Northwest Ohio, but all over the country.
The largest chunk of data centers is actually, some of it being built in Texas, but the largest chunk that has been built is actually around the outskirts of Washington, D.C. And the challenge associated with this is you've got a renewable source of generating electricity that's coming on stream, which is intermittent in nature, but these data centers are not intermittent in their requirements. They want electricity 24 hours a day, seven days a week.”
Mismatch
“So what you have is a mismatch in the marketplace between an intermittent production facility that's going to come online and a large amount of electrical demand that's coming into the grid on an ongoing basis,” Frye said. “And when I say a large amount of electricity — one large hyperscale data center, when it's fully constructed and built out, could consume as much electricity as every single electric consumer in Lucas County — refineries, Jeep plant, everybody.
“These are very, very large electrical consuming operations. And what that caused in the marketplace, and some of that caused the increase in the cost of your electricity you saw in your aggregation supplies from 2023. You'll remember a minute or two ago I mentioned that three percent over 18 years, which is effectively flat amount of electric demand and consumption in the United States. From 2023 to 2024, the electricity demand increased three percent in one year alone. So, 18 years, three percent. One year more, three percent. And 2025 is heading in that direction. Another three is probably going be likely before the end of this year. So, the marketplace basically gets concerned about these incremental demands.”
PJM
“Lots of these data centers have been constructed and connected to the grid, connected to the interstate highway of the electricity market,” Frye said. “You all see them when you drive through town — the high voltage, large transmission towers. That is the interstate highway of the electrical grid. And the entity that controls this distribution on this, at least in this section of the country, all over the state of Ohio, is an entity called PJM.
“Their job is to keep the lights on 24 hours a day, seven days a week. They've done a great job with that. But effectively, they cover everywhere from basically from the Statue of Liberty down to North Carolina, the whole way to Chicago — about 65 million people are dependent upon this organization to make sure that the transmission system is operating efficiently, effectively, and keeping the lights on for all of us to enjoy and deal with.”
They’re going to get built
“Part of the challenge with this is a lot of concerns about data centers, and I get that,” Frye said. “But the important thing to understand with this is the data centers are going to get constructed. They're going to get built. Unless we could round everybody's cell phones up and put them in a shredder, and we're never going to ask another question from anybody, that's just not going to happen. We're all going to utilize this technology, and we need to understand that this demand is coming. There is no doubt about it, and many of the entities that got in early around the Virginia area, around Washington D.C., and Maryland, they got in before the recognition of the marketplace was such that it created this situation and recognized these demands.
“Most of these generators are going to get constructed wherever there is a large pressure high-volume interstate natural gas pipeline system. Well, as it turns out, when people start looking around where there's transmission systems and where there's large high-pressure pipelines with capacity to pull natural gas from them, many of those are in northwestern Ohio. Central Ohio, in the Columbus area, they basically, the utility down there, AEP, has come back and said we're not accepting any more data center applications. They've actually had applications on the order of 19,000 megawatts. That's 19 Oregon clean energy centers, plus some probably closer to 20, actually.
“These are very, very significant electrical demands. Now, I don't believe that these are all going to get constructed. Most of them will not be constructed, but if even a quarter of them are, that's a massive incremental demand for electricity.”
Bring your own generation
“What the data center companies, the developers, have come to the conclusion of is that anybody who's coming in at this particular point in time, it's what I characterize to be BYOG, which is bring your own generation because you're not going to connect to the grid unless you've got your own generation source nearby,” Frye said. “It doesn't matter whether it's in Oregon, Ohio, whether it's in northwest Ohio, whether it's in Waxahachie, Texas, it doesn't matter. You're going to bring your own generation because these loads are so large that they're going to have to build and construct to feed these facilities. That is the fundamental reality of this particular situation.
“As these data centers grow, we're going to be consuming more natural gas to feed these facilities. And all of the development you're going to see, whether it's here or somewhere else in the country, are all going to be driven by that by that absolute fact. So, wherever there's large natural gas availability, wherever there's lots of transmission for the interstate highway system across the country, those facilities will be constructed in those locations.
“I don't know whether any of you have seen any other commentary I've made, but from my perspective, the reality is in the next three to five years, the unfortunate fact is your electric bills are probably going to go up some. How much is uncertain at this point.”
Bills to increase no matter data center’s location
“If you put a data center here, your electric bills are probably going to go up some in the next three to five years,” Frye said. “If you don't put a data center here, your electric bills are probably going to go up in the next three to five years because the bump that you just saw, the increase that we just saw, was driven by data centers not in Columbus, not in the Toledo area, but in basically outside of the outside the beltway in Washington D.C. That's how far the impact of these things can make.
“Council president Reeves mentioned that I'm the mayor of the city of Sylvania. If I could figure out a way to get one of these in Sylvania, even though I only got six and a half square miles, I'd be on it like a tent. But I can't speak for what's right for the city of Oregon. That's up for you all to determine. The other thing to understand what's associated with this is you're not going to see these prices last forever.
“Eventually, this market will balance itself out, but the reality is for the next few years you're going to continue to see some pretty substantial increases in your collector costs. Now, I do believe we're going to see in the next aggregation contract a reduction relative to where we're at today, so we'll see some relief. But the fact is that these pressures are going to continue, whether we like them or not, whether you're buying from the utility, whether you're buying through the aggregation supplier, whether you're buying out on your own, it doesn't really matter from the perspective of … these prices are going to be under pressure, and there's lots of volatility in the market.”
Money up for grabs
“Now, the other thing that I wanted to mention, I ran some quick math because I know the mayor has been on record in talking about the one that's being considered to be constructed here in Oregon,” Frye said. “That's up to you to decide what to do, but I can give you a sense of proportionality, if you will, because sometimes it's hard to wrap your mind around some of these numbers.
“A data center, as I understand it, is going to take a period of years to be constructed. You're going to build these things in phases. You're going to have between 1,500 and 2,000 construction jobs that are going to be created, and they're going to pay payroll taxes, and those people are going to be living in your community, and they're probably in some cases going to be living in my community because these are bricklayers, these are concrete workers, these are electricians and plumbers, and HVAC technicians.
“These people are going to be working in these facilities, and one of the concerns that I've heard is that, ‘Oh, the chips are going to get outdated just like your phone. You're going to get rid of it in two years.’ But in reality, that's not my understanding, that's not what's getting taxed here. What's getting taxed is the building, the actual facility, and these are very valuable facilities that create the potential for property tax revenue.
“Mayor Seferian had mentioned somewhere on the order of $20 million. I don't know whether it's $20 million, whether it's $5 million, or whether it's $30 million, but I can generally give you a sense of what that means. I ran the math. After the announcement by the Stellantis company about the Jeep plant, they're adding another 900 jobs, and inside that bucket, there's about 5,200 workers that are going to be working at the Jeep plant, and if they were all making $30 an hour, not with benefits but just payroll, $30 an hour, full-time, 2,080 hours a year, the payroll tax off of that for the city of Toledo, plus the property tax according to the county website, is about $10 million a year.
“I'm not going to equate the $20 million that is potentially up for grabs here in the city of Oregon on this particular facility to a job and a person who's working at the Jeep plant. It's not the same. There's a bigger ripple effect associated with somebody who's working and assembling vehicles. But it's $20 million a year versus $10 million. This is the Jeep plant, and from an economic development perspective, that's a very, very large and significant project.
“In the end, as I said a bit ago, to me, this is a situation where we're going to be impacted by these prices. Putting one here, putting one down the road, putting one in Chicago, putting one in Boston, wherever it goes, these are going to change the market conditions, and they're going to push the price of electricity, so putting one here isn't going to materially change the outcome of what you're going to see on your electric prices.”
COUNCIL Q&A
COUNCIL MEMBER DENNIS WALENDZAK: The only question I have is if new generation is created not only by their facility but in additional gas-fired power plants, how does that impact the whole network? Obviously, power plants are going to have to be built in conjunction with these throughout the United States also. Does that have any relief on pricing in the short term?
FRYE: Short term being what duration?
WALENDZAK: Three to five years is it?
FRYE: Probably not. The lag time in getting one of these facilities constructed is towards the end of that time frame. The relief is after that, to the extent that that occurs, and the reason that I say to the extent that that occurs, council member, is because I don't know what is going to be happening with artificial intelligence five years from now. When people started talking about the internet 25 years ago, and that was a big deal, the amount of electricity we consumed popped. At the time, there was a turnover there, and the creation of the infrastructure was such that there was some excess for a while, which drove prices down. In this case, this would be generation-related, potentially extra, that would push prices down. What I don't know is how much we're going to use, how much that's going to change. I can't comprehend what's going to occur with these AI data centers and how we're all going to be utilizing those assets even five years down the road. It's moving so fast.
COUNCIL MEMBER BETH ACKERMAN: I understand as infrastructure has to be improved upon, and we know we've gone a long time without, it's like roads or anything else, we are going to pay through our bill. We're going to see that. I know there's legislation. There's a lot of discussion about making these companies that are making the billions of dollars to have them front more of the bill of increasing that infrastructure to bring, because they are the biggest users. What can you tell us about that as far as what's a two-part question: Do you see anything changing in these huge mega companies helping to pay for the infrastructure that they're requiring instead of it being passed on to consumers? And how do we assure, can we assure citizens, that they will not be, because it is a fear, and I'm sure you've heard it, that the energy will be prioritized to those companies versus those of us that are going to pay for it in our electric bill?
FRYE: As for the companies paying for infrastructure, that's already started to occur. The most material example that I can give you is, and this is reported in the public press, Microsoft went to the company that owns Three Mile Island over in Pennsylvania, and basically, there's two units there — the one that had the partial meltdown, the other unit ran for many years afterwards and was shut down five years or so ago. And in that particular case, the company who owned that facility, the company by the name of Constellation, they negotiated a contract with Microsoft to restart that facility. Microsoft wrote them a check for $1.5 billion and said, 'Go!' They're going to take the entire output of that facility, entire nuclear generators, which is about the same size as Davis Besse. So, there is a recognition by these companies that they have to be part of this solution from an infrastructure dollar perspective, whether it's generation of electricity, whether it's any water demand, whether it's fiber, whatever infrastructure requirements are necessary to build one of these things. I can't speak for them personally, but data that I've seen tends to point to their recognition that this is going to have to be part of the cost of doing business.
ACKERMAN: The biggest fear with a lot of people is that the power, say we all see that increase in our electric bills over the years, and there's a lot of talk of cities where the power is prioritized to those because we know that the data centers can never be starved of any power, that has to be consistent. So how do we, as citizens, can you ease our minds that the power will never be prioritized to them over our homes and our businesses and what we need it for, considering especially since we help pay for the build-out of it?
FRYE: That’s a long answer, so I'll try to shorten it as much as possible. Part of this is a regulatory question, and I'll give you a little bit of history. In the late 1970s, there was a shortage of natural gas, what was determined to be a shortage at that point and time. And back then, if there's anybody here in the audience, they shut the schools down during the middle of the winter for a few weeks or days or what have you. And all of that occurred in what the regulatory agencies, in this case the Public Utilities Commission of Ohio (PUCO), said is you must supply your natural gas that you have available to homes and small businesses, and the industrial customers have to get whatever's left over. So part of this conversation is a regulatory-driven conversation. As for what they ultimately choose to do, history says they're going to recognize the same sort of thought process that homes and businesses have to be fed first. These facilities have to take their chances, which is one of the reasons they're coming back saying, ‘I'm going to build my own power plant right next to me, because then I can become an island on my own if I need to.’ As for all the other questions associated with whether the utility company would make that level of decision, practicality speaking, electrons flow by the path of least resistance. If you have a power plant right next to a big load, that's naturally going to absorb most of that electricity, unless there's a regulatory order that says ‘No, the electricity continues to be generated, but this load needs to reduce. It needs to go back.’ So that, rather than three milliseconds for your response on what's the best restaurant in Oregon, Ohio, which, by the way, I think is the Oregon Inn since I was there this evening, so I apologize for the easy one, but fundamentally that's a thought process that, okay, it's not going to take two milliseconds; it's now going to take five seconds to get the answer. And that basically becomes the mechanism by which they reduce those demands.”
COUNCIL MEMBER STEVEN SALANDER: What I'm hearing from you is that pretty much whether we have it or whether we don't, we're going to be hit with higher bills — higher electric bills.
FRYE: (Yes). I wish I had better news for you.
SALANDER: What else can you tell us about some of the electricity usage or possibilities of what we're looking at for this particular project that we're talking about here in Oregon?
FRYE: I don't know enough detail to give you much feedback in regards to the specifics of the situation in Oregon. All I know is generalities of stuff that I've read in the public, so I'm not part of that process. I don't have a dog in that fight, so to speak. So I can't give you a lot of information, just what's out there in the public record. What I can give you a sense of is that because I know one of the fears is that, ‘Okay, this is going to be like an abandoned Kmart or some other situation because they're going to build these buildings and 10 years later they're going to abandon ship.’ I don't think that's likely for a couple of reasons. First, they're going to build these things in phases. They're going to construct a couple of these buildings, make sure they've got the demand. They're going to build a couple more of these buildings, because these buildings are expensive. I mean, the buildings and the materials, the chips that go inside, this is hundreds of millions or potentially even billions of dollars. No matter how big a company you are, that's real money no matter where you're at, even with the federal government. What I would generally say is they're not going to build more than they think they have demand for. From that perspective, that's part of that puzzle. The interesting thing is, let's say that you're going to build a generation station right next door, Oregon Clean Energy Center number two, because I know that's something that's actually gotten approval. So, they're going to build this power plant, and I don't even know where this facility is going to be out in Oregon. Maybe it is connected, or maybe it isn't. But they're going to build this power plant nearby, whatever that name is. They're going to build the entire power plant. They're not going to build 200 megawatts of generation because they have 200 megawatts of load that's going to expand to 600 or 700 megawatts of load. They’re going to build the whole generation facility now. And if they don't effectively build out that infrastructure to consume that electricity, the power plant's not going anywhere. It's a separate investment from a separate investment group, presumably. They're going to write that check separately, and these big companies are going be on the hook for that economically, but then they're going to have the extra power output to sell against that in order to balance those numbers out. There's going to be, that's why I mentioned to the council member earlier, it's really hard to sense what the ramp-up of demand for this information is going to be relative to how fast we can build these generation facilities and the infrastructure that's attached to it.
COUNCIL MEMBER STEVE HORNYAK: I just want to appreciate you being here. Obviously, there's a lot of questions. Having experts who really understand this is good. I think the thing I would just like to reiterate, I know I've had this conversation with a lot of folks, whether this is located in Oregon, Ohio, whether it's located in Lucas County, whether it's located in Ohio, whether it's located in about an eight state area, our rates are going up. The demand on electricity is going to cause that to happen no matter where these data centers are. The other point, just to reiterate, though, and I had this conversation with someone who was very against the project and the idea of this being in Oregon, they said, how do you stop this? Throw them in the garbage. As long as you want 3,000 pictures of your cat, dog, family, whatever available to you in a nanosecond, as long as you want to say what's the best restaurant here, if you want to say where's the closest laundromat, every time you hit that button, every time you ask that question, that's AI. That is what we demand of what now is the computer we carry in our pocket. So, the way you do this is by curbing cell phone demand. In my opinion, I don't believe that's ever going to happen because they have become not only part of our lives for most of us, but part of our right hand. This is going to keep going. It's going to continue to be a need. The evolving technology; it's always a question whenever you're dealing with technology. Five- to eight-year lifespan is long for a technology lifespan. So the question of what's this going to be in eight years, or 10 years, or 15 years? I don't know that we can say that today. I don't think we know that, because five years ago we didn't necessarily know a whole lot about why we needed data centers. I would just like to reiterate, no matter where it goes, it's going to impact our electric rates because of the facts you talked about. Stopping the idea of these data centers is unlikely because we are all ultra consumers of data. And as long as we're ultra consumers of data and when you think about a lot of the conversation in our community that's taken place over this proposed data center, it has taken place over Facebook. That's Meta, folks, if you don't know. Meta is one of the largest data center builders in North America.
CITY ADMINISTRATOR JOEL MAZUR: I have one question about outages, but I'll get to that in a second. My other question is about natural gas. We talk a lot about electricity and it's been three years. I've been here three years now. In my prior position, I was on the AMP board of trustees. So, I'm three years out of the game of closely tracking energy markets. In the natural gas world right now, are you expecting to see any kind of ramp-up in rates for natural gas as well, with the increased usage of bringing your own energy to the data center sites, or is that a big unknown right now?
FRYE: It's both. It is an unknown, but here's what I can tell you in regards to natural gas. As you construct these facilities, there's lots of incremental natural gas demand that comes from it. We're producing more natural gas in this country than we ever have before. Twenty years ago, we produced about 50 to 52 billion cubic feet of natural gas; we're at about 107 right now. We're exporting about 16 to 18 billion cubic feet of that overseas through liquefied natural gas, which is basically a thermos bottle, or via pipeline to Mexico and/or Canada. Those exports are going to ramp up. You've heard press reports about that. That's just another reality. There's lots of facilities that are going be constructed. There's new incremental gas demand that's going to be created by these data centers, by electric vehicles to some extent longer term, by the export capacity requirements associated with these contracts with these overseas companies to export liquefied natural gas from the United States. The question is, what's the number of dollars per million BTU does it take in order to incentivize producers to go out and drill more wells, to make sure that the supply is available? That number, according to the current projections, is around five bucks. As of today, the number is about four bucks. That's part of the reason why I indicated earlier that there's probably going to be increased prices for electricity because 45 percent of all electricity in the United States is generated by natural gas. Because of that, they are the unit of last resort. And as those prices rise, the wholesale price of electricity naturally rises with it. With that being said, if I got shorts on the 17th of January here in Northwest Ohio, then we don't have a problem with natural gas for another couple of years because we're not consuming it as much as we expect it to heat our homes. It's still a very significant impact on weather. That's where it gets more complicated to get an assessment of where those prices can be because, unlike electricity, we can store natural gas and do it all the time, as you well know.
MAZUR: This is a question that I get from people and that I've seen on some of this Facebook traffic. But can you talk about just data centers specifically, and if you, and I haven't read about any, but if there are any outages that they cause, or are they well-insulated facilities that don't cause outages or blinks, so to speak, out in the system?
FRYE: The infrastructure that was built early on, the nature of a data center load with us asking these questions, there can be significant swings in the demand of electricity. It's not by the minute; it's by the millisecond. So it's just on and off, on and off, based upon whatever the demand is on the system. That creates a challenge for the electrical, even the interstate highway known as the transmission grid. But with these newer data centers that are under consideration now, there's a lot of belt and suspender kind of infrastructure that would be constructed. It's not just dropping in a natural gas-fired combined cycle combustion turbine like OCE 1. It's ‘Okay, we're going to have capacitors, then we're going to have batteries, then we're going to have engines, and then we're going to have electric generation from the natural gas turbines.’ That creates, I'm getting into electrical engineering, but that gets into inertia associated with the consumption and the shift in demand, which creates a much, much lower likelihood. In fact, it probably increases the reliability of the grid here locally. That's one of the things that these facilities will probably do once they're ultimately connected to the grid, which they will be.
RESIDENT Q&A
RESIDENT 1: Would it be more conducive as a community to have a Jeep plant as opposed to a data center? Would that be a more cost-effective way to use our money for that money than would be spent to buy that property and also employ people in our community. They're going to spend their money here, maybe start a new business here as well.
FRYE: What I would generally tell you is if you can get another Jeep plant and put it in Oregon, Ohio, absolutely, I would put another Jeep plant here, no question about it. But I know that economic development professionals have been trying to figure out a way to get another facility like that here for 30 years. And I don't know if you recall this, but when (Former Toledo) Mayor (Carty) Finkbeiner basically was able to get whoever it was, Chrysler or whatever at the time, to commit to build the new Jeep plant, everybody yelled at him because they thought he was giving the store away with economic development money, which has turned out to be a boon for Toledo and all of Northwest Ohio, obviously. If we can get another one of those plants, oh yeah, absolutely, 100 percent we definitely should. I don't know that that's going to happen in the near term. I don't know of any automotive facilities that are under construction that are being looked at here in Northwest Ohio, but I'm not part of that process. But yes, I wholeheartedly agree. We could go get another Jeep plant, another 6,000 jobs from Jeep, plus all the ancillary jobs that are attached to Mobius and whatever, hallelujah! Yeah, let's do it. They're just not coming. So the question isn't whether this is an alternative. That's not an alternative to the best of my knowledge. If it was, my impression is we can walk and chew gum at the same time, I think we should do it.
RESIDENT 2: I would just like to ask how often are our gas or electric prices going to go up, and how much each time?
FRYE: Don't know how often. The current contract, we went out 12 months only because the price was so much higher, and the offers that we got to go out further than that were even further were higher yet. We decided that we recommended to the communities to fix only for 12 months. I do expect given where current prices are that there's going to be a little bit of relief on the generation side, but I don't control the distribution of the local wires and stuff. That's regulated by the Public Utilities Commission of Ohio (PUCO). Short term there may be some slight relief based on market conditions, but long term, I'm probably looking at recommending a two- or three-year price if we can get good prices going out. Generally speaking, I don't know if we're going to be able to get competitive prices to go out that far in the future. I wish I could tell you. And how much? I think short term we might be able to get a little bit of relief because of market conditions. As I say, long term, 15 or 20 percent on the generation, which represents about half of your bill. It's significant.
RESIDENT 2: Yeah, our electric bill went from $250 to $450. We're not going to be able to afford to live in Oregon. No one's going to want to move to Oregon because that's a lot of money. The prices of homes, they're fantastic houses. I am not downing Oregon at all. Fantastic houses. But when you add in this kind of utility, we're all in trouble because we're all going to take a loss on our house. What's going to make people want to move here?
FRYE: If you had your house in Sylvania, you'd pay the exact same cost. It's not a matter of being in Oregon or Sylvania or Toledo.
RESIDENT 2: No, but Sylvania don't have a data center.
FRYE: Wouldn’t matter. I’m paying the same number you’re paying, ma’am.
RESIDENT 3: Could you describe bulk power purchasing agreements pertaining to data centers?
FRYE: Wow, you're not going to have enough time for that. If you're going to buy third-party power for a data center and you don't have your own generation asset, you have what's called a power purchase agreement that you go through. A lot of these developers, they have created their own power purchasing groups inside. They hire their own individual professionals internally in their company to buy wholesale electricity from the grid. They buy it 24/7, 365 days under these power purchase agreements. Typically, what they're going to look at is a block and index structure, which basically tries to lock in large chunks of what they know their demand is going to be and let the rest of it float at the wholesale market prices. That's a risk tolerance conversation that that individual entity has got to determine internally within their own operational expenses. But that's very specific based upon what the actual ability of this facility is to be able to offset demands in the future. I'd be happy to talk with you further about that. But that's a really, really complex question.
RESIDENT 3: My concern is that in the research I've done is that the cost has shifted then on to local residents and businesses in those situations. So that was my concern.
FRYE: I appreciate that. I don't think that that's, I mean, to the extent that it would shift on to businesses and residents on a global scale across 65 million households, yes. Those incremental demands do affect the marketplace. There's no question about that. I mentioned that earlier. But if they're bringing their own generation at the same time as they're building their own demand, that's a much more conversation.
RESIDENT 4: I have a friend that's in California, and they have much more demand on electricity than we do. You talked about hyperscale. That would be the same amount of electricity as the entire county of Lucas County, so that's pretty much doubling the area's electricity. In California, the way that they handle that capacity load is, to prevent rolling blackouts, they have smart meters on their houses that they control how much power you're getting in order to lower how much air conditioning you're having in your house, or how much power you're using. How do we know that that wouldn't be something that was put into place here?
FRYE: Actually, Toledo Edison, which is our local utility, as you all know, they're in the process of installing smart meters. You may have a smart meter at your house right now, I don't know, but they're in the process of installing exactly what you're talking about with smart meters as we speak. And by the way, I'm not advocating smart meters, but what I can tell you is they're spending about $700 million to do it. So, they're not free. I don't know what the return on our investment is. Toledo Edison has indicated, the PUC has agreed, that that return is sufficient in order to do that.
RESIDENT 5: I want to know if you're aware of any other cities turning these data centers down.
FRYE: Turning them down in what regard, ma’am?
RESIDENT 5: They just don't want them in their city. They don't want them. I'm reading on Facebook different cities coming in because I'm friends with a lot of different cities on here, and they're saying how their city is turning them down. I want to know if you know of any of the cities that are turning them down.
FRYE: I don't know of any off the top of my head. I would not be shocked that there would be some that might decide to turn them down. And you all, members of council and the administrative staff, can make that determination, what's right or what isn't right for the city of Oregon.
RESIDENT 6: Can we just clarify real quick where we get our power from? How many states are involved? It's a regional thing, not a local thing, right? Is it regional? Is there 12 states that we're attached to in Ohio right now?
FRYE: It's 13 states.
RESIDENT 6: So anything in those 13 states is going to directly affect Oregon, Ohio the same way as if it's in Oregon, Ohio or it's in them 13 states. Am I correct in that?
FRYE: Correct. The reason we saw the bump was because of the data centers that were constructed outside of Washington DC, which is part of our region.
RESIDENT 6: So it's a regional thing more than a local … one here or one in Washington is the same thing, right?
FRYE: That's correct. I mean, from a wholesale pricing of electricity perspective, yes.
RESIDENT 7: You talked about the hyperscale centers. In some production of electricity, there's also water use with that. How much water use are you talking about in order to produce electricity for something on a hyperscale that would be for the amount of Lucas County power?
FRYE: That's more of a (Director of Public Service) Paul Roman question. It isn’t a Mark Frye question. But what I can generally tell you is the technology that the data center companies are using now is what's called a closed loop system. They're basically pulling the BTUs off of the chips. They're pulling the water that's been heated up by those chips, and they're basically taking that through and getting rid of those BTUs through a standardized process and then returning the water. So, the amount of water consumed for the data centers that are going to be built over the next few years is drastically, I don't know what the percentage is, but drastically lower than what it would have been something that was built three to five years ago.
RESIDENT 7: It's lower, but it's not never used again. They have to dump it. They have to purge it. They have to do all those kinds of things. It's not like you fill it and it's done, right?
FRYE: There's clearly maintenance that is required. There's all sorts of things like that that naturally occur, absolutely 100 percent. What the actual consumption is on that and how that would interact, in your case, with the city of Oregon and its availability of water capacity, I don't have the first clue.
In next week’s issue of The Press, we will have a story on what the impact of data centers will have on water rates in the area.
