Chelan PUD commissioners Monday considered contract terms that would supply power to Microsoft’s new data center campus in Malaga while protecting reliability and stable, predictable rates for existing customers.

“Chelan PUD has a long history of managing local hydropower in the best interest of customer-owners,” said General Manager Kirk Hudson. “We’re continuing that legacy by preserving what’s most important to our customer-owners -- reliability and low rates.”

The Microsoft data center is considered a large load, which covers a range of power-intensive industries, including manufacturing and industrial plants. Supported by customer feedback, Chelan PUD established a framework last year to serve large-load customers with three options for power supply:

• Short-term supply: Chelan PUD procures wholesale energy from the market and resells to the large-load customer.
• Customer choice: Large-load customer identifies and procures wholesale energy, which Chelan PUD purchases and re-sells to them.
• Negotiated contract: At the Board’s discretion, Chelan PUD negotiates a contract which may include surplus hydropower, consistent with the PUD’s wholesale energy marketing strategy.

Chelan PUD also developed a large-load contract template that ensures costs and risks, such as power supply availability, are covered by large-load customers. Microsoft paid up front to build the $86.5 million Jumpoff Ridge substation and other infrastructure improvements that were needed to serve the data center.

“As a utility, we like to provide solutions, not just say ‘no,’” Hudson said. “This agreement protects the interest of our customer-owners and protects the assets of our public utility, while finding solutions to meet our region’s growing energy needs.” 

Using the framework, Chelan PUD negotiated a contract with Microsoft for a five-month term using Chelan PUD surplus hydropower at market-based pricing. That electricity – up to 18 megawatts – is scheduled to begin flowing to the data center in August. Commissioners will consider authorizing the proposed contract June 16. Microsoft estimates the first data center building will begin phased operations by mid-2026, with full operation estimated by the end of that year.

From 2026 to 2040, the power supply for Microsoft’s data center has not yet been determined. Chelan PUD is not obligated to serve electricity from its hydropower resources. Under Chelan PUD’s framework, Microsoft may choose to source power from the wholesale energy market, or negotiate a contract with Chelan PUD at the Board’s discretion.

"Microsoft will continue to be a responsible neighbor and one that gives back to Central Washington. Our agreement with the Chelan County PUD will ensure ratepayers are protected as we develop and operate our Malaga facilities,” said Irene Plenefisch, Senior Director of Government Affairs at Microsoft. “We are committed to working with the PUD with integrity, developing additional sources of energy and water for our facilities, and paying our own way.”

View of Jumpoff Ridge Substation 

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