SMECO Says It Will Protect Customers, But Energy Market Has Many Unknowns

PRINCE FREDERICK, Md. — In response to growing community concern about data centers, the Southern Maryland Electric Cooperative (SMECO) gave a presentation to help the public better understand how energy works in Maryland.

SMECO officials Hugh Voehl, manager of transmission and substation engineering, and Tom Dennison, vice president of government and public affairs, presented to the Board of County Commissioners at the April 28 meeting and began with an overview of how SMECO buys, distributes and bills for electricity.

SMECO uses a managed portfolio to purchase power for members. Investor-owned utilities procure power through twice-yearly auctions, which SMECO then buys. There is no markup on prices — SMECO’s purchasing rates are the same as what they charge customers.

But Dennison said wholesale capacity prices for power have exploded over the past several years as demand grows faster than supply, a fact that is particularly true in Maryland, which imports 40% of electricity and has shut down baseload fossil fuel generation sources. For example, PJM Interconnection (PJM), which manages the power grid, cleared at a record-high price of $269.92 per megawatt-day at the 2024 capacity auction, up from $49.49 per megawatt-day.

On data centers, Dennison said data centers are not solely responsible for the higher prices in the market. Factors such as weather, energy efficiency, labor, material and service costs, lack of new baseload generation and population growth all contribute — and SMECO is required to provide electric service to anyone within their service area.

SMECO’s position, and Maryland law, is that any data center seeking to build in Southern Maryland must directly pay the full cost for all electric transmission and distribution system buildout and ongoing operations and maintenance expenses required to interconnect the data center and provide electric service. Additionally, SMECO also believes that data centers should be directly responsible for offsetting any adverse impacts on members.

Dennison also said that any data center established in the area will pay a distribution charge to help offset costs.

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