Chelan PUD discusses powering Microsoft data center with customer rates and reliability in mind

MALAGA — Chelan PUD commissioners are considering a contract to supply power to Microsoft's new data center in Malaga, aiming to balance their large energy requirements with reliability and stable rates for existing customers.

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

The Microsoft data center is a large load customer, similar to manufacturing and industrial plants. To serve such customers, Chelan PUD established a framework with three power supply options: short-term market supply, customer-procured wholesale energy, and negotiated contracts involving surplus hydropower.

A standard contract template ensures large-load customers cover associated costs and risks. Notably, Microsoft itself has already funded the $86.5 million Jumpoff Ridge substation and other necessary infrastructure improvements.

“As a utility, we like to provide solutions, not just say ‘no,’” said Hudson. “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.”

The negotiated contract with Microsoft is for a five-month term, supplying up to 18 megawatts of surplus hydropower at market-based prices, starting in August. Commissioners will consider authorization on June 16. Microsoft expects phased operations by mid-2026 and full operation by the end of 2026.

The power supply for Microsoft's data center from 2026 to 2040 remains undetermined. Chelan PUD is not obligated to supply hydropower resources and Microsoft may source power from the wholesale market or negotiate a contract with Chelan PUD.

In a statement of their own, Microsoft’s Senior Director of Government Affairs Irene Plenefisch said “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. 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.”

Andrew Simpson: 509-433-7626 or andrew@ward.media