Black Hills Corp. said Tuesday that it has signed definitive agreements to supply power to a planned Google data center in Cheyenne, Wyoming, committing about $1.8 billion to new natural gas generation. The South Dakota-based utility said in a release distributed by GlobeNewswire that the contracts took effect Sept. 30 and run through 2048.

What Happened

Under the agreements, Black Hills will provide up to 590 megawatts of grid-connected service to the site. It will also manage the output of about 2.1 gigawatts of Wyoming-based, third-party contracted resources through a privately managed microgrid under its Large Power Contract Service tariff. Including reserve margins, the total resource mix comes to roughly 2.7 gigawatts.

To cover most of the grid-connected portion, Black Hills will build and own 564 megawatts of nameplate gas generation through a non-regulated affiliate at the existing Cheyenne Prairie Generating Station. The remaining 26 megawatts will come from market energy purchases and retail service under the utility's industrial tariff.

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Construction of the new units is planned for 2027 through 2029. Service is set to begin in late 2027, and the data center is expected to reach peak load in 2030. Google has already provided $399 million in refundable advances to buy long-lead-time equipment, which Black Hills is to repay by June 30, 2027.

Why It Matters

For Black Hills, the deal is large relative to its size. The company expects the arrangement to contribute about $150 million of net income in 2030 and roughly $2.4 billion of unlevered free cash flow through 2048, after the $1.8 billion of capital spending.

The structure also speaks to a growing political problem for utilities: who pays for the generation that AI data centers require. Black Hills said the agreements and supporting regulatory mechanisms are built so that Google bears all costs of serving the data center over the life of the project, with no cost shifting to other customers. The release lists four safeguards: cost pass-through provisions that also cover inflation and interest rate swings, full recovery of generation capital over the contract term to avoid stranded assets, protection if the project ends early, and collateral and financial assurance requirements.

CEO Linn Evans said the contracts show how new energy arrangements can support economic growth while protecting existing customers.

Placing the gas units in a non-regulated affiliate, and routing most of the site's supply through a private microgrid of third-party resources, keeps much of the project outside the utility's regulated rate base. That model lets a hyperscaler bring very large amounts of contracted power to a single campus without that capacity being paid for by the wider customer base.

Approvals Still in Play

Not every permit is in hand. According to the release, a certificate for the Robinson substation was approved in May and an air quality permit for the Cheyenne Prairie expansion in August. An industrial siting permit for the expansion was filed in July, a large-customer transmission cost mechanism in June and a South Cheyenne transmission expansion certificate in September. A further Wyoming transmission expansion filing is planned for the fourth quarter.

What to Watch

Google has not detailed the size of the Cheyenne facility or its construction schedule beyond the power ramp to 2030. The pending Wyoming filings will show how regulators treat the cost-protection mechanisms, and construction of the gas units is due to start in 2027, with the refund of Google's advance due by mid-2027.