20.1 Context: Exploring Whether Nearby Unused Capacity Can Be Accessed Legally and Technically
When a facility cannot obtain full utility service on its required timeline, executives often ask whether power can be purchased from a neighboring facility that already has capacity. The neighboring site may be an industrial plant, warehouse, campus, data center, refinery, hospital, university, airport, port, generator owner, or landlord-controlled property. At first glance, the idea appears simple: if a neighbor has unused electrical capacity, build a line, install meters, pay for the power, and operate until the utility upgrade is complete.
In practice, neighbor power, private wire, and direct supply are among the most legally and technically complex workstreams in power access acceleration. The issue is not only whether electricity exists nearby. The company must determine whether that power can be transferred safely, whether the neighbor has rights to resell or share it, whether the local utility has exclusive service rights, whether regulators would view the arrangement as an unauthorized retail sale of electricity, and whether the physical connection can be built without creating reliability or safety problems.
This option can be valuable in the right circumstances. A landlord may have a master-metered campus with spare capacity. An adjacent industrial host may have a private substation and unused transformer capacity. A generator owner may be able to supply a nearby load under a properly structured agreement. A multi-building development may be able to allocate power internally. In some cases, power may be available only during off-hours, weekends, or low-production periods, which may still support commissioning, charging, refrigeration, or selected operations.
The business appeal is speed. If the neighbor’s electrical infrastructure already exists, the arrangement might avoid waiting for a new utility feeder or substation upgrade. It may also reduce temporary generator fuel cost or support a smaller bridge-power system. However, the risks are significant. A poorly structured arrangement can violate utility tariffs, public utility laws, franchise rights, lease restrictions, interconnection rules, safety codes, tax rules, or insurance conditions. It can also damage the relationship with the utility whose permanent service is still needed.
This workstream should also account for the host’s incentives. The host may worry about higher demand charges, reduced reserve capacity, penalties, power quality impacts, interruption of its own operations, site access, cybersecurity connections, and liability if the receiving facility loses power. A neighbor with apparent spare capacity may still decline because the business risk is greater than the revenue opportunity.
A practical red flag is any proposal that assumes power can cross a property line without legal review. In many jurisdictions, that single fact changes the analysis. Internal campus allocation, landlord submetering, generator-to-load supply, and utility-system wheeling may all be treated differently. The structure must be confirmed before engineering money is spent.
The executive question is therefore not, “Can we buy power from the neighbor?” The better question is, “Is there a legally permissible, technically safe, commercially bankable, and operationally reliable way to use nearby capacity without compromising permanent utility service?”
20.2 Methodology: Identifying Neighboring Capacity, Assessing Private-Line Feasibility, Negotiating Terms, and Confirming Regulatory Legality
The methodology begins with a structured screen of nearby power sources. The team should not start by drafting a commercial agreement. It should first determine whether the concept is technically plausible and legally allowed.
Step 1: Identify potential host facilities. The team should map neighboring properties, campuses, industrial sites, substations, generators, landlords, public agencies, and large commercial users near the facility. The screen should consider physical distance, property boundaries, existing electrical equipment, ownership, likely spare capacity, operating hours, security, and willingness to discuss an arrangement.
Step 2: Confirm the host’s actual available capacity. A neighbor may believe it has spare power because its current demand is below its contracted capacity. That does not automatically mean capacity is available for resale or transfer. The team should review utility bills, interval demand data, service agreements, transformer ratings, switchgear capacity, backup obligations, production plans, future expansion, and any utility restrictions. The host must also preserve enough capacity for its own operations.
Step 3: Define the proposed supply profile. The customer should specify how much power is needed, when it is needed, for how long, and whether the load is firm, interruptible, seasonal, off-peak, or emergency-only. A 2 MW nighttime charging need is different from a 10 MW continuous manufacturing load. The supply profile drives technical design, legal analysis, and commercial pricing.
Step 4: Assess electrical feasibility. Electrical engineers should evaluate where the private connection would originate, where it would terminate, what voltage would be used, what conductors, transformers, switchgear, protection, grounding, metering, and transfer equipment would be required, and whether utility backfeed can be prevented. The design must protect both facilities and utility workers.
Step 5: Evaluate property rights and route feasibility. A private wire may cross property lines, roads, rail lines, easements, leased premises, utility corridors, or public rights-of-way. Real estate counsel should determine whether easements, landlord approvals, permits, encroachment agreements, or access rights are required. A short electrical route can become difficult if land rights are unclear.
Step 6: Confirm regulatory legality. Energy counsel should review state law, utility tariffs, franchise rights, retail choice rules, landlord-tenant rules, public utility definitions, and exemptions for self-supply, campus systems, private wires, or qualifying facilities. In some jurisdictions, selling electricity across a property line can make the seller a regulated utility or violate the incumbent utility’s exclusive service territory. This determination must be made before construction.
Step 7: Engage the utility deliberately. Some arrangements require utility approval, metering changes, standby service, interconnection review, or confirmation that no prohibited parallel path is created. The company should not surprise the utility. Because permanent service is still needed, communications should be careful, factual, and coordinated through counsel and the utility-facing project lead.
Step 8: Design metering and settlement. The parties need accurate measurement of energy, demand, losses, power factor, outages, curtailment, and possibly emissions attributes. Metering should be revenue-grade where payments depend on measured consumption. The settlement method should define price, billing period, taxes, demand charges, imbalance treatment, and responsibility for utility charges imposed on the host.
Step 9: Negotiate commercial terms. The agreement should address capacity reserved, energy price, demand charge pass-through, minimum payments, term, early termination, curtailment rights, outages, maintenance windows, capital cost recovery, insurance, indemnity, default, confidentiality, regulatory change, and demobilization. The host may require compensation for risk, administrative burden, reduced flexibility, and impact on its own utility account.
Step 10: Build the operating protocol. The parties should define who controls energization, who can curtail, who responds to alarms, who maintains equipment, how outages are communicated, what happens during emergencies, and how the arrangement ends when permanent service arrives. Operators at both sites need clear procedures.
Step 11: Compare against alternatives. Neighbor power should be compared with temporary generation, batteries, gas engines, phased operations, and waiting for utility service. The comparison should include schedule, legal risk, cost, reliability, emissions, relationship risk, demobilization, and long-term consequences.
Step 12: Plan implementation, testing, and exit. If the concept passes legal, technical, and commercial screens, the team should build an execution plan covering design approvals, utility notifications, permits, easements, procurement, construction, testing, safety procedures, energization, operating governance, and demobilization. The exit plan matters because the private arrangement may only be needed until permanent utility service is available. The agreement should define whether equipment is removed, retained, transferred, or repurposed.
The final deliverable is a direct-supply feasibility memo and decision package. It should state the host source, available capacity, supply profile, legal path, private-line route, technical design, metering approach, commercial terms, approvals needed, cost, schedule, risk rating, and fallback plan.
20.3 Skills Required: Energy Law, Utility Regulation, Electrical Engineering, Real Estate/Easements, Metering, Commercial Negotiation
Energy law is the first required skill because the legal question can determine whether the opportunity exists at all. Counsel must understand retail electric service rules, utility franchise rights, private-wire restrictions, resale limitations, public utility definitions, landlord-tenant structures, and state-specific exemptions. This analysis should be done early and documented clearly. A technically attractive private wire is not useful if it cannot be operated legally.
Utility regulation expertise is closely related but distinct. Regulatory advisors understand how commissions, utilities, consumer advocates, and intervenors may view the arrangement. They can assess whether filings, approvals, tariff interpretations, or utility consents are required. They also help protect the customer’s long-term relationship with the utility.
Electrical engineering is needed to determine whether the physical connection can be designed safely. The engineer reviews service voltage, spare capacity, fault current, protection coordination, grounding, cable routing, transfer equipment, metering, utility separation, and emergency shutdown. If the arrangement involves generators, batteries, or parallel operation, protection and control expertise becomes even more important.
Real estate and easement expertise is required when the line crosses property boundaries or shared infrastructure. Lawyers and surveyors may need to define easement routes, access rights, maintenance rights, restoration obligations, landlord approvals, and termination rights. The business team should not assume that a visible short route is legally available.
Metering expertise ensures the parties can measure and settle the transaction accurately. This includes revenue meters, submeters, interval data, power quality data, demand measurement, and data access. Metering design should align with the commercial agreement and regulatory requirements.
Finance and tax support are also useful. Payments may be structured as energy charges, capacity payments, rent, infrastructure recovery, service fees, or reimbursement of utility charges. Each structure can create different accounting, tax, and regulatory implications. Insurance advisors should confirm coverage for shared equipment, outages, property damage, environmental events, worker access, and third-party liability.
Commercial negotiation skills are essential because the host is not merely selling a commodity. It is taking operational, regulatory, financial, and relationship risk. A workable agreement should be fair to both parties, executable by operators, and flexible enough to handle curtailment, outage, utility delays, and eventual termination. The team should also include insurance, tax, finance, construction, safety, and operations representatives.
20.4 Terminology: Private Wire, Direct Supply, Submetering, Wheeling, Retail Sale of Electricity, Easement, and Host Facility
Private wire: An electrical line or connection used to supply power between facilities outside the normal utility delivery path. Private-wire legality depends heavily on jurisdiction, ownership, property boundaries, and tariff rules.
Direct supply: An arrangement in which one party supplies electricity directly to another party, often through a private connection or special commercial structure.
Submetering: Measuring electricity use downstream of a main utility meter. Submetering may be used for internal allocation, tenant billing, or settlement, subject to local rules.
Wheeling: The delivery of electricity across a utility transmission or distribution system from one party to another. Wheeling usually requires utility or market arrangements and is not the same as a private wire.
Retail sale of electricity: The sale of electricity to an end-use customer. In many jurisdictions, retail sales are restricted to utilities or licensed suppliers, with limited exceptions.
Easement: A legal right to use another party’s land for a specific purpose, such as installing, operating, and maintaining an electrical line.
Host facility: The neighboring facility, campus, landlord, generator owner, or industrial site that may provide power, capacity, route access, or electrical infrastructure.
Backfeed: Unintended flow of electricity into a utility line, neighboring system, or de-energized circuit. Backfeed creates serious safety risk and must be prevented by design.
Revenue-grade meter: A meter accurate enough to support billing or settlement between parties.
Service territory: The geographic area in which a utility has the right or obligation to provide electric service. Service territory rules can affect private supply options.
Franchise right: A legal right granted to a utility to serve customers in a defined area or use public rights-of-way. Franchise rights may restrict competing delivery arrangements.
Curtailment right: The host’s or utility’s right to reduce or interrupt supplied power under defined conditions.
