In short
A take-or-pay contract obligates a buyer to pay for a set amount of capacity each year, whether the buyer uses it or not. In AI data center projects, these contracts appear at three layers including utility power supply, GPU compute hosting, and gas turbine slot reservations. They are generally enforceable because the payment is treated as a reservation fee, not a penalty. Major deals like the CoreWeave and Core Scientific $8.7 billion hosting agreement and Duke Energy’s large load tariffs for AI data centers over 100 megawatts rely on this structure. The Federal Energy Regulatory Commission is now actively shaping the rules, with an order on its large load interconnection docket due in June 2026. Law firm analysis, FERC, DOE ANOPR, FERC docket
What is a take-or-pay contract?
A take-or-pay contract is a deal where the buyer promises to pay for a minimum amount of a product or service, even if it takes less. The payment is for keeping the supply available. For example, a utility agrees to build a new transmission line for a 100 megawatt AI data center. The developer signs a 15 year contract saying it will pay for at least 80 megawatts each year, no matter how much it actually uses. If the developer only uses 60 megawatts one year, it still pays for 80. This gives the utility the certainty to invest in new infrastructure.
Under U.S. law, take-or-pay clauses are generally enforceable. Courts do not view them as illegal penalties because the payment is not triggered by a breach of contract. Instead, the buyer has a choice, either take and pay for the minimum amount, or pay for the capacity without taking it. The payment is seen as consideration for the seller standing ready to perform. Law firm analysis
The enforceability analysis does not depend on whether the contract gives the buyer a right to make up unused capacity later. Many utility and compute contracts include such makeup rights, but they are not required.
Where do these contracts appear in AI data center projects?
There are three main places where take-or-pay structures are used in AI infrastructure today.
Utility power agreements
Electric utilities require large AI data centers to commit to paying for a minimum share of their contracted power demand for many years. This requires the data center to pay for a minimum amount of electricity regardless of usage, while separate provisions may require it to co-invest in the generation, transmission, and distribution infrastructure needed to serve its load. Power Magazine
GPU compute hosting
Companies that own large GPU clusters, like CoreWeave, sell compute capacity under multi year take-or-pay contracts. The customer pays a fixed monthly fee for a block of computing power, whether it runs AI workloads or not. CoreWeave S-1
Gas turbine slot reservations
To build AI data centers powered by on site natural gas, developers sign slot reservation agreements with turbine makers like GE Vernova. They put down a nonrefundable deposit, typically about 20 percent of the turbine price, to hold a place in the production line years before delivery. GE Vernova transcript, GE Vernova transcript
How do utility take-or-pay tariffs work?
Utility companies across the U.S. have created special rate classes for large AI data centers. These tariffs typically include a demand ratchet, which is a floor on the amount of capacity the customer must pay for, set as a percentage of the contracted peak demand. If the customer uses less, it still pays for the floor amount.
Duke Energy, which serves the Carolinas, Florida, and parts of the Midwest, plans to apply take-or-pay provisions to AI data center customers with peak demand over 100 megawatts. The minimum payment is 75 to 85 percent of the contracted capacity, embedded in a 15 to 20 year Large Load Customer Agreement. Customers must give 2 to 5 years notice to terminate. Duke estimates it has about 2 gigawatts of prospective AI data center load subject to these terms. Data Center Dynamics, Florida PSC Docket 20250113
Duke Energy Florida filed its own Large Load Customer Policy in September 2025. It applies to customers with a firm load of 100 megawatts or more. The tariff, called LLC-1, is for service at 230 kilovolts or higher. The take-or-pay minimum runs at 75 to 85 percent of contracted capacity, with upfront contributions for construction of up to 100 percent of the estimated extension cost. Florida PSC
Dominion Energy Virginia requires data centers and other large scale customers of 25 megawatts or more to pay a minimum of 60 percent of the contracted generation demand and a minimum of 85 percent of contracted distribution and transmission demand. Virginia SCC
Florida Power and Light has an approved tariff for customers at 50 megawatts and above with a load factor of at least 85 percent. It includes take-or-pay, minimum term requirements, exit fees, and collateral. EEI Large Load Tariffs summary
A March 2026 survey of 25 utilities in 19 states found that 18 of them filed or approved AI data center specific tariffs in 2024 or 2025 alone. The demand ratchet is the centerpiece cost protection mechanism, with values largely around 80 percent. Cleanview
The table below summarizes several major utility take-or-pay terms.
| Utility | Capacity Threshold | Take-or-Pay Minimum | Contract Term |
|---|---|---|---|
| Duke Energy (multi-state) | Over 100 MW peak | 75 to 85 percent of contracted capacity | 15 to 20 years |
| Duke Energy Florida | 100 MW or more firm load | 75 to 85 percent of contracted capacity | 15 to 20 years |
| Dominion Energy Virginia | Over 25 MW | 60 percent generation, 85 percent distribution and transmission | Not specified |
| Florida Power and Light | 50 MW or more | Included (specific percentage not public) | Minimum term required |
How do GPU compute take-or-pay contracts work?
A different take-or-pay model has emerged in the layer of cloud computing. Neocloud companies, which rent out large clusters of Nvidia GPUs, sell capacity through multi-year contracts that act very much like utility tariffs. The customer pays a fixed monthly sum for a guaranteed block of compute power. If the customer does not run any workloads, it still pays.
CoreWeave is the most prominent example. In 2024, 96 percent of its revenue came from take-or-pay contracts. Its weighted average contract length was about 4 years. The contracts are structured so that the customer has no right to cancel early. Pricing is generally fixed for the contract duration. CoreWeave also grants security interests in its AI data center assets to its lenders, perfected under the Uniform Commercial Code. CoreWeave S-1
A real example is the CoreWeave deal with Core Scientific, a bitcoin mining operator that pivoted to AI hosting. In October 2024, the two companies signed 12 year take-or-pay contracts for about 500 megawatts of critical IT load across six sites in Texas, Georgia, Kentucky, North Carolina, and North Dakota. CoreWeave committed to pay a fixed annual amount for the contracted capacity, whether it used the GPUs or not. The projected cumulative revenue over the contract life was $8.7 billion, later expanded to more than $10 billion when an additional 70 megawatts were added. In the initial deal CoreWeave funded site capital upgrades and received credits for Core Scientific’s share capped at $1.5 million per megawatt. In the February 2025 expansion Core Scientific directly funded $1.5 million per megawatt for the powered core and shell. Core Scientific 8-K (Oct. 2024), Core Scientific 8-K (Feb. 2025), Core Scientific Q1 FY2026 earnings deck, Core Scientific 8-K (May 2025)
CoreWeave operates on a principle of not building unless it has a contract. Every GPU cluster is pre sold under a take-or-pay deal before the company spends money on infrastructure. As of March 31, 2026, its revenue backlog, the total future revenue under signed contracts, stood at $99.4 billion. Its largest customers include Microsoft, Meta, OpenAI, and Jane Street. Sacra, Fitch
The contracts are used as collateral for large asset backed loans. Lenders can rely on the predictable cash flows from the take-or-pay obligations, even though the underlying GPU hardware depreciates quickly.
What are gas turbine slot reservation agreements?
Many AI data center projects plan to use on-site natural gas generation because the grid cannot deliver power fast enough. To secure the needed turbines, developers are signing slot reservation agreements with manufacturers like GE Vernova and Siemens Energy.
A slot reservation agreement works like a capacity reservation. The developer pays a nonrefundable deposit to hold a place in the manufacturer’s production schedule. The deposit is typically about 20 percent of the turbine contract price. The agreement is not a full purchase order. It is a right to later convert to a firm order once the developer has its permits, financing, and engineering contract in place. The reservation does not guarantee a specific delivery date, but it does put the developer ahead of those who come later. Electron Economics, Utility Dive
The turbine market is heavily constrained. GE Vernova ended 2025 with approximately 80 gigawatts of combined gas turbine equipment backlog and slot reservation agreements, up from 55 to 62 gigawatts midyear, with lead times stretching into 2029. The company expects to be sold out through 2030 by the end of 2026. About one third of its reservation book is tied to AI data centers. Utility Dive, Electron Economics
A real example is the Chevron, Engine No. 1, and GE Vernova partnership announced in January 2025. The group plans to build up to 4 gigawatts of co located natural gas power for AI data centers across the Southeast, Midwest, and West. The power will be generated behind the meter and not flow through the existing transmission grid initially. The project secured seven GE Vernova 7HA turbines under a slot reservation agreement, with initial service targeted by the end of 2027. Chevron
Another example is Crusoe Energy, which ordered 29 GE Vernova LM2500XPRESS aeroderivative gas turbines for the Stargate project in Texas. Crusoe also secured a $750 million credit line from Brookfield for AI data centers, Nvidia chips and power generation infrastructure. Crusoe turbine order, Crusoe, CNBC
What role does FERC play in these contracts?
The Federal Energy Regulatory Commission (FERC) has a growing role because the new large loads connect to the interstate transmission system. In October 2025, the Secretary of Energy directed FERC to start a rulemaking for interconnection of loads larger than 20 megawatts. This would be the first time FERC exercises jurisdiction over the interconnection of retail loads, which includes AI data centers. FERC will take action on the large load interconnection docket by June 2026. FERC
FERC has already acted on co-location disputes. In November 2024, FERC rejected an amended interconnection agreement that would have allowed Talen Energy to increase the amount of co-located load it sold from its Susquehanna nuclear plant to an Amazon data center from 300 megawatts to 480 megawatts. Talen appealed that order to the U.S. Court of Appeals for the Fifth Circuit. Meanwhile, in June 2025, Talen and Amazon restructured the deal as a traditional front of the meter power purchase agreement with PPL Electric as the transmission provider. The new contract covers 1,920 megawatts for 17 years, valued at about $18 billion. Utility Dive, Reuters, Talen 8-K, Talen press release
In December 2025, FERC ordered PJM Interconnection to create new transmission service rules for large loads, including both firm and non firm services, and to revise its rules for behind the meter generation. A House committee urged FERC to consider requiring large loads to sign take-or-pay commitments with transmission providers, with the largest customers being subject to the most stringent requirements. FERC order, House E&C letter, Law firm analysis
These regulatory moves could directly affect the terms of utility take-or-pay contracts and the cost of connecting large AI data centers to the grid.
What are the main risks and enforceability issues?
Although take-or-pay contracts are generally enforceable, the AI infrastructure market presents several unique risks.
Customer concentration. The economics of AI compute deals often depend on a small number of hyperscaler customers. For CoreWeave, Microsoft accounted for 62 percent of 2024 revenue. The loss of a single anchor customer could undermine the entire financial structure. CoreWeave S-1, Sacra
Mismatch between contract length and asset life. CoreWeave depreciates its GPUs over a 6 year useful life. Under its take-or-pay contracts, the customer commits to pay for a minimum specified amount of services regardless of whether it fully utilizes them. The weighted average life of CoreWeave’s contracts is about 4 years, which is shorter than its six year GPU depreciation schedule, but other deals are longer. S-1 filing, Earnings call
Circular financing. Hyperscalers invest in neoclouds who buy GPUs and rent capacity back to them. This can create a web of mutual dependency. A downturn could cause cascading defaults. A research paper called the risk roundabouting. Center for Public Enterprise
Regulatory change. FERC’s pending rules could raise interconnection costs or impose new take-or-pay requirements at the transmission level. State utility commissions may modify or disallow cost recovery for certain tariffs. The Talen and AWS dispute shows how regulatory action can force a restructuring of a deal.
Litigation risk. There has not yet been a reported court decision on a GPU compute take-or-pay dispute, and law firms tracking the sector treat such disputes as an emerging rather than a tested risk. As the market scales, contract disputes are likely, particularly around performance defaults, force majeure, and the reasonableness of prices after technology shifts.
Key takeaways
- Understand the three layers of take-or-pay in AI data center projects, including utility power, GPU compute, and turbine slots. Each has different terms and regulatory frameworks.
- In utility agreements, know your state’s specific tariff. Thresholds, percentages, and termination notice periods vary widely.
- GPU compute take-or-pay contracts often lack early termination rights. Negotiate technology refresh clauses to avoid paying for obsolete equipment.
- Slot reservation agreements are a new form of capacity reservation with nonrefundable deposits. They do not guarantee delivery dates. Negotiate clear conversion conditions.
- FERC’s June 2026 rulemaking could impose new interconnection requirements and potentially mandate take-or-pay at the transmission level. Monitor developments.
- Customer concentration is the top credit risk. Diversify the customer base or obtain credit support from a parent company.
- Contract length should align with asset depreciation. A 12-year contract on a 6-year GPU useful life needs a roadmap for upgrades or replacements.
- Because no compute take-or-pay dispute has been litigated, contract language should be precise on performance metrics, force majeure, and default remedies.
Frequently asked questions
Q:What is a take-or-pay contract?
A:A take-or-pay contract requires the buyer to pay for a minimum amount of capacity each year, whether it uses that capacity or not. This is common in energy, compute, and equipment supply.
Q:Are take-or-pay contracts legally enforceable?
A:Yes. U.S. courts generally enforce them because the payment is treated as a reservation fee, not a punitive penalty. Law firm analysis
Q:What happens if I use less power than the take-or-pay minimum?
A:You still pay for the minimum. The utility or compute provider is not obligated to refund or credit the difference unless the contract provides a makeup right.
Q:How are take-or-pay contracts different from a power purchase agreement?
A:A power purchase agreement typically requires payment only for the power delivered. A take-or-pay contract requires payment for a set amount even if you take none. Many AI data center tariffs combine both.
Q:Which utilities have AI data center take-or-pay tariffs?
A:As of early 2026, 25 utilities across 19 states have them. Examples include AEP Ohio, Dominion Energy, and Florida Power and Light. Cleanview
Q:What is a slot reservation agreement for gas turbines?
A:It is a contract to hold a future manufacturing slot by paying a nonrefundable deposit, usually about 20 percent of the turbine price. It does not force the developer to buy, but reserves a place in line. Electron Economics
Q:Can FERC require AI data centers to sign take-or-pay contracts?
A:The House Energy and Commerce Committee has urged FERC to do so. The Committee urged FERC to consider such requirements in its ongoing rulemaking on interconnection of large loads. House E&C letter
Q:What are the biggest risks for a developer using a take-or-pay contract?
A:Key risks include relying on a concentrated customer base and committing to long terms that nearly match the useful life of GPU hardware. Center for Public Enterprise
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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.