Colorado Lands $250 Million for a Major Eastern Plains Transmission Upgrade

A major transmission investment could substantially increase Colorado's ability to exchange electricity with the Eastern Interconnection while adding another important piece to the state's changing Eastern Plains power infrastructure.

The U.S. Department of Energy has selected the Colorado Energy Office and Xcel Energy for a $250 million federal investment supporting the Colorado-to-Texas Western-Eastern Intertie Modernization Initiative, known as CO2TX. Selection is subject to a finalized funding agreement.

The broader project is expected to cost approximately $1.2 billion.

The development was reported by CPR News and Colorado Newsline following the federal announcement.

For Colorado's emerging data center market, the project is important because it adds capacity and flexibility to a transmission system that is already undergoing one of its largest expansions in decades.

It does not create 2,000 MW of immediately available data center capacity. It does, however, change the infrastructure picture in southeastern Colorado.

From 210 MW to 700 MW

Colorado currently has a relatively limited electrical connection between the Western and Eastern Interconnections near Lamar.

CO2TX is designed to modernize that connection and move the Colorado side of the interface to the higher-capacity May Valley Substation.

The project's initial transfer capability is expected to increase from approximately 210 MW to 700 MW, with infrastructure capable of eventually supporting roughly 2,000 MW of transfer capacity.

That represents a major expansion of Colorado's ability to move electricity between regional grids.

The Colorado Energy Office will serve as the primary recipient of the federal funding. Xcel subsidiaries Public Service Company of Colorado and Southwestern Public Service Company will provide matching funding and participate in planning, design and implementation. Southwest Power Pool will provide regional coordination.

CO2TX connects directly to Colorado's Power Pathway

The location is particularly important.

May Valley is also part of Colorado's Power Pathway, Xcel Energy's new high-voltage transmission system across the Eastern Plains.

According to Xcel Energy's official Colorado Power Pathway project information, the project includes approximately 550 miles of new double-circuit transmission, four new substations and additions or expansions at four existing substations.

The planned system uses 345-kV transmission and spans 12 Colorado counties.

Segments 1, 2 and 3, including the Canal Crossing, Goose Creek and May Valley substations, are already constructed and in service. Segments 4 and 5 are scheduled to continue through 2027.

May Valley therefore sits at the intersection of two significant grid projects.

One expands high-voltage transmission across eastern Colorado.

The other strengthens Colorado's ability to exchange electricity with the Eastern Interconnection.

What this means for data center site selection

Large data centers require unusually large and reliable electrical supplies. That makes major transmission investments relevant to site selection long before a data center project is announced.

CO2TX should not be interpreted as evidence that hundreds of megawatts are available to a data center near May Valley.

Transmission capacity, generation availability and large-load service capacity are related but different things. LandmAIn uses the same distinction in our site-screening methodology. A transmission line or substation near a parcel establishes useful infrastructure context. It does not establish that the utility can serve the requested load.

A data center developer would still need to establish a viable utility service and interconnection pathway. Depending on the project, that can require new substations, transmission upgrades, generation resources, system studies and substantial financial commitments.

Those commercial requirements are becoming more important as Colorado utilities develop rules for very large customers. Our analysis of Xcel's proposed large-load tariff examines how contracted capacity, load ramp and infrastructure obligations can affect the economics of a site even after its physical location appears attractive.

Utility territory can also change the development path. United Power's emerging large-load process provides another example of why the serving utility belongs in the site record alongside transmission infrastructure.

The significance of CO2TX is therefore broader than any single parcel.

It strengthens the electrical network serving a part of Colorado that historically has not attracted the same level of large-scale data center development as the Denver metropolitan area.

That changes the long-term site-selection equation.

Explore Colorado transmission, fiber, parcels and development signals on the LandmAIn map.

Southeastern Colorado deserves another look

Colorado's Eastern Plains offer several characteristics that can attract large infrastructure projects.

Land is generally more abundant than in the Denver metropolitan area. Major renewable generation resources are located throughout eastern Colorado. New transmission infrastructure is being built across the region.

The traditional challenges have included distance from Denver, limited local infrastructure and fewer established data center clusters.

AI computing can change some of those assumptions.

Many large AI training workloads are less dependent on millisecond-level proximity to end users than traditional latency-sensitive computing. For those projects, power availability, development timelines and infrastructure economics can become relatively more important.

That does not automatically make southeastern Colorado a data center market.

It does make the region worth evaluating again as its electrical infrastructure changes.

Transmission projects can change land value before development arrives

Large infrastructure projects often change the development potential of surrounding land well before the first major customer appears.

A parcel that once sat far from meaningful transmission infrastructure may find itself near a new substation or high-voltage corridor.

That does not make the parcel development-ready.

It creates a new reason to investigate it.

For data center development, that investigation needs to combine several variables:

power infrastructure, utility territory, fiber connectivity, land assemblage, water strategy, environmental constraints, transportation access and local permitting.

The important point is timing.

By the time a major data center is publicly announced, the developer may already have spent months or years evaluating land and infrastructure.

Tracking transmission development earlier can identify areas undergoing structural change before that development becomes obvious in commercial real estate activity.

A new infrastructure node to watch

May Valley was already important because of Colorado's Power Pathway.

CO2TX increases its strategic relevance.

The next step is not to assume that the surrounding area has available data center capacity. It is to track what develops around the strengthened transmission network.

That includes new generation, substations, utility planning, industrial land activity, fiber expansion and large-load requests.

Colorado's AI infrastructure geography is still being formed. The state's transmission buildout will help determine where very large electrical loads can eventually locate.

The CO2TX investment adds another significant piece to that map.