Analysis: Consumer utility bills may climb as data centers get special deals

Getty Images Plus image via The Conversation, CC

At a time when U.S. consumers are getting squeezed from all sides, the idea that average Americans may pay higher electric bills so mega-companies such as Google and Meta can get special discounts for their energy-guzzling data centers may sound unfair, but it could be true, write Ari Peskoe and Eliza Martin in their story for The Conversation.

"In our paper Extracting Profits from the Public, we explain how utilities are forcing regular ratepayers to pay for the discounts enjoyed by some of the nation’s largest companies," they write. “And [we] identify ways policymakers can limit the costs to the public."

While most utilities are sanctioned monopolies, their foundation lies in shared costs. "Splitting the utility’s costs among all consumers made perfect sense when population growth and economic development across the economy stimulated the need for new infrastructure," Peskoe and Martin write. "But today, in many utility service territories, most of the projected growth in electricity demand is due to new data centers.

When data centers are the impetus for a utility having to build more supporting infrastructure, the normal way power utilities pay for their expansion no longer works. They explain, "If state regulators allow utilities to follow the standard approach of splitting the costs of new infrastructure among all consumers, the public will end up paying to supply data centers with all that power."

A Meta data center in Louisiana provides a good example. "By our calculations, [the center will use] twice as much energy as the city of New Orleans," Peskoe and Martin add. "Entergy, the regional monopoly utility, is proposing to build more than $3 billion worth of new gas-fired power plants to meet the data center’s energy demand. … Entergy is proposing to include the costs in rates paid by all customers."

Instead of billing Meta $3 billion for its infrastructure needs, Entergy is working on a separate contract with Meta, with rates the general public won't see. Peskoe and Martin write, "Entergy has asked state regulators to keep key terms of the contract secret, and only a redacted version of its application is available online."

The fact that there are many secret deals isn't much of a secret; however, what's in the deals remains protected. "Our research, reviewing nearly 50 public utility commission proceedings about data centers’ power needs across 10 states, uncovered dozens of secretive contracts between utilities and data centers," Peskoe and Martin explain. "Unlike Louisiana, most states require utilities to submit to the public utility commission their one-off deals with data centers, but they allow utilities to conceal the pricing terms from the public."

Is anything being done to address the issue? "Many state legislatures are noticing these problems and working to figure out how to address them," they add. "Several recent bills would set new terms and conditions for future data center deals that could help protect the public from data center energy costs."