A new paper by Legal Fellow Eliza Martin and Electricity Law Initiative Director Ari Peskoe explores how the public is paying the energy bills of some of the largest companies in the world. Amazon, Google, Meta, Microsoft, and other technology companies are looking to secure electricity for their new power-hungry data centers. To provide energy to these new facilities, electric utilities are expanding their systems with new power plants and transmission lines. Because utilities profit by building infrastructure, serving data centers is a lucrative opportunity that is incentivizing utilities to offer attractive rates to Big Tech companies.
The paper uncovers how utilities are forcing ratepayers to fund discounted rates for data centers. Martin and Peskoe explain that government-regulated utility rates socialize a utility’s costs of providing electricity service to the public. When a utility expands its system in anticipation of growing consumer demand, ratepayers share the costs of that expansion based on the premise that society benefits from growing electricity use. But data centers are upending this long-standing model. The very same utility rate structures that have spread the costs of reliable power delivery for everyone are now forcing the public to pay for infrastructure designed to supply a handful of wealthy corporations.
The authors reviewed nearly 50 regulatory proceedings about utility rates for data centers. After describing how rate-setting processes can shift utility costs among ratepayers, the paper explains how rate structures, as well as secret contracts between utilities and data centers, could be transferring Big Tech’s energy costs to the public. It also provides recommendations to limit hidden subsidies in utility rates. Finally, the authors question whether utility regulators should be making policy decisions about whether to subsidize data centers and speculates on the long-term implications of utility systems dominated by trillion-dollar software and social media companies.