How to Stop Big Tech From Jacking Up Utility Costs
PLUS: Oregon sets a new 'corporate practice of medicine' standard.
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It’s becoming clear that the rapid expansion of data centers — those facilities where the guts of the internet reside — is going to vastly increase the U.S.’s electricity needs, and that much of the increased cost of that electricity is going to fall not on the large tech firms who require all that power, but on everyday, residential ratepayers, who are just literally trying to keep the lights on. For example, a report from Harvard’s Electricity Law Initiative says that “unless something changes, all U.S. consumers will pay billions of dollars to build new power plants to serve Big Tech.”
As with so many things, foisting the cost of new data centers — which are increasingly powering the artificial intelligence wish-casting of tech firms such as Meta and Google — onto residential ratepayers is a policy choice that can be made or unmade. And some states are pursuing the latter, attempting to insulate residential utility customers from the costs of Big Tech’s quite literal power grab.
For example, the Oregon legislature approved a bill, that Gov. Tina Kotek is expected to sign, that would direct the state’s utility regulator to create a new special rate for data centers, in order to protect residential and other commercial customers from the costs of the new infrastructure required to support them.
In Georgia, the utilities regulator approved a rule allowing the largest electrical utility there, Georgia Power, to ensure that data center owners “would pay for costs incurred by upstream generation, transmission and distribution to these large-load power users as construction of the data centers progresses.” A state-owned utility in South Carolina has also enacted a rule applying higher rates to data center owners.
All told, about a dozen pieces of legislation at the state level across the country this year sought to protect utility customers from paying more due to data center construction and operation.
Not that this has been a one-way street, of course. In Maryland, Gov. Wes Moore vetoed a bill that would have simply had the state study the impact increasing data center construction would have on its economy.
And many utilities and their regulators have negotiated special discounted rates for data center owners so that other ratepayers are actually subsidizing their outsized power needs. (I’m also leaving aside the fact that dozens of states provide corporate subsidies for the construction and maintenance of data centers, under the misguided notion that doing so is good for local economies, and which surely inspires other public officials to further grease the skids with discounted utility rates.)
That negativity out of the way, it’s encouraging to see some state legislators and regulators coming around to charging data centers owners for the effect they have on power supply and infrastructure.
However, there would likely be much less urgency for these steps had utility regulators not spent years approving rate hikes exceedingly out of proportion to the actual needs of monopoly utilities, causing a large spike in utility costs to coincide with a general rise in inflation and cost of living.
Remember, due to their unique role as regulated, usually privately-owned monopolies overseen by specifically appointed or elected state officials, utilities are supposed to charge only what is necessary to maintain their operations and make a reasonable return for investors. That’s not what has happened in recent decades: Due to a host of factors, including regulator corruption, campaign finance shenanigans, and a rigged process that favors their interests, monopoly utilities have been allowed to overcharge customers by about $5 billion per year for the last 30 years.
In just the last three years, price hikes at investor-owned electric utilities outpaced inflation by 49 percent; publicly-owned utilities, meanwhile, raised prices at 44 percent less than inflation. A 2019 study of U.S. utilities found that for years regulators have been increasing the amount of return they allow utilities to make when compared to other safe, stable investments, “highlighting a disconnect between what regulators claim to be doing and what they are actually doing.”
So even in those states that are affirmatively moving to make Big Tech shoulder the cost of its increased power needs, there’s little reason to think broader relief for other ratepayers is coming. Which is frustrating, because, as I’ve noted before, good regulators can almost single-handedly reduce costs for customers by simply hewing to a more reality-based formula to determine rates, as Connecticut’s did recently.
Still, all else being equal (which it never is), it’s good to see some states attempting to grapple with the impending data center-driven explosion in power needs. More need to get into the game to ensure that we’re not all unwittingly subsidizing the latest useless AI gizmo.
UPDATE: And now for more good Oregon news. Last year, I wrote about how the legislature there came agonizingly close to approving a bill that would create the nation’s strongest limits on corporate control of health care facilities by bolstering what’s known as the state’s “corporate practice of medicine,” or CPOM, law. Most states have some kind of CPOM law, but they’re chronically under-enforced and riddled with loopholes.
This year, things went better: The Oregon legislature passed the bill and Gov. Tina Kotek signed it into law this week. “We’re at an inflection point in this country when it comes to the corporatization of healthcare,” wrote House Majority Leader Ben Bowman, a Democrat and the bill’s sponsor. “With the passage of this bill, every Oregonian will know that decisions in exam rooms are being made by doctors, not corporate executives.”
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Arkansas Gov. Sarah Huckabee Sanders wrote an op-ed defending her state’s groundbreaking law to break up pharmacy benefit managers.
Oregon became the second state, after Maryland, to ban the sale of precise individual location data.
Minnesota Democrats successfully blocked an effort to roll back the state’s 2023 ban on worker non-compete agreements.
Iowa Gov. Kim Reynolds signed into law a $110 million cap on the state’s economic development subsidies, a drop from the previous total of $170 million.
New York State legislators Brad Hoylman-Sigal and Linda Rosenthal wrote an op-ed explaining why their state should become the first to ban algorithmic price-fixing in rental housing.
The New York Senate adopted a ban on non-compete agreements and a ban on corporate subsidies for Amazon warehouses, both sponsored by State Sen. Sean Ryan.
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— Pat Garofalo
That’s not good for Maryland. They’re in a tough position in PJM with potential for big time cost increases even without data center growth.