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The High Cost of Cheap Corporate Utilities
Discounted energy is a backdoor subsidy.
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Last summer, despite the best efforts of a bunch of labor and good government folks, Amazon received more than $120 million in tax breaks for a warehouse in Niagara County, New York. At the time, it was unclear if Amazon was also going to benefit from a separate handout for discounted power from the New York Power Authority.
Well, we now know the answer to that was a resounding yes, making it the latest deal in which a large corporation received discounted utilities in the name of economic development. It’s an all-too-regular practice that probably occurs even more than we know.
Under the deal announced last week by New York Gov. Kathy Hochul — who just can’t quit corporate giveaways — the New York Power Authority will give discounted power to the Amazon warehouse. At the same time, Hochul revealed a separate deal awarding discounted power to Micron, which will also be a main beneficiary of $10 billion in subsidies the state approved for semiconductor manufacturers last year.
It’s unknown how much the corporations will save on these deals, but it wouldn’t be pitched as “economic development” if the cost they’ll pay wasn’t something less than what is on the books. “At a time when utility rates have skyrocketed and almost 30 percent of New Yorkers were unable to pay at least part of their energy bill in the past 12 months, it is laughable that [Hochul] would direct utility discounts to Amazon in the name of ‘economic development’ instead of directing them to struggling New Yorkers,” said the Public Power New York Coalition. “New York Governor Franklin Delano Roosevelt did not create the New York Power Authority to provide discounts to the world’s richest men.”
These are, of course, not the only instances of a large corporation receiving discounted utilities in the name of economic development and job creation, though the Amazon handout is one of the more egregious considering that it is for an already heavily-subsidized warehouse where the jobs will not be great ones. (In fact, all of this public money is being siphoned toward a facility that will probably harm the local economy far more than it helps.)
Other big tech firms, including Facebook and Google, have received discounts for water and power to their data centers, for example. In one case we know about, Google received a 10 percent discount on its energy at one data center in Minnesota.
Providing below-normal-cost energy to corporations in the name of economic development and job creation is a backdoor subsidy to the corporate world, plain and simple, one of the many ways public officials funnel money to corporate that isn’t strictly out of the tax coffers. And it adds insult to injury when these discounts are piled on top of those tax handouts, giving corporate actors access to two separate streams of public dollars for the same project.
The issues here are two-fold: One, utilities likely have to make up the funds they lose in big corporate deals by hiking rates on other customers. Trying to get exact numbers can be tricky, but utilities generally aren’t in the business of handing out discounts and then not trying to recoup the money elsewhere. So in these deals, it’s a safe bet some percentage of the cost will work its way back into residential ratepayers’ bills.
And that leads into the second problem: The terms of those arrangements with specific firms often aren’t made public, so the extent of the subsidies are opaque to the community, as are the costs of subsequent rate hikes.
“We don’t know the amount of savings they are getting,” Gabriel Chan, a professor at the University of Minnesota, told Bloomberg, regarding Big Tech utility reductions. “The state can go too far and give Google too much, but no one knows what the numbers are actually.” (You may remember that Google claimed just the amount of water that it uses in its data center is a trade secret that can’t be divulged to the public.)
So we can’t even get a comprehensive accounting of how much this stuff costs the public, even as new handouts crop up all the time. Just last week, business interests were pushing a bill in Missouri to give discounted natural gas to large corporate projects, including business campuses and prisons. A quick Google search reveals utilities all across the country hawking their discounted rates for business developments.
Again, this money generally has to be made up somewhere by the utility, which usually means you and other residential ratepayers. And these issues are also tied up in broader questions about the role utilities play in the political process: They are explicitly government-granted monopolies, yet are allowed to influence the political process through direct candidate donations, massive dark money operations, lobbying, and astroturfing in ways that make them look very much like all the other for-profit corporations trying to purchase favors from the politicians onto whom they shower campaign contributions.
There are some steps to take to address these concerns. First, make any utility discounts for “economic development” transparent and debatable before public bodies, if they have to be allowed at all. Second, ban giveaways — tax, utility, and otherwise — from particularly destructive types of development, such as warehouses and data centers, which have a proven track record of failing to generate benefits for local communities.
Third, coming at it from the other side, get utility money out of the political process. Connecticut is currently debating a bill that would ban utilities from using ratepayer money across a host of political activities, including lobbying and legal efforts to raise rates. It could be a model for the country if it comes to pass.
And, for sure, stop subsidizing Amazon generally and its warehouses in particular.
ONE MORE THING: Oklahoma Gov. Kevin Stitt is one of the most enthusiastic boosters of secret subsidy deals in the nation. And he and the state legislature there were at it again, voting to hand hundreds of millions of dollars to a mystery corporation that was likely Volkswagen. (Volkswagen’s new facility went to Ontario, Canada, instead.)
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— Pat Garofalo