Georgia, Data Centers, Energy Rates, and You.
Good morning everyone. We wanted to share an illuminating report from investigative journalist Ronan Farrow. The long and the short? The taxpayer is doubly on the hook for data centers and the bogus tax breaks that they receive. The video link below is well worth your watch (written description is provided within this update, along with a great explanation on energy rates):
Georgia audited its own data center tax breaks and found that the state gave up $474 million in sales taxes in one year—and got back just $41 million from the industry.
Georgia audited its own data center tax breaks and found that the state gave up $474 million in sales taxes in one year—and got back just $41 million from the industry. At least 38 states have deals like this. (It's not clear whether all that money the state waived was necessary to attract the construction: in Georgia's case, by the state's own estimate, 70% of the data center construction would have happened anyway.) And it's not just states paying: Bloomberg analyzed seven regional power grids across the country last year and found that wholesale prices near data centers have risen as much as 267% since 2020. Around Washington DC, near the world's largest cluster of data centers, power bills rose about $20 a month last summer. The AI boom is lifting the economy, but there's mounting evidence that the people benefiting least are carrying significant costs through tax breaks, power bills, and deals they never voted on.
In response to the following comment/question: "Please explain this to me like I’m a fifth grader. If I start a business, I get an account with the power company. Every month they read my meter and I get charged the full amount for every kilowatt hour I use. Why do these data centers not have to pay their full amount for every kilowatt hour they use?”, Mr. Farrow responds: “...They do pay for every kilowatt-hour they use, metered, same as your business. If anything, some pay less per kilowatt-hour than you: big industrial buyers negotiate discounted bulk rates, and Georgia’s state audit notes that data centers do the same, saving them millions.
Bigger bills for consumers aren’t really coming from those metered amounts. The companies that deliver your electricity don’t make it, they buy it in bulk from power plants, in auctions run for your whole region’s grid. Picture every plant in the region, lined up, cheapest to most expensive. Some are cheap to run (wind, solar, nuclear) because their fuel is free or close to it. Gas plants cost more, because they burn fuel every hour they run. And at the expensive end sit the “peakers”: plants that stay idle most of the year and only fire up on the hottest and coldest days. The few hours they run have to cover the cost of keeping the whole plant staffed and ready year-round, so their power costs the most, and the grid calls on them last. Because it’s all one shared pool of power, the price of the last plant needed sets the price for the whole pool. Everyone’s rates then reflect that. Most of the time, the grid never has to reach the expensive end of the line.
Add a buyer that uses more power than a small city, and the grid has to go further down the line, into pricier plants, more of the time—and that new, higher price applies to everyone’s electricity, not just the data center’s. It’s reflected in the rates they pay for their meter. And in what you pay for yours.
On top of that, the grid has to keep extra plants on standby and build new lines to serve big new users, and under today’s rules, those costs get spread across the region’s bills too.
So: they pay their bill in full, sometimes at better rates than you’ll ever get. What they don’t pay for, yet, is what their arrival does to everyone else’s bill. (Federal regulators just ordered the grid operators to fix that, or defend it. That fight’s happening now.)