EDITORIAL: Who will pay data centers’ electric bills?

Executives of We Energies knew a massive hyperscale data center complex was destined for Port Washington long before anyone in the community had a clue, probably even the elected officials who were to later approve it.

That’s a safe assumption because data centers cannot exist without a volume of electrical energy so huge that it would have been unfathomable a few years before “gigawatt” became a household world. We Energies and Vantage Data Centers had to find sources for the equivalent of the amount electricity needed to power two or three million homes before the Port Washington data centers could be seriously planned.

Well run We Energies is Wisconsin’s largest utility. Vantage is a worldwide phenomenon, creator of more than 35 data center campuses on five continents. These are smart companies, and they understand that electricity is not only the biggest need of data centers, but also their biggest vulnerability. Much of the public’s disdain for data centers derives from fear that their thirst for energy will increase the cost of electricity for homeowners.

We Energies and Vantage got ahead of this by announcing early on that any new electrical infrastructure needed to power the Port data center campus would be paid for by its owners, not ordinary ratepayers.

That was welcome, of course, but guaranteeing that the public will not have to subsidize the data center boom by paying inflated electricity costs is more complicated than issuing a statement of good intent. The Wisconsin Public Service Commission is currently reviewing a We Energies proposal for data-center electricity pricing that falls short of adequate ratepayer protection.

Mike Hooper, president of We Energies, assured Ozaukee Press readers in a letter to the editor published last week that under his company’s proposal, “data centers will pay their own way—covering both the power they use and the cost of new power generation and equipment built to service them.”

That is exactly what is needed, of course, but the proposal does not ensure that outcome. It requires that data centers pay only 75% of the cost of new power plants, leaving other ratepayers to cover the rest of the cost. If new gas-fired plants have to be built mainly to service the electricity demands of data centers, the provision leaves the door open to a public subsidy of the $15 billion Port Washington data center development among others in Wisconsin.

The Citizens Utility Board of Wisconsin, the watchdog organization that monitors PSC actions, points out other weak spots in the We Energies proposal. One is the absence of controls shielding the public from the costs of operating the new plants, particularly the expense of the natural gas needed to fire steam generators. Fuel costs are generally passed on to all customers.

That issue would be alleviated by increased use of renewable energy sources, and We Energies is working on that, but for now and in the near future data centers will mostly run on gas.

The data center rate proposal is also questionable on the subject of “stranded assets,” the term used in the utility industry for prematurely shut-down power plants. In Wisconsin, ratepayers keep paying for these assets until the utility recovers its investment.

This is particularly worrisome in the case of power plants built mainly to accommodate data centers—because the investments are enormous and the long-term viability of data centers is uncertain.

If accelerating technology would overtake data centers built now at the dawn of the artificial intelligence era and render them obsolete, someone could be left with a very large bill to pay for power plants that no longer produce revenue. It should not be ratepayers.

Last week, the Milwaukee Common Council voted unanimously to oppose the We Energies data-center rate proposal because it does not require data centers to pay 100% of their energy costs.

The PSC should reject the We Energies proposal for that very same reason.

The billions of dollars worth of data center construction in Wisconsin is an economic phenomenon that comes with benefits for the state; in return, residents have to put up with data centers’ associated negative environmental impacts and disruptions of their communities. But they should not have to help data centers pay their electric bills.