We Found the Hidden Cost of Data Centers. It's in Your Electric Bill [video]

This feels misleading to me.

I accept that data centers generate more load for a system. Which will make the overall system need more maintenance, which is something that others paying into the system will also have to support. But, I'm not clear on why this is a hidden cost.

Consider, if people get the new housing developments that they want, that would also add load to the system. This larger energy system will be more expensive to run, which will lead to higher costs. Adding houses would probably be even more expensive in the transmission maintenance costs associated.

Any model you do that tries to prevent this is essentially rent stabilization for early members. And that has a pretty good track record of not being a good idea.

How do you feel about homestead exemptions in general?

Sounds more like externalized cost that data centers should pay more for but it is spread evenly across all customers.

Make the user who requested the extra power pay for it (upfront then monthly cost)? That's what we do in the UK, then if you stop paying the monthly cost for the 'commit' you surrender it and someone else is allowed to use it without the upfront cost (but with the monthly cost). Why is that hard please?

> Consider, if people get the new housing developments that they want, that would also add load to the system.

It's a matter of scale and efficiency. Housing also adds (full-price) customers new taxpayers. A major problem with housing development is that low density (e.g. single-family zoned suburbs) are net-negative contributors. (But this effect is primarily seen with infrastructure like roads)

> Any model you do that tries to prevent this is essentially rent stabilization for early members.

The problem with datacenters is twofold:

1) It's a demand-shock. Because of the rapid rollout of datacenters, energy production and transmission capacity simply can't scale up. This causes prices to spike locally.

2) 'Industrial' electricity like this tends to pay very cheap rates, leading to residential electricity customers subsidizing them. Especially as such industry tends to be given high tax & other incentives.

> Any model you do that tries to prevent this is essentially rent stabilization for early members. And that has a pretty good track record of not being a good idea.

A question here is whether or not we're in a datacenter construction bubble. (To anyone who says we're not: Nvidia's stock price has soared more than Cisco's during the dotcom bubble.)

If you're in charge of a major electricity company, are you going to sign off on major expansion investments right now, knowing that it will take 5-10 years?

A lot of these datacenters are not owned and operated by Big Tech itself, but instead disposable companies like CoreWeave. If there's a bubble, it'll pop, and these companies will just go bankrupt. The power purchase agreement'll be worthless then.

I'm in favor of them only if they are extended to renters. I don't know how to do this, but everyone should get a lower cost for their first home, even if it is an apartment. If you want a second home, apartment, campsite, or whatever additional place to dwell I'm fine with you paying a little extra for that luxury, but for your first home we should make it affordable.

Now let's consider a different form of govt/shared charges.

Taxes, why are individual and corporate taxes and structures different?

Both are doing work and generating income?

Why do corporations get to deductions and do so much tax magic that individuals don't?

why don't we charge them both with the same laws, and structures?

Cause corporates generate jobs? Isn't that unfair to the people born individuals...

I don't think anyone is saying there should be stabilization of electricity prices. But costs for grid improvements for industrial, data center or AI usage should be on the said companies.

They are using that resource to generate a profit.

While people in residential homes are just living their lives, you are comparing cost of essential commodities to production inputs...

We make taxes on poorer people less as well for the same reason.

But yes if someone is saying electricity prices should be stabilized for early consumers that's definitely unfair. But I didn't see or read that here.

Homes also generate property taxes and sales taxes (from the occupants inside of them). Cities nearly always make money selling to new homes -- low density suburbs are highly profitable for municipalities, even on utilities alone, both initially and over a 40 year time period.

Data Centers do not work like this. They don't generate any new sales taxes, they don't really generate much in the way of new jobs, and they often don't even pay property taxes at all (our biggest data center here, for example, got a sweetheart deal on a massive property tax exemption -- they literally don't have to pay any property tax at all)

Data Centers also don't pay standard price for their power -- they get 'industrial' power rates (locally here, our industrial power rate is much lower than what a home would pay for equivalent kwh usage, even after factoring in transmission differences).

If you just charged equivalent access (if industrial users had to pay to-the-penny exactly the same prices as a residential user, identical transmission fees, identical per-kwh prices, identical time-of-day usage surcharges, etc), it would go a long way to making the data center setup more fair for everyone.

In most of the US new housing has to pay (sometimes large) “impact fees” to cover infrastructure upgrades.

>Why do corporations get to deductions and do so much tax magic that individuals don't?

Individuals can do deductions if they're a sole proprietorship. The requirement in general is that the expense is used for a business purpose. Buying a laptop for personal consumption isn't tax deductible, but buying it for your consulting business is.

Same way I feel about any rules. Worth trying and seeing how they can get the desired outcomes.

I should have said that rent stabilization may work out some day. Just it is not my expectation that it will, as it has a record of not. As such, I would expect some inflationary pressure on utility rates.

My understanding, the last time rising electric costs came up, is that a large part of the cost increase was finally paying for the infrastructure maintenance that companies put off for a time. Is that no longer the case?

That is, it is specifically the transmission and distribution network that is driving costs increases. Per the crappy AI answer "Electricity distribution costs now often exceed the cost of electricity generation for U.S. utilities, with transmission and distribution (T&D) costs potentially comprising over half of a customer's energy bill, up from about one-third previously."

I should say, I have no problem thinking data centers may need to pay more. If only because they are probably able to. My assertion is just that it is misleading to pin them as THE reason costs have gone up. It is far more complicated than that.

Most data centers almost certainly pay property taxes, as well. It is still a deeded plot of land, after all? I'm curious what data center you know of that doesn't have to pay any. I know incentives are common, but they are usually tied to some other growth metric.

> If you just charged equivalent access (if industrial users had to pay to-the-penny exactly the same prices as a residential user, identical transmission fees, identical per-kwh prices, identical time-of-day usage surcharges, etc), it would go a long way to making the data center setup more fair for everyone.

Why? An industrial feed to a data centre is the company dealing with a single customer contact, to a single location, probably bulk-buying up front. That's very different to serving 500 houses with very variable demand.

This is wrong, the data center supply chain is very large with hundreds of thousands of components all generating tax.

These larger power-generation systems tend to be more efficient than smaller power-generation systems, not less, which should result in a cost decrease, not an increase.

Tennessee (for example) has fairly cheap electricity because the TVA uses a lot of hydroelectric, and since we have a ridiculous amount of rain and violent thunderstorms each year, every decade or two they build another hydroelectric dam and create a new lake, which generates more hydroelectric power (and a moderate increase in tourism/recreation). We don't have buried power lines (excepting in a very few places) but we've got a ton of redundant power substations and multiple transmission paths (because storms). The TVA and Corps of Engineers are kinda hardcore here otherwise the valley would flood about a quarter of the year and be sitting around in the dark for another quarter of the year.

Maintenance of the power transmission lines is paid for by the electrical customer as a part of paying for the electricity itself. This actually scales just fine. If your local electrical utility is not doing it this way, someone needs to explain to them how proper accounting works.

Calling a "hidden cost" is just a convenient way to say "We're making this up because we feel like it's right and we don't intend to show any proof."

They're getting that rate because of the reduced cost to support their connection to the grid per kWh. It's essentially the cost of the "packaging". If this is resulting in a loss of revenue for the utility, the blame for that falls on the utility for not properly measuring costs.

Is that also factoring in demand charges? I find this gets forgotten in a lot of discussion of industrial rates, when it is often a large factor in the effective $/kwh.

TBH, most articles like this read like industry propaganda intended to promote rate increases.

It seems to work.

> Is that no longer the case?

Generally (but there are exceptions) in the US they have not gotten better. It's just that datacenter demand has eclipsed the effect of that.

> My assertion is just that it is misleading to pin them as THE reason costs have gone up. It is far more complicated than that.

It's not so much that they are the sole cause, but that their effects (especially on local scales) are 1-2 orders of magnitude larger than all other causes, so people focus on this matter.

Do you have numbers showing that data centers have eclipsed this? Quickly looking at search results on this it seems transmission/delivery is estimated to be half of a consumer's bill. Even the high estimate for increased costs from data centers has the increase at less than a quarter of the bill.

Not nothing. And if we can do things to reduce this, I'm game to do that. But I can't get behind the rhetoric that they are eclipsing other cost drivers.

One particular datapoint to watch is auction prices for production capacity as these are the most immediate market. Those have jumped, with PJM's +800% in 2024 and +22% (22% from 2024->2025, $28.92 -> $329.17 or +1038% total over 2023 -> 2025) https://www.reuters.com/business/energy/biggest-us-power-gri...

We (Well, the article does it for us as well) can identify that this market jump is driven primarily by increased demand rather than lower capacity, as the amount of capacity sold has increased. (Covering ~50% of the new demand)

These prices do not immediately translate into residential fees, there's a lot of financial engineering in between the auction and customer contracts (F in chat for the counterparty of the hedge), but at the end of the day you can't sell $500 of power for $5 so the increased cost will worm their way through to residential consumers eventually. One particularly annoying thing is that this isn't a consistent amount of time by region; Some people are seeing 3x electricity bills already, for others their power company may have more strongly hedged against price increases.

How much of that tax goes to the city or county that the data center is in?

doesn't really match what I'm seeing in Chelan County, WA... the county is now in a fight with the port because the port wants to create a Tax Increment Area to capture the taxes from the two data center buildouts... ~$100m over 25 years. they also estimate $150m sales tax revenue and $70m in property tax revenue for those data centers. one relevant stat is that Microsoft will become the biggest taxpayer in the county.

I confess I don't know how to contextualize this. The article says that PJM claims this should be a 1.5% to 5% increase in bills for folks. And it notes this is the first time capacity has been added in the last four auctions.

Is your contention that we a) not believe this will only have an "at most 5% increase" or b) predict that it will be more dramatic in the future?

I'm also curious where you are getting the 3x electric bills claim. The largest bill jumps I'm aware of were in CA and were largely related to fires. That and general grid upgrades.

Isn't that proving my point you change laws based on what you do with your money and where you get it from.

If so data centers should also be separately booked for their electricity consumption.

> I know incentives are common

I'd go further than common, I don't know any major data center built in the last 6 years that didn't get them. 36 out of 50 US states give away public money to privately owned data centers right now (see https://www.naiop.org/research-and-publications/magazine/202... )

It's not always property taxes (sales tax and/or use tax and/or waived utilities costs are also common). But property taxes are also waived in various cases.

> Most data centers almost certainly pay property taxes, as well. It is still a deeded plot of land, after all?

Not always -- they often waive property taxes too.

I'm told Nevada, West Virginia, and Wyoming all have waivers on property taxes for data centers specifically, and at least 12 other states (including Illinois, New York, Texas, and many others) also waive property taxes for data centers through indirect means.

Locally here, data centers get to skip out on paying 100% of their property taxes for 10 to 20 years. They do this by getting a county to label their property as a 'Renaissance Zone' (more commonly known as an 'Enterprise Zone').

Rules for that also vary. As one example, Connecticut has 'Enterprise Zone' distinction as well, but theirs is only an 80% tax abatement, and only for 5 years.

As you might imagine, this quickly becomes a race to the bottom, on which state is willing to give away the highest amount of public money to these private companies. See https://goodjobsfirst.org/enterprise-zones/ for more details.

A recurring use of energy generates tax.

I don't know if I can get behind rhetoric like "further than common." It is just common. Period. And you can be opposed to it, just on principle. It would help me oppose if you showed places that were not seeing benefits.

I'm reminded of places like Alabama that would do massive incentives to Mercedes to build a production plant in the state. Again, I know many that opposed on principle, but they were a touch off balance when it came to the benefits that the state was getting from the plants.

And I agree it can be a bit of a race to the bottom, as it were. As things are, there is little to no evidence that that is the case. Building any large industrial building is a large construction project that alone will generate plenty of tax revenue to justify pushing off many taxes. Would it be even better for the localities to not? Yeah, but only if they could still get the build.

Apologies, I misread some of this yesterday.

The easy way to justify why corporations get to deduct their spending, is it encourages corporations to spend. Something that a for profit company would not necessarily do otherwise. With the obvious note that spend sent to people is taxed as income for that person.

Now, I agree that this gets super odd when people also make an odd "corporations are people" argument.

As for my assertion that this is effectively arguing for price stabilization. The entire thing hinges on the complaint that costs have been going up. Which, of course the price of a good that has increasing demand is going up. I'm not sure how to read that other than an appeal to price stabilization for early consumers.