Power-Hungry Amazon Sticking Rural Americans With Tab For Data-Center Expansions

Amazon, through negotiated tax incentives and secret deals with power companies and politicians, has perfected the art of sticking rural Americans with the tab for their power-hungry data centers, reports Bloomberg


Power companies, like politicians, actively pursue Amazon. In that way, the company fits into a long U.S. tradition of shifting costs from businesses to poor residents, who already pay about three times more of their income on utility bills than do wealthy households, according to a 2016 ACEEE study. The difference these days is that data-center operators, unlike manufacturing plants, can’t claim to be engines of job growth, says the ACEEE’s Elliott. –Bloomberg

Meanwhile, data centers typically add few new jobs to rural counties. “When you attracted the steel mill years ago, you got 2,000 employees,” says Neal Elliott, senior director of research at the American Council for an Energy-Efficient Economy (ACEEE), a green lobbying group. “When you attract a data center, you get maybe 50.”

Despite this, desperate state politicians scrambling to replace shrinking manufacturing industries have worked closely with utility companies to score Amazon data center contracts, “using the company’s name as a shorthand for economic resurgence.” 

In Virginia, where Amazon’s Vadata Inc. is believed to operate at least 29 data centers and be planning 11 more, the company’s 78-page application for a special rate agreement has two versions—a heavily redacted public one and another under seal with state regulators.

Amazon has also negotiated an unknown rate discount with American Electric Power in Ohio, where it received $77 million in tax incentives for three data centers in 2016. Late last year, Amazon dangled 12 more in exchange for reduced electricity rates, and AEP exempted it from surcharges other Ohioans must pay. –Bloomberg

“That’s de facto cost-­shifting,” according to Ohio State University economist Ned Hill. “Other businesses and households in Ohio are now bearing all the costs of those riders.”

Those “other businesses” include Facebook, which opened a $759 million data center in Ohio in 2017. “As a general practice, we do not negotiate exclusive rates,” said spokeswoman Melanie Roe. 

Amazon has nearly doubled the size of its physical footprint worldwide over the last two years – boasting 254 million square feet, which includes dozens of new data centers with racks upon racks of power-hungry servers running 24/7. It has also benefitted $1.2 billion in state and municipal tax incentives it’s received over the past decade, along with untold millions of dollars its negotiated with local utilities and politicians. 

Elder abuse

Aside from tax incentives, the cost of routing power to the data centers has been passed directly on to locals. After the company’s planned data center in Gainesville, Virginia required Dominion Energy, Inc. to run a hotly contested aboveground power line straight through a Civil War Battlefield, residents like 87-year-old Rosie Thomas and her neighbors petitioned and protested in front of the gated data center, “skirmishes punctuated by barking dogs and shooting police.” The result was that Dominion agreed to bury that part of the line along the highway at an estimated cost of $172 million

What happened next? Gainesville locals were stuck with the bill.

Within a month, however, the utility and state legislators had passed on the cost to Thomas and her fellow Virginians. The state’s House of Delegates approved Dominion’s proposal to raise the money needed for the Amazon line with an as-yet-unannounced monthly fee. “Lord, have mercy,” Thomas said when a neighbor gave her the news this spring in the gravel driveway of her one-story clapboard home, where she was watching the metal disk spin inside the electricity meter on the side of the house. She was already struggling to pay her monthly $170. –Bloomberg

And who’s privy to the value of Amazon’s Ohio rate deal? The state’s five-person public utility commission and the publicly funded but privatized economic development agency, JobsObio. Amazon maintains that the value of their discount is a trade secret, and one clause in their contract stipulates that it will not face public review for at least five years, at which point Amazon can request that report be redacted. 

Price cuts are treated as trade secrets by the utilities. Baloney,” says Ned Hill. “All should be made public and made in advance of any action,” with key documents posted online.

“If these discounts are generating the kind of economic bounty officials claim, why aren’t they willing to show us what the discounts are?” wonders Zach Schiller of left-leaning think tank Policy Matters Ohio. 

The company has also ratcheted up the secrecy around who’s paying for electricity, says environmental advocate Greenpeace, which calls Amazon the single biggest obstacle to industry transparency. –Bloomberg

“Amazon had a huge advantage, because there weren’t a lot of other sectors growing in the electricity market,” says Elliott, the ACEEE senior research director. 

Bloomberg’s bottom line: It’s tough to know just how much of Amazon’s electricity and infrastructure costs other people are bearing, but in Virginia, the tab starts at $172 million. 

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Author: Tyler Durden

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