South Carolina Daily Gazette
April 28, 2025
Commentary: Good and instructive news on data centers
By Frank Knapp
Two announcements last week were good news for South Carolina’s electric customers and instructive news for our legislators trying to pass an energy bill in the last few days of the session.
The focus of these announcements was on data centers and who pays for the new power plants and transmission lines they will need.
These data centers are large, windowless buildings packed with computers and related components to store massive amounts of data and do high-speed data analysis necessary for AI, artificial intelligence.
They consume huge amounts of electricity that earn them the name “energy hogs.”
Big tech needs these data centers to sell AI services to drive their profits. Unlike other large industries they create few jobs.
According to our utility executives, data centers account for about 65% of the new energy generation needs of the state.
Private utilities, like Duke Energy and Dominion Energy, are more than willing to build new power plants to serve data centers since building things is the way these utilities really make their money, i.e. profits approved by the South Carolina Public Service Commission.
Typically, all utility customers pay for new power plants.
However, the growth of data centers across the country and the new power plants they will require have alarmed state officials nationally.
Other states are looking to protect residential and small business customers from paying higher electric bills driven by the energy needs of big tech data centers.
Last year, a Senate Special Committee on South Carolina’s Energy Future took testimony covering a wide range of issues including data centers.
The consensus of that committee was that consumers needed to be protected from the costs of building new power plants and other facilities mostly to serve new data centers.
As a result, the Senate amended an energy bill (H.3309) previously passed by the House to require data centers to pay their own way for their energy. There would be no cost shifting to other consumers.
New data centers would pay for the new power plants and transmission they need with higher rates, a minimum billing requirement and a 15-year contract with the utility to guarantee that the data center would pay for the energy generation they said they needed even if they moved or reduced their energy use.
Other consumers would be protected.
The Senate also removed tax incentives for new data centers. No longer would these data centers be exempt from paying sales tax on their computers and the electricity those computers use.
The Senate concluded that state taxpayer dollars should not be used as an incentive for data centers that produce few local jobs and little other economic benefit to the entire state.
That energy bill is now back in the hands of the House where some members are concerned that data centers would no longer be interested in investing in South Carolina and local governments could lose property tax opportunities.
So, now for last week’s surprising news.
A $2.8 billion computing center was announced in Spartanburg County, reportedly the second largest investment ever in South Carolina.
What makes this supercomputing operation important is that it will generate its own electricity from natural gas. This shows that requiring data centers to cover all costs associated with their energy needs is not a deal breaker.
They will still be very profitable.
The second announcement was that the Board of Santee Cooper, the state-owned utility, voted unanimously not to wait on the state Legislature.
The board voted to immediately adopt special rates, as proposed by the Senate, that would result in data centers not shifting any of their energy costs to other consumers. The board also included new large manufacturers in this policy.
With last week’s energy-related announcements as instructive, the House should accept the Senate’s and Santee Cooper’s lead on protecting other ratepayers from rate hikes due to the costs of providing electricity and transmission to new data centers.
Regarding state tax exemptions to lure data centers, the Senate position should be kept.
Taxpayer money should not be used to attract a data center that generates few employees in a local community but provides very little economic benefit to the rest of the state. Local governments can offer any sweetheart property tax deal they want, as was done for the Spartanburg County data center.
Data centers are coming to South Carolina and every state. Do we need them here?
No.
But they are welcome as long as the rest of us don’t have to subsidize their profits with higher electric rates and state-tax incentives.
Frank Knapp Jr. is the President, CEO and co-founder of the South Carolina Small Business Chamber of Commerce.
https://scdailygazette.com/2025/04/28/good-and-instructive-news-on-data-centers/