SC Daily Gazette, September 12, 2024
The Berkeley Independent, September 13, 2024
The Island News, September 18, 2024
Commentary: Protect SC consumers from data center costs
By Frank Knapp Jr.
Utilities always paint a dire scenario to the Public Service Commission and Legislature about why they should get their way.
They must get the revenue increases, and thus rate hikes, they ask for so they can provide safe and reliable energy. Permission to build more energy generation must be given or the economy will be hurt.
But this absolute need for big rate increases and much more energy generation seems to dissipate when those rate hikes are not allowed, and construction projects fail to be approved or just fail.
When utilities don’t get everything they ask for, both they and our economy go on just fine.
Several weeks ago, at a meeting of the Senate Special Committee on South Carolina’s Energy Future, the CEOs of Dominion Energy, Duke Energy, and Santee Cooper stated that they needed to build big new power plants to supply the amounts of new energy they say the state needs.
When questioned about what is causing the need for the expensive new gas plants they propose, the response was enlightening. It wasn’t because of residential or industrial growth.
What is driving 65% to 70% of this future energy demand are the anticipated new artificial intelligence (AI) data centers in the state.
AI data centers handle complex calculations and process large amounts of data for big tech companies. They require enormous amounts of electricity to operate.
Sen. Tom Davis, R-Beaufort, asked the utility executives if there was an economic advantage for South Carolina to have these data centers within our state borders.
The response offered was that industry needs AI data centers to be close to the end users to reduce latency, the time it takes for the user to send a command to the data center and receive a response.
Latency differences are measured in milliseconds. But while reducing latency might be good for some business needs, it is not necessary for most data center services.
So, what are the economic advantages to our state to have AI data centers within our borders and thus require the construction of large gas plants that all utility customers must pay for?
These data centers don’t create many jobs.
They don’t seem to be critical to our state’s industrial recruitment. Despite our lack of these data centers, our Department of Commerce reports that South Carolina is consistently ranked as one of the top five states to do business in the nation.
AI data centers do contribute to local revenue through more property taxes.
Local governments are willing to give sweetheart incentives to close the deals. Dorchester County recently gave Google a fixed 4% property tax rate for 53 years to locate a new data center in the county. Also, during those 53 years there will be no reassessment of the value of the property. And the company will pay no property tax on vehicles, equipment, etc. as all other businesses must do.
The state layered on at least one of its own incentives. Dorchester County got an “economic development rider” from the Public Service Commission cutting Google’s new data center’s electricity costs to only 6 cents per kilowatt hour, about 60% below whatDom Dominion Energy residential customers pay.
But while new AI data centers might provide some economic benefit to a few local governments, the costs are borne by all the utility’s ratepayers and all South Carolina taxpayers.
Amazon, Google, Meta and the other giant tech companies want more AI data centers so they can sell more services and make higher profits. For example, Microsoft’s AI cloud computing business income generated $1 billion in revenue in just three months.
Our state’s investor-owned utilities want to build more energy generation for new data centers because building things is the way they make more profits in our regulated system.
Everybody makes a lot of money by building more AI data centers and energy generation except the consumers who are forced to pay higher utility bills for new power plants and cover the government incentives with their taxes.
That simply isn’t fair.
The Legislature should protect taxpayers and ratepayers.
Stop all state and local government incentives for AI data centers.
Require data centers to self-produce a minimum of 50% of their energy needs with clean energy like solar and battery storage.
Instruct the Public Service Commission not to approve any provision to reduce electric rates for AI data centers or allow any socializing of AI data center related utility costs to other consumer groups.
With that, AI data centers are welcome in South Carolina.
Frank Knapp Jr. is the President & CEO of the South Carolina Small Business Chamber of Commerce, which has intervened 11 times in utility rate cases since 2002.