Energy-Hungry Tech Companies Told to Pony Up to Improve Power Grid

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Technology companies need an extraordinary amount of electricity to power data centers at the core of the artificial-intelligence race. They don’t want to foot the entire bill.

Across the U.S., utilities are asking tech companies including Google, Microsoft and Amazon to pay more to connect their new data centers to the power grid. Utility officials are concerned that the cost of new power infrastructure needed to serve data-center demand could raise rates for regular customers.

Utilities are seeking assurance that tech companies will pay for any potential surplus if the AI boom spurs the development of more power lines and plants than U.S. data centers ultimately need.

The tech companies, meanwhile, say they are committed to paying their fair share of power costs, but that they shouldn’t have to pay substantially more for grid investments needed to serve them because some of those upgrades also benefit other customers.

U.S. power companies are already charging more to cover a surge in spending to upgrade the aging grid, address risks related to climate change and support drivers of power demand such as data centers and electric vehicles.

In Virginia, which has the most data centers in the world, utility company Dominion Energy this year proposed a series of measures that would require data-center developers to commit to longer-term electricity contracts and agree to pay for certain amounts of power—even if they use less.

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A Virginia legislative commission determined last year that data-center operators there have so far paid their share of electricity costs, but that new measures will be needed to ensure they keep doing so as they use much more power. It concluded that data-center demand likely will drive up costs for all utility customers.

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Tech companies are investing tens of billions of dollars in the AI race, much of it to build the data centers. Microsoft expects to spend $80 billion this year. Google this month increased its expected investment this year to $85 billion. Amazon expects to spend $100 billion.

Some are building data centers in regions where there isn’t yet a large number of them, leading utilities to make costly upgrades to meet the huge new power demands. Rural states including Louisiana and Tennessee are now home to enormous projects that local officials are hoping will bring jobs and boost tax revenue.

Utilities in Kansas, Missouri and Texas are debating who should pay for the build-out. Ohio this month became one of the first states to require companies to pay more of the costs associated with connecting data centers to the grid after receiving requests for more than 50 times the amount of power used by its existing data-center customers.

Tech companies and other data-center developers opposed the requirements. The Data Center Coalition, a trade group, is looking at ways it could push to change it.

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In the early days of data-center development in Virginia, data centers required between 10 megawatts and 20 megawatts of electricity, Dominion said. Now, most projects require at least 300 megawatts, enough to power tens of thousands of homes.

Dominion filed the new proposals as part of a regulatory proceeding now pending at the Virginia State Corporation Commission, which determines how much the utility is allowed to charge for service.

Google, Amazon, Microsoft and other data-center developers earlier this month pushed back on Dominion’s proposals, saying they go too far in shifting risk onto the companies. Each said the measures would drive up the cost of development and slow growth in a market where it already takes years for data centers to connect to the grid.

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Dominion estimated that it will have to invest more than $40 billion in the state over the next five years to serve data-center demand, meet clean-energy targets and complete other necessary work. That is roughly equal to the value of its entire system there.

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