Tech ratepayer pledge may be more bark than bite — but still matters
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Big Tech's coming vow to pay for its own power amid the data center boom may be light on policy specifics. But it could still pack a political punch.
Why it matters: Electricity markets are largely regulated at the state and regional levels, limiting Washington's direct sway.
- Even so, the White House-tech initiative "is a big bully pulpit that could influence state economic regulators around the country even if it lacks an implementation plan or regulatory teeth," said Rob Gramlich, founder of Grid Strategies, a consulting firm.
Catch up quick: Tech execs are expected at the White House next week to sign what President Trump called a "ratepayer protection pledge" during Tuesday's State of the Union.
- OpenAI and Amazon are taking part in the "pledge" initiative, the companies confirmed. Others expected include Google, Meta, Microsoft, xAI and Oracle, Fox News reported.
The intrigue: It's still not clear how it might change policies and practices.
- Several tech giants have already vowed to prevent consumers from getting stuck with the energy bills for the AI buildout.
- "Data center 'pledges' to ring-fence costs are both non-binding and not new," TD Cowen analysts said in a note.
- FERC, with urging from DOE, is working on policies that push large industrial customers to cover costs like needed grid upgrades.
State of play: More than a dozen states in recent years have changed power rules to require data center developers to shoulder more of their electricity costs, Gramlich said.
- The "sharp end of policy developments in this space" is already unfolding at FERC, in wholesale markets including the massive PJM grid region covering much of the Northeast, and in state regulatory commissions, the TD Cowen analysts said.
- But as more states weigh similar moves, a high-profile tech pledge could shape those hyperlocal debates, Gramlich said.
Reality check: Power market rules already require new large customers to pay their fair share, wrote one leading data center developer on LinkedIn.
- Current pricing structures — known as tariffs (not to be confused with import duties) — are generally designed around "cost causation" principles, meaning costs are allocated to the customers that drive them, said Brian Janous, chief commercial officer of Cloverleaf Infrastructure.
- That framework is intended to minimize cross-subsidies between rate classes, such as residential and industrial customers.
The biggest tech players like OpenAI and Amazon have been making various promises.
- For instance, Microsoft last month said it will "ask utilities and public commissions to set our rates high enough" to cover costs of adding and using power.
The bottom line: Several experts say the pledge is more about optics than overhaul. But optics matter as power prices rise.
- "Clearly the public is blaming data centers for cost increases, so these sorts of announcements are probably necessary," Janous said.
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