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Business & Economy

Article reports Amazon and AEP want secret discount for data center electricity

Reed Saxon

Amazon wants a discount on the massive amount of electricity their new data centers will use in central Ohio over the next decade.

Amazon 's data center arm built more than $6 billion worth of data centers in Ohio between 2018 and 2023. The company plans on spending an additional $8 billion on data centers in central Ohio by 2029.

State regulators at the Public Utilities Commission of Ohio (PUCO) will have to approve the discount between Amazon and AEP Ohio, but the terms of the potential deal are secret.

Ellen Thomas and Daniel Geiger wrote about the issue in Business Insider.

Thomas said northern Virginia has long been the country's largest market for data centers, but central Ohio is becoming the next go-to market as the northern Virginia region struggles to manage its grid.

"They are having major grid issues right now. Data centers have clustered there for the last 15 years. And, you know, the strain on the grid has just become enormous. And data center operators are starting to go elsewhere," Thomas said.

Thomas also said data centers use massive amounts of energy.

"Data centers are considered one of the most energy intensive types of buildings. According to the Department of Energy, they consume 10 to 50 times the energy per floor space than your average commercial office building," Thomas said. "And that's because these data centers are essentially just giant warehouses filled with computers. These are racks, tiny servers, for as far as the eye can see, it's a warehouse full of computers. And, you can imagine how hot that gets. There needs to be cooling systems in place in the data center. And that that requires a lot of energy as well."

But it's not just cloud storage driving the growth of energy-hungry data centers.

"Artificial intelligence and especially generative artificial intelligence, which is like ChatGPT that you hear about on the news generating images and text, is a lot more energy intensive than a traditional cloud computing service like photo storage. Running an AI workload on a server just requires significantly more energy than traditional cloud computing," Thomas said.

The PUCO granted Amazon Data Services a 2017 requestto keep the details of their 2018 electricity discount under seal. Even though that arrangement has ended, the information still isn't public. The company is asking the PUCO to keep it private through 2026, but the commission hasn't made a decision.

Amazon and AEP Ohio ended that 10-year arrangement early in 2023, and opened a new case seeking a new discount that is now awaiting approval.

"So we don't know the exact terms of the deal, because Amazon has asked state regulators for a protective seal that would keep any financial details of the deal a secret. But what we do know is that the arrangement would provide discounted electricity to Amazon for up to 10 years, at a time when electricity bills are going up for everyone in Ohio due to the increasing strain on the grid that is coming from data centers. AEP Ohio says that electricity demand in its region is going to double from 2018 levels by 2028," Thomas said.

Thomas' article states that utility competitor Buckeye Power has said the arrangement "could eventually shift more than $135 million a year onto other electric customers at a moment when transmission costs are already fast rising."

"Citing information from PJM, Buckeye Power pointed to $760 million of upcoming transmission upgrades in the state that cater to data center demand, including Amazon facilities, that could push that rider even higher. Amazon, Buckeye Power claims, would be shielded from those charges if the new discount is granted," the article states.

A spokesperson for AEP in Ohio told Business Insider that Amazon's projects would be served by "existing transmission facilities or previously planned upgrades."

A spokesperson for Amazon told Business Insider, "As our payments to AEP should more than cover any AWS specific infrastructure, we don't expect any AWS costs to be passed onto other ratepayers."

The lack of transparency makes consumer advocates uncomfortable, according to PUCO filings. But the PUCO allows the secrecy to protect "trade secrets."

"Amazon keeps a lot of things about its data center operations secret. Even basic information, like the number of data center facilities that it operates in the state and the number of jobs that it has created in the state. They consider that trade secret information," Thomas said.

The company even redacts information about job creation.

"Amazon's PR team will tell you Amazon's data centers support roughly 3,500 jobs in the state of Ohio. But the key word is that word 'support.' And this isn't an Amazon thing. This is a data center industry thing. The data center industry measures the jobs that it creates by 'jobs supported,' instead of a direct job. And a job supported does not mean a data center technician, it could be anything. It could be a babysitting job or a barista job that was created because a data center moved to the area," Thomas said.

The data centers often employ few people.

"There's not a lot of work that goes on. I think that the stereotype of a data center, at least in the tech industry, is that it's this giant warehouse, which is basically full of computers and no humans," Thomas said. "There might be a few technicians on hand in case something goes wrong. And security guards, because data centers are where all of the data in the cloud is stored. So that's all of our pictures and personal information and confidential documents."

Consumer advocates argued to the PUCO that there is no way the costs of the discount won't get passed down to other electric customers.

"AEP Ohio also has 1.5 million residential customers. And because of the way that investor-owned utilities are operated, AEP Ohio is able to recoup those costs of new construction from their entire customer base. And they don't have to charge just Amazon for the extra electricity that it needs. Those costs end up, in some way or another, being spread out to everyone," Thomas said.

Renee Fox is a reporter for 89.7 NPR News.