Viewpoint: NW Energy making secret deals with data centers
Karin Kirk
Data centers are a hot topic. They’re drawing large amounts of electricity from the stressed grid, and their thirst for ever-more power is daunting. Where will this energy come from? Who will pay for it? We have a lot of questions, and rightly so.
What we don’t have is answers.
NorthWestern Energy has signed agreements with three new data centers so far. The energy demand from those three deals will require nearly double the amount of electricity that NorthWestern currently serves to Montana. NorthWestern will get to build new, expensive (and likely polluting) power plants to serve those data centers, and it all sounds like a great deal for NorthWestern’s shareholders.
But what about the rest of us? Well, that remains a big question.
Last month, an opinion column by the Frontier Institute’s Tanner Avery argued that we don’t need to worry about data centers. They will bring jobs and attract new local businesses, it will all be great! The author dismissed well-founded worries about water use and rising electricity bills as a “fear-driven narrative.” I admire the author’s optimism, and for that matter, his bravery in sticking up for data centers.
But in many ways, I agree with Mr. Avery. Data centers shouldn’t raise prices for the rest of us. Rules should require that data centers pay their fair share so we don’t get stuck with the bill.
But here’s the problem. So far in the U.S., those things are not happening. Many people are paying more for their electricity use while data centers score big discounts. The rules are failing to protect everyday people.
Let’s dive into this.
I recently published an analysis of electricity prices, which was in turn published in the Washington Post.
The graph below shows electricity prices for homes, commercial use (which includes data centers), and industrial use, like factories.
Starting at the beginning of the graph, look how the three lines rise and fall together. That shows that all types of electricity users experienced similar changes in price. That seems fair, right?
But beginning in 2008, residential users of electricity (that’s us!) started to pay more, while commercial and industrial users paid less. That doesn’t seem fair.
Things have gotten even worse since then. In just two years, the price of household electricity rose by 10%. But for data centers and commercial use, their price increased by only 3%, and for industrial uses, the price of electricity actually went down by 2%.
You’d be wise to wonder which type of electricity use is driving more growth. Those that use more energy should have to pay for the power plants and power lines, right?
Wrong. Since 2021, data centers have driven by far the most growth in energy demand. They’re gobbling up 9% more electricity, while household use has only gone up by 1%.
To sum up the situation, household electricity use has grown the least, but our prices have gone up the most. That’s definitely not fair.
There is mounting evidence that regular people are subsidizing the energy needs of billion-dollar tech companies. I fully agree with Mr. Avery that this should not be happening. Nevertheless, it is happening.
The big question is what can we do about it, and again, I agree with Mr. Avery. We need more transparency and better rules.
As for transparency, the letters of intent between NorthWestern Energy and various data companies are almost entirely blacked out. The deals are secret, so no one knows how big a discount the data centers are getting.
It feels like that shouldn’t be legal, but it is, thanks to a recent ruling by our Public Service Commission.
Which brings me to my last point. The rules around data centers are complex and often negotiated behind closed doors. These tech companies have powerful lawyers and expert negotiators. It’s a tall task for lawmakers to make sure regular folks are protected. And so far, this data shows that lawmakers have not been successful. A whole lot of people are paying more because the rules aren’t protecting them.
In Montana, we should learn from the mistakes happening elsewhere. We need transparency, not secret deals. We need our PSC to listen to the public and make us their top priority. We need everyone – from the Frontier Institute to our state lawmakers to consumer advocates – to fight for everyday people.
The billionaires can afford to pay their fair share. They don’t need our help to pay their bills.
Karin Kirk is a geologist and science journalist specializing in energy and climate. She sits on the steering committee of Montanans for Affordable Energy.