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Extracting Profits From the Public

How Utility Ratepayers Are Paying for Big Tech’s Power Eliza Martin and Ari Peskoe* Executive Summary Some of the largest companies in the world — including Amazon, Google, Meta, and Microsoft — are looking to secure electricity for their energy-intensive operations.1 Their quests for power to supply their growing “data centers” are super-charging a growing national market for electricity service that pits regional utilities against each other. In this paper, we investigate one aspect of this competition: how utilities can fund discounts to Big Tech by socializing their costs through electricity prices charged to the public. Hiding subsidies for trillion-dollar companies in power prices increases utility profits by raising costs for American consumers. Because for-profit utilities enjoy state-granted monopolies over electricity delivery, states must protect the public by closely regulating the prices utilities charge for service. Regulated utility rates reimburse utilities for their costs of providing service and provide an opportunity to profit on their investments in new infrastructure. This age-old formula was designed to motivate utility expansion so it would meet society’s growing energy demands. The sudden surge in electricity use by data centers — warehouses filled with power-hungry computer chips — is shifting utilities’ attention away from societal needs and to the wishes of a few energy-intensive consumers. Utilities’ narrow focus on expanding to serve a handful of Big Tech companies, and to a lesser extent cryptocurrency speculators, breaks the mold of traditional utility rates that are premised on spreading the costs of beneficial system expansion to all ratepayers. The very same rate structures that have socialized the costs of reliable power delivery are now forcing the public to pay for infrastructure designed to supply a handful of exceedingly wealthy corporations. To provide data centers with power, utilities must offer rates that attract Big Tech customers and are approved by the state’s public utility commission (PUC). Utilities tell PUCs what they want to hear: that the deals for Big Tech isolate data center energy costs from other ratepayers’ bills and won’t increase consumers’ power prices. But verifying this claim is all but impossible. Attributing utility costs to a specific consumer is an imprecise exercise premised on debatable claims about utility accounting records. The subjectivity and complexity of ratemaking conceal utility attempts to funnel revenue to their competitive lines of business by overcharging captive ratepayers. While PUCs are supposed to prevent utilities 2 from extracting such undue profits from ratepayers, utilities’ control over rate-setting processes provides them with opportunities to obscure their self-interested strategies. Detecting wealth transfers from ratepayers to utility shareholders and Big Tech companies is particularly challenging because utilities ask PUCs for confidential treatment of their contracts with data centers, which limits scrutiny of utilities’ proposed deals and narrows the scope of regulators’ options when they consider utilities’ prices and terms. Meanwhile, regulators face political pressure to approve major economic investments already touted by elected officials for their economic impacts. Rejecting new data center contracts could lead potential Big Tech customers to construct their facilities in other states. Indeed, Big Tech companies have repeatedly told utility regulators that unfavorable utility rates could lead them to invest elsewhere.2 In the following sections, we investigate how utilities are shifting the costs of data centers’ electricity consumption to other ratepayers. Based on our review of nearly 50 regulatory proceedings about data centers’ rates, and the long history of utilities exploiting their monopolies, we are skeptical of utility claims that data center energy costs are isolated from other consumers’ bills. After describing the rate mechanisms that shift utility costs among ratepayers, we explain how both existing and new rate structures, as well as secret contracts, could be transferring Big Tech’s energy costs to the public. Next, we provide recommendations to limit hidden subsidies in utility rates. Finally, we question whether utility regulators should be making policy decisions about whether to subsidize data centers and speculate on the long-term implications of utility systems dominated by trillion-dollar software and social media companies. 

https://eelp.law.harvard.edu/wp-content/uploads/2025/03/Harvard-ELI-Extracting-Profits-from-the-Public.pdf