The euphoria over Amazon’s much-publicized $10 billion Mississippi data center deal is fading. Why? Not because of anything Amazon has done. But because of growing concerns that the deal favors Entergy and political insiders at the expense of residential customers and small businesses. There are over a million of these outsiders.
And because secrecy surrounding the deal shields politicians and other insiders. And because secrecy breeds suspicion that someone is hiding something. And because rates have increased for small customers in other states with data centers (up 30% in Virginia, 27% in Georgia). This “data center effect” happens when data centers don’t pay their fair share of utilities’ investments for them. And small customers pay more than their fair share. Entergy’s Amazon deal appears to be worse for small customers here than deals cut in other states.
So Entergy’s CEO is spinning the deal. He says it’s good for everyone. Amazon isn’t spinning. It’s just taking advantage of the deal it was offered. It likes it so much it has increased its investment to $16B — with more coming. This will benefit local contractors and suppliers and ripple through the economy. It will create some permanent jobs too — and some will go to Mississippi residents. So what’s good for Amazon is good for the local economy.
What’s good for Amazon is also good for Entergy. It is spending over $3 billion to supply power to Amazon and coincidentally to upgrade service for small customers. Thanks to the secret deal, its spending is unconstrained — and Entergy receives a guaranteed 10.5% profit on it. Small customers will likely pay more than their share of the unconstrained spending through higher rates. That lopsided deal is hard to spin even for the articulate CEO.
He is the public face of the insiders. Who are they? Entergy is the original insider. It courted Amazon and orchestrated the deal. Mississippi’s Development Authority assisted. The Legislature passed a 315-page bill enabling the deal in a two-day special session called by the Governor. Legislators’ hurried votes made them insiders too - maybe not fully informed insiders. But insiders anyway and responsible for the deal’s consequences. They voted for it. They own it. The Pottery Barn rule.
The bill includes unusual concessions for Entergy not found in data center deals in other states. They made the deal sweeter for Entergy and worse for small customers than other deals. The concessions sidelined the Public Service Commission (PSC). It normally regulates utilities and protects small customers. It’s an outsider too now.
The legislature usurped the PSC’s authority to review utility spending, determine its prudence if in the public interest, and approve rates. The PSC has no say-so about Amazon’s rate or Entergy’s spending. In other states, PSCs and legislators tried to mitigate data center effects. Seems our legislators made them worse.
Their concessions also exempt Entergy from customary permits to ensure safety and protect the environment, allow no-bid contracts, remove the 4% annual rate cap, and grant automatic approval (prudence) for all costs Entergy’s accountants book. So Entergy has a blank check to pad costs. Its deal is probably the sweetest of over 1,000 data center deals.
Entergy is spending over $3 billion to provide power to Amazon and upgrade service for small customers. It could upgrade service for small customers for an estimated $500-700 million. So if costs were fairly allocated, Amazon’s share would be over 80% of Entergy’s cost. And small customers’ share would be less than 20%. But under the secret deal, Amazon probably pays less than 80%. And small customers probably pay more than 20%.
That’s why insiders like secrecy. And why outsiders don’t. And why few outsiders trust politicians and other insiders.
Kelley Williams, a Northsider, is chairman of Bigger Pie, a Jackson-based think tank promoting free markets and government efficiency.
