The politically driven $7+ billion Kemper County Lignite Plant boondoggle was probably the biggest abuse by a monopoly utility in Mississippi’s history. But Entergy Mississippi’s plant and infrastructure for the $16 billion Amazon data centers project may be worse. Mississippi Power and its Southern Company parent paid most of the cost of Kemper’s experimental gasifier that wouldn’t work. But some 150,000 small customers in Mississippi Power’s monopoly service area got stuck with a 17% rate increase anyway— for electricity they didn’t need.
Amazon’s data centers may cause rates for Entergy Mississippi’s small customers to increase even more— due to the data center effect and to Mississippi politicians’ concessions to Amazon. The justification for the concessions is the usual “more jobs.” The data centers are supposed to create 1,000 permanent jobs. (But many, maybe most of them, will likely be filled by out-of-state contractors.) So 384,000 households in Entergy’s service area will pay more for electricity to create maybe 500 permanent jobs. Is that a good trade-off? Not for Entergy’s small customers. They don’t need more electricity. Many households can barely afford what they have. Some 154,000 households in poverty can’t.
Why is this happening? Mississippi was late to the data center party. Our politicians and their development professionals may have been out-negotiated. Other states which were early to the party now have data center hangovers. For example, Georgia with 149 data centers has had residential rates increase 37% in the last two years. And Virginia with more data centers than any other state expects electricity costs for small customers to increase 25-70% by 2030. Georgia’s Public Service Commission (PSC) is looking to freeze rate increases for three years. Georgia’s Legislature is looking to close loopholes in PSC rules to keep Georgia Power from sticking small customers with rate increases that benefit data centers. Virginia is looking to create a new rate class for data centers to isolate their costs from small customers. Why?
Data centers are known to cause rate increases due to utility accounting - if PSC regulators allow them. This data center effect happens when utilities charge small customers for part of their system expansions (power plants, transmission lines, substations, etc.) to serve data centers. Entergy needs a new plant at Greenville. But its small customers don’t need more power from it and the infrastructure the data centers require. They pay for part of their costs anyway. So data centers pay less, and small customers subsidize giants like Amazon. That’s embarrassing. That may explain the secrecy surrounding the concessions and incentives politicians gave Amazon.
The concessions make the data center effect worse. And Mississippi’s demographics make it even worse. We’ve described the concessions in earlier articles. To recap, they include: 1) Mississippi’s PSC is not allowed to determine if Entergy’s costs for the data centers are reasonable and should be included in the small customers’ rate base. 2) The PSC can’t alter the agreement between Entergy MS and Amazon even if it harms small customers. 3) Entergy’s construction costs for data center power plants and infrastructure are exempt from competitive bidding. 4) There are no limits on annual rate increases for small customers. 5) Entergy doesn’t have to get usual government permits before beginning construction.
These concessions give Entergy a blank check to pad costs and overspend on plants and infrastructure. This means rates for small customers will be based on higher costs plus 10.5% (Entergy’s approved return on investment). Amazon’s rates are secret. Maybe because it would be embarrassing if its rates are lower than rates for small customers. So who are the small customers subsidizing Amazon and increasing Entergy’s profits?
Mississippi has a little over 1.1 million households. Median household income is $55,000 per year. That’s about 30% below the U.S. average. About 18% or 198,000 households in Mississippi live in poverty with median incomes of $15,000 - $25,000. Our poverty rate is about 63% higher than the national average. Entergy MS has 384,000 households in its monopoly service area. Entergy says about 40% or 154,000 of these live in poverty.
Entergy’s customers living in poverty are eligible for a government low-income assistance program for heating and cooling. About 30,000 customers use them. That suggests that about 124,000 unassisted households living in poverty will subsidize Amazon as Entergy’s rates increase due to the data center effect and the political concessions.
Entergy’s other residential customers are better off. There are about 230,000 Entergy customer households with median incomes above $55,000. But many of those households can’t afford to subsidize Amazon either as their rates increase. Those who can may resent it - but have no choice if they want electricity.
Is there a better way for Mississippi to have data center investments without harming small customers? Yes. One way is to require that data center power plants and related infrastructure be “behind the meter” (i.e., not on the grid) and that the data centers pay for all the related investments. Other states are doing this. Elon Musk did to accelerate start-up of his artificial intelligence project in Memphis while waiting for backup grid approval.
Who opposes behind-the-meter projects? In Virginia, the existing electric cooperatives and utilities do. Old Dominion Electric Cooperative has filed a formal protest against a proposed behind-the-meter project. Its concerns include grid reliability and fair cost allocation. Ironically, these are the same concerns Mississippi’s small customers should have with Entergy’s Amazon project and might voice - if they had an advocate.
The concerns of Mississippi’s small customers are unlikely to be heard, however, even if the PSC could do its job. No one speaks for them. Mississippi’s Public Utilities Staff was supposed to. But the utilities seem to have captured it. Other states have independent consumer advocates to represent small customers. That seems to help small customers and produce fairer outcomes in rate cases.
Mississippi’s small customers could use some help. And fairer outcomes too.
Kelley Williams, a Northsider, is chairman of Bigger Pie, a Jackson-based think tank promoting free markets and government efficiency.
