(The Center Square) – Data centers are expected to consume extraordinary amounts of electricity in Louisiana, forcing utilities to build new power plants, transmission lines and other infrastructure.
Entergy Louisiana says that growth will not simply create new costs. The utility argues its agreements with large data center customers could ultimately save existing ratepayers about $2 billion over 20 years, but consumer advocates argue those savings depend on optimistic assumptions that may not hold over time.
The argument is this: Make data centers pay for the costs they create, then use the additional money they pay as some of Entergy’s largest customers to help cover expenses everyone else already shares.
Entergy expects this to be the case for Meta’s data center and plans to build three new natural-gas power plants and major transmission infrastructure to serve the project. Under its agreement with Meta, the company is paying minimum monthly charges designed to cover the full cost of the additional generation needed over the initial 15-year contract.
Meta is also directly funding certain transmission facilities built specifically to connect the data center to the grid, preventing those costs from being passed on to other customers.
But Entergy says the savings come from what happens after those new costs are covered.
The utility expects the money it collects from Meta in the form of rates to exceed the added cost of serving the data center. Some of the remaining revenue would then help pay for Entergy’s existing system – costs that otherwise would be divided among residential, commercial and industrial customers.
Meta will also contribute toward storm debt and Entergy’s grid-resilience program, adding another enormous customer to expenses already shared by existing ratepayers. Because Meta will consume so much electricity, the effect could be substantial.
In simpler terms, Entergy argues it will have far more electricity sales over which to spread the fixed cost of maintaining its transmission system.
“Entergy’s analysis shows that large data centers like Meta meaningfully reduce costs for all customers by covering a substantial portion of systemwide investments, beyond the ones being built to serve them, that would otherwise be paid through general rates,” Entergy told The Center Square in a statement. Meta has promised “$300 million toward Entergy Louisiana’s resilience program, roughly $700 million toward storm restoration costs for past hurricanes, and more than $1.5 billion toward major transmission and generation upgrades that will benefit all customers.
But each of the above benefits depend on several assumptions Entergy has made, according to various stakeholders.
Logan Atkinson Burke, executive director of the Alliance for Affordable Energy, said Entergy’s projections rely on what she described as “very rosy numbers” and limited analysis of what would happen if construction costs rise or expected revenues from Meta fall short.
“If Entergy’s numbers, if everything works out beautifully and as expected, there may be an argument to make that other customers will benefit,” Burke told The Center Square.
Her organization’s forthcoming analysis, however, is expected to argue that the projected benefit to other customers is far more fragile than Entergy suggests.
Burke said an increase of roughly 3.5% or more in the cost of the project could effectively wipe out the benefits Entergy says existing customers will receive.
Catherine Kunkel, an energy consultant who has testified on behalf of the Alliance for Affordable Energy and Union of Concerned Scientists, warned that other customers could eventually inherit significant costs.
Her biggest concern is time.
The new gas plants will operate for decades, while Meta’s initial electric-service agreement lasts 15 years.
Entergy argues that if Meta leaves after that period, the plants could be used to serve other customers and replace generation the utility otherwise expects to build.
Kunkel says that may not happen.
If electricity demand grows more slowly than Entergy forecasts, fewer future power plants may be needed. Existing customers could then be left paying for expensive generating plants originally built because Meta came to Louisiana.
There is also a timing problem. Building a gas plant can take years, while Meta may be required to give far less notice before declining to renew its agreement. Kunkel warned that Entergy could already have committed substantial money to future generation before learning that Meta plans to leave.
She also noted that some costs remain shared. Fuel and purchased-power expenses flow through Entergy’s Fuel Adjustment Clause. If Meta’s enormous demand raises those costs, other ratepayers could pay part of the increase.
Kunkel recommended a longer initial commitment of 25 years and stronger protections against shifting data center-related costs to other customers.