During hearings before the commission this week, consumer and environmental advocates raised concerns about the specific costs the Georgia Power is including in its fuel cost recovery plan. John McCosh/Georgia Recorder
This coverage is made possible through a partnership between WABE and Grist, a nonprofit environmental media organization.
Georgia’s largest electric utility wants to lower what it charges its customers for fuel, which would in turn reduce customers’ bills.
It’s a different direction, after several Georgia Power bill increases in recent years.
But critics worry the new rate could see ordinary customers footing the bill for serving new, large users like data centers.
It’s another instance of a recurring question in this era of rapid data center development: who is paying for data centers’ enormous energy use?
“I’m trying to wrap my arms around whether or not those costs are being borne by those that are causing them,” said Georgia Public Service Commissioner Peter Hubbard during a hearing over Georgia Power’s fuel proposal on Tuesday.
Georgia Power is building expensive new infrastructure to meet the spike in electricity demand the utility is predicting, most of which comes from data centers. In December, the state Public Service Commission approved power plant expansions, storage batteries and purchase agreements estimated to cost at least $15 billion.
The commission has also approved new terms for the contracts between Georgia Power and large customers like data centers, designed to ensure those customers pay for infrastructure built to serve them.
The utility maintains that large power users pay their fair share and even help keep rates down for other customers.
But consumer advocates argue the existing protections aren’t enough. The costs embedded in this fuel proposal, they argued in hearings before the commission this week, are one example.
Fuel cost basics
On top of the base rate for electricity, Georgia Power charges customers to pay for the fuel that runs power plants. Under state law, the utility is allowed to pass its fuel costs on to customers as long as the Georgia Public Service Commission deems those costs prudent. Because of that law, this process, known as fuel cost recovery, is typically treated as a pass-through cost — not a matter for negotiation and substantial adjustment.
The current fuel cost proposal would lower monthly bills for a “typical” residential customer using 1,000 kilowatt-hours of electricity by about $5.74 a month, according to Georgia Power. But an additional charge for Hurricane Helene cleanup costs, also being considered by the commission, would reduce the savings. In the end, the average customer would pay $1.32 less a month.
But during hearings before the commission this week, consumer and environmental advocates raised concerns about the specific costs the utility is including in fuel cost recovery. They worry that under the current proposal, residential and small business customers would subsidize larger customers like data centers.
That’s because in addition to paying for the actual coal, natural gas and nuclear material used to run power plants, the fuel rate encompasses other fuel-related costs, including what’s known as firm transportation — the cost of delivering natural gas to a power plant via a pipeline. Although that cost has long been a part of the fuel rate, advocates are concerned this time around because of new firm transportation costs to support the new natural gas turbines Georgia Power plans to build to supply new demand coming mostly from data centers.
Who pays for what?
Georgia Power officials disputed the idea that firm transportation costs can be separated out among different types of customer, because the fuel carried in pipelines serves the whole grid.
“We serve the system,” said Matthew Berrigan, assistant comptroller for Georgia Power. “We’re not looking at adding generation for any specific customer or types of customer.”
But advocates pushed back.
“If there weren’t a large increase in data center demand, these units would not have been built,” said Bobby Baker, a lawyer who previously served on the commission, who’s representing MARTA in the current proceeding.
Power bills for large energy users like data centers and factories are calculated differently from residential and small business customers. Those big users pay for fuel differently, too. Instead of the fuel cost recovery rate that the commission is currently considering, most large commercial and industrial customers pay their fuel costs in real time. Because firm transportation is a fixed cost that doesn’t change with power usage, it’s not included in that real-time fuel billing. Fixed costs show up elsewhere on commercial customers’ bills, Georgia Power officials said.
The company also argued that because large commercial and industrial customers use lots of energy, they also pay a lot of money to the utility, driving down the base rate paid by ordinary customers. The influx in revenue that Georgia Power is expecting from new large customers like data centers is credited with the current three-year freeze on base rates, and the company has promised it will offset future changes to base rates.
The counterproposals
Still, advocates are not satisfied the breakdown of costs is fair given the historic expansion Georgia Power is planning, driven primarily by data centers. The commission’s public interest advocacy staff has called for an investigation into the rate large commercial customers pay and possible changes to how those customers pay for fuel.
The staff also recommended the commission deny more than $10 million in fuel costs related to power plant outages and terminate a program known as hedging that’s designed to insulate customers from spikes in fuel prices. Advocates argue the program doesn’t work as designed and ends up costing customers money.
If the commission adopts the staff recommendations, customers would pay less for fuel, though the impact would likely be small, according to a spokesman.
Environmental groups called for additional changes to the fuel cost recovery proposal, including adding a fuel cost line item to customer bills. They said this would increase transparency. Some also argued that Georgia Power should pay a percentage of fuel costs to incentivize the utility to minimize those costs. Company officials said they already work to keep costs as low as possible while keeping power service reliable.
Before deciding on the fuel cost proposal, the commission will hold a hearing on Georgia Power’s storm recovery costs from Hurricane Helene and other recent storms. A vote is expected on both plans later this month.
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