Power and pricing take today’s focus as we unpack the ways in which millions of Americans are unknowingly financing electric grid projects before they get any benefit, passing on costs to customers, as officials seek to upgrade electric grids to keep up with demand from data centers.
We’ll also look at how Chile’s environmental authorities gave the green light for Amazon Web Services’ plans for a data center despite pushback from residents on concerns over destruction of conservation spaces, water resources and the potential construction of a high-voltage power line.
U.S. policymakers are increasingly letting utilities charge customers for power plants and transmission lines long before they’ve been built, boosting near-term bills in exchange for promised savings decades down the road, according to a Reuters review of regulatory disclosures.
The incentives aim to supercharge grid upgrades at a time of soaring demand from data centers that power artificial intelligence but are also raising power bills for households and businesses already reeling from rising energy costs.
Traditionally, utilities seeking to build expensive infrastructure projects have had to secure loans from banks and investors and are only allowed to pass along those costs to customers after the projects are finished.
But those projects can also be financed in advance under the so-called Construction Work In Progress (CWIP) incentive.
What’s a CWIP incentive, you ask?
CWIP is a benefit that supercharges cash flow and reduces borrowing costs for electric utilities. The fees typically total several dollars per month on an average household bill, multiplied across millions of customers.
At least 40 U.S. states now have some form of CWIP incentive, according to a Reuters review of several thousand pages of electric utility rate disclosures.
That’s twice as many as a decade ago, when a survey by economic consultant The Brattle Group found fewer than 20 states with CWIP provisions.
Reuters also interviewed two dozen industry officials, analysts, and consumer watchdogs to reflect the impact of these policies on the buildout and repair of the grid and on the electricity bills of American households and businesses.
Many of the new state CWIP policies have been introduced in just the past few years, as tightness on the grid has worsened, according to the Reuters reporting.
But business and consumer groups criticize CWIP for forcing up power costs for projects that may never benefit them.
“All this does is shift the financial risk to the ratepayer,” said Paul Cicio, president of the Industrial Energy Consumers of America, a trade group that represents large manufacturers. “The average ratepayer has no idea this is happening.”
