At the beginning of this year, the story of 87-year-old Rosie Thomas came to light. Rosie who is a resident of Gainesville, a small town in Virginia, was at the center of a dispute between Amazon and a local utility provider. The case looked simple at first although it turned out to be more complex than anyone had thought. Amazon had established a data center just around the town. As you’d expect, the data center needs power. So naturally, they contacted Dominion Energy, a local utility company and one of the biggest in the state.
Dominion Energy wanted to develop an above ground line to supply the data center with the electricity it needed. The only challenge here was that the line would pass through an old Civil War battlefield and right above Rosie’s property. After three years of petitions against the proposal including protests by locals at the Amazon data center, Dominion Energy chose to go for a buried line that would stretch along a nearby highway. This project would cost $172 million.
For Rosie and other locals, this was perhaps the end of the story. But after a few weeks, local authorities approved new regulations that appeared to pass on the costs for this investment to the residents of this small town. The local legislators approved a proposal by Dominion Energy to raise the money needed for the project through a monthly fee charged on local residents. It was a slap in the face for Rosie and her fellow town residents. As it stands, Rosie is struggling to pay even for her $170 a month bill so any extra fee would be too much to take.
However, this is not the only case. This kind of thing is becoming a pattern. Amazon has been expanding its Amazon Web Services and cloud computing business. However, this expansion demands massive investments in new infrastructure most of which has to go for electricity costs. The company has negotiated its way into new locations worldwide cutting deals with local officials for tax exemptions. It’s estimated so far that the online e-commerce giant has received over $1.2 billion in tax incentives and millions of this have gone towards subsidizing the cost of setting up its data centers.
The energy companies have largely been targeted. Desperate for growth, any deal that promises to revive the future of local utility companies is definitely attractive. Local authorities are pushing for this to happen in an effort to attract Amazon and its investments to their cities and towns. But as it turns out, local taxpayers may be in fact paying too much of a hefty price for the Amazon presence in their districts.
The difference between tax incentives and these off the book deals on electricity is simple. While tax incentives must always be disclosed to the public, deals on energy can be swept under the rug. In the end, local residents may be powering an Amazon data center with their own money without even knowing it. Other tech companies like Google have also benefited from these kinds of deals but so far Amazon has had the largest share of benefits.