Thread by @SimonMahan

Some argue data centers should pay 100% of their own transmission costs. Sounds fair on the surface — but that’s not how our electric system was built. Transmission has always been socialized across customers and classes. In defense of data center transmission cost allocation.🧵

Data centers are new. Cost allocation isn't. 100 yrs ago, Samuel Insull pioneered cost allocation by spreading fixed costs across users. That’s how electricity became affordable and universal — economies of scale. Resi pays most, then commercial, then industry the lowest rate.

Industrial, commercial, and residential customers don't each build their own wires and plants. Costs are pooled. Rate classes balance out peaks and valleys in use, keeping the grid reliable and prices stable for everyone. Today, "cost of service" studies underpin our rates.

When factories grew, when homes added air conditioning, when businesses lit up skyscrapers — the grid adapted. Costs were spread across classes, because everyone benefited from a stronger, more resilient system.

When a new metal smelter shows up, or a Wal-Mart store, or even a new housing subdivision, folks often cheer. Jobs, new tax revenue, better local services; society benefits from economic growth, so we all pay a bit on our utility bill to support it. Growth = good.

Data centers today are just the latest “new load.” Yes, they’re big. Yes, they need transmission. But history shows we don’t build bespoke, one-customer systems. We build shared infrastructure that benefits the whole economy.

A lot of the "make data centers pay 100% of their costs" folks don't realize they're actually making a libertarian argument. Those same folks often have 0% problem with society paying for transmission lines for schools, hospitals, or even existing internet infrastructure.

If we suddenly demanded that data centers (or any one class) pay 100% of their infrastructure costs, the system would break down. Residential customers couldn’t afford AC, factories couldn’t scale, and rural electrification never would’ve happened. That's a threat to development.

I think some data centers would be more willing to pay for their infrastructure, but their local incumbent utility is concerned about the precedent that sets. Would a future military base, auto manufacturer, or some other factory also be forced to do the same and scare them off?

Really, I tend to think the complaint against paying for data center transmission lines is based on an equity argument: data companies are sometimes trillion-dollar corps, why should anyone help pay for their infrastructure when they should be able to pay their own way?

The data center crowd are so eager to get stuff built, some ARE ok with paying more than 'normal'. But I can guarantee you for every data center that makes this deal, there's an industrial users group fighting for all others to not; and we're dying by a thousand cuts.

Some folks view AI/data centers as a stupid waste of energy, and that helps underpin this argument against cost allocation. That sentiment really started with crypto and has spread to all data center types. But I struggle with the, "I don't use X, so neither should you" sentiment

I don't have a swimming pool, but I'm glad a local swimming pool business has electricity. I don't attend Lutheran church services, but I'm glad those faithful have a place of worship. There are a lot of places I don't patron, but are used for/important to civil society.

If AI/data centers have some social value (jobs, tax revenue, cloud services, or viral videos of cats jumping off high dives), there's an argument to be made that we all benefit. That's a debate worth having, and we need skilled state regulators to handle the discussion.

Are we better, together? All technological progress deserves scrutiny and criticism; that's how we advance. It really wasn't until recently that we could ascribe system costs to specific users, and maybe that's the future. But be careful for what you ask for. You may just get it.