Monday Musings #59: Are Newly-Planned Data Centers Driving Utility Rate Hikes?

San Antonio’s two major municipal utilities, CPS Energy and SAWS, have both briefed city Council on the need for future rate hikes.

CPS Energy’s board recently approved a budget with a $50 million deficit, a signal that trustees believe a rate hike this year will enable staff to balance the budget.

SAWS recently briefed the City Council on its plans to raise its rates to fund $32 billion in looming capital costs, according to this article in the San Antonio Report. Right now, the average monthly bill for San Antonio residents is $56.68. By 2029 it would be $75.19, an increase of 32.7% over the next four years. Mayor Jones, who holds a seat on the SAWS board, signaled her support for the rate increases, which would begin in July.

San Antonio is a fast-growing, sprawling city, both factors driving the utilities to grow alongside the city's population and geography. Even so, here is a question that needs to be thoroughly answered before any hikes are approved: Is San Antonio’s status as a Tier One data center hub leading the two utilities to seek rate hikes so the city can become home to even more data centers?

The new generation of data centers powering artificial intelligence computing, a generational technology leap that many of us have already incorporated into our daily work lives, use far more water and electricity than the kinds of data centers we started to see in the 1990s.

Data centers tend to be out of sight, and thus out of mind. It’s time to step back and take stock. The city already hosts 56 datacenters, depending on how they are counted. That number includes a number of hyperscale data campuses, including Microsoft, Amazon, Cloud HQ, Vantage Data Center, Tower Semiconductor and CyrusOne.

Readers of this newsletter might not recognize the name of some of these entities, but consider this: the former Sony chip manufacturing facility, now a Tower Semiconductor plant, uses 214 million gallons of pure water a year while employing 600-700 people. That’s enough water to serve 2,000+ households using 100,000 gallons annually. By comparison, the Toyota manufacturing facility here uses mostly recycled water and employs 4,000, a number that is growing, with another 7,500-10,000 employed by the network of suppliers.

It’s worth noting that both utilities operate rate plans that discount the cost to families living at or 125% above the federal poverty level, currently $49,550 for a family of four.

My issue with SAWS, which is otherwise noted for its many conservation initiatives over the years, still turns a blind eye to the cost we all bear for residences and businesses that use automatic irrigations systems to keep non-native turf and landscaping alive and green year-around, even in the hottest, driest months, which can now extend from April to October.

Early in the life of the bigcitysmalltown podcast, we hosted Gregg Eckhardt, a highly respected senior water engineer with SAWS, who said that up to 50% of SAWS water in the summer months is consumed by the owners of those irrigation systems. That is an astonishing figure. Unfortunately, no elected official in my experience is willing to take on the issue and follow cities in Arizona, Nevada, and New Mexico that have banned non-native landscapes and such water usage.

An examination of the incremental rates SAWS charges for egregious water users, who consume with indifference to conservation or cost, is a related problem. Many people who own large homes and lots in exclusive gated communities are indifferent to the added cost. The rates should be penal for such usage. I’d like to see how a healthy multiple of the rate the rest of us pay affects usage. Even if a truly punitive sliding rate scale failed to reduce consumption, the added revenue would offset some of the water utility’s future expenses.

My issue with CPS Energy is its interest in generating additional power beyond its service area. Our podcast guests this week will be Ted Flato, founding partner of Lake Flato Architects, and Jada Jo Smith, both ranch owners on the Edwards Plateau, who are campaigning against the proposed Howard–Solstice Transmission Line Project, which would run 370 miles from Fort Stockton in West Texas to a CPS Energy station in Bexar County, through environmentally sensitive areas, including over the Edwards Aquifer Recharge Zone in multiple counties. 

CPS Energy’s power supply has to grow with the metro area, and is essential to future job growth in the region, but one wonders whether the high-voltage line would be necessary if the two utilities, which serve a multi-county area, would declare a moratorium on providing service to new data centers.

At the very least, we need to have a very public conversation about the pros and cons of continuing to build out the city and region as one of the country’s major data center hubs. Let data center supporters convince us that the benefits outweigh the risks to our water and energy supply. If such evidence is not at hand, the public should oppose rate hikes until Mayor Jones and City Council can determine what rate increases serve the best interests of the community.