Are data centers pushing grid costs onto consumers?

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.

Passing costs to customers

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."

Santiago’s lost battle against AWS

Over in the northern outskirts of Chile's capital Santiago, a hilly area below the Andes mountains, residents like Patricio Hernandez fear that the green space could be devastated by a major Amazon data center complex.

Hernandez and other residents tried to block the data center, arguing the permit did not consider the potential construction of a high-voltage power line that they said would be needed to feed the site, but they lost their case.

Environmental authorities in early April ruled the data center could move ahead, saying that any plans for a power line should be assessed separately.

Amazon Web Services said it aims for the data center to consume minimal energy and water and that its plan had met the environmental requirements.

"Chile is a magnet for this industry," ‌said Sebastian Diaz, ⁠a sustainable city specialist and former adviser on Chile's national data center plan. He also warned that Chile and the wider region must balance attracting investment with protecting people and the environment from negative consequences.

ESG Lens

Climate change stories are not all about messages of doom, but can also seek to inspire and provide hope, like today’s spotlight on Iraq’s once dried up marshes springing back to life.

After years of drought that left large swathes of Iraq's historic marshes cracked and empty, rising water levels are beginning to revive the wetlands, drawing buffalo herders and fishermen back to areas once abandoned.

Iraqi marshland expert Jassim al-Assadi said the Ishan Hallab area - part of Iraq's marshes, believed by some to be the biblical Garden of Eden and designated a UNESCO World Heritage site in 2016 - had dried up completely between 2021 and 2025, forcing herders to abandon it.