Why Today’s White House Pledge Agreement on Electric Rates Matters

By Paul Steidler: President Donald Trump took a break from prosecuting the war with Iran Wednesday afternoon to meet with leaders of seven tech companies building AI data centers and secure pledges that these projects will not lead to increased electric rates for consumers.

The key text of the mutually agreed upon proclamation is:

“The hyperscalers and AI companies that increase electricity demand must pay for the full cost of the energy and infrastructure needed to build and operate data centers, and must not pass this cost on to the American people …

“These companies will build, bring, or buy the new generation resources and electricity needed to satisfy their energy demands, and pay for all new power delivery infrastructure upgrades to service their data centers. They will voluntarily negotiate new, separate rate structures with their utilities and relevant State governments, and pay those rates, and for their infrastructure, whether they use the electricity or not.”

To be sure, the measure does not have the force of law. But the law, through federal and state regulations, public utility commissions, and regional transmission grids, already is supposed to have numerous safeguards so that big companies pay their fair share. Tech companies have strong arguments to make that they already do so. Sharply rising electricity prices also preceded the AI boom.

Furthermore, the arcane and complex issues of cost allocation and permitting will continue to be important in getting new facilities approved and operational.

The tech companies have a public relations Sword of Damocles hanging over them to act reasonably, and indeed to the extra mile, in working with utility regulators. At the same time, the President recognizes the profound importance of the AI buildout. State and regional regulatory obstructionists are now also likely to face his wrath as well.

Making this clear to policymakers and the American people today is far more sensible and important than introducing new legislation or litigating in the courts, which provides uncertainty and could take years to resolve.