Cloud Computing Centre – Electricity Bill Subsidized?

Blog, Energy, Frontier Centre

A red flag may be warranted.

While, the recent announcement of Canadian Tire’s Cloud Computing Centre is welcome news on several counts, there is one implication of the pending arrival that may not be so well received.

Manitoba Hydro has (correctly) been concerned about the potential for a new or expanded energy intensive industry being subsidized by present (existing) ratepayers.  While Hydro proposed a new rate be set for electricity sold to such customers starting at least five years ago, a rate that would represent the marginal cost of new power, nothing has materialized.  Discussions surrounding the prospect for such customers waned since the 2008 global credit crisis and recession, and with no new major industry arriving in Manitoba since the 1990s.

The marginal cost to Hydro of the production, transmission and distribution of electricity could exceed 10 cents per kilowatt hour, while the price now being charged high volume industrial customers averages less than 3.5 cents per kilowatt hour.

If the demand from an intensive new or expanded industry was to be significant, it would either drive an earlier than otherwise required expansion (at high cost) or reduce the power that can be exported on a fixed price basis.

While Premier Selinger’s news release heralding the coming arrival of Canadian Tire’s cloud computing centre does not mention inexpensive electricity as being an element in the firm’s decision, other reports suggest that ‘cheap power’ was a factor. (Server farms require substantial volumes of electricity, have relatively few workers and locate where power is inexpensive.)

The implications for Manitoba Hydro and its existing ratepayers of the advent of a cloud computing centre should be made clear. If the new centre is anticipated to be treated as a major industrial power user and billed at current industrial rates, the inherent subsidy from marginal cost should be ‘picked up’ by ‘core’ government and not through future rate increases for Hydro’s current customers.

Transparency is required (not a regular attribute of the government).