As electricity demand from data centres continues to surge, a persistent question has dogged the industry: Are residential ratepayers footing the bill for massive tech infrastructure? According to Amazon Web Services (AWS) and an independent study it commissioned, the answer is a definitive no.

As a guest on The POWER Podcast, Mandy Ulrich, senior manager of energy and water for Americas East at AWS, outlined the company’s energy strategy and discussed findings from a study by Energy and Environmental Economics Inc. (E3) that examined how Amazon data centres impact local power systems.

Study Finds Data centres Generate Surplus Revenue

The E3 study evaluated Amazon data centres across a diverse set of utility territories, including large investor-owned utilities such as Pacific Gas and Electric (PG&E) and Dominion Energy, mid-size utilities like Entergy, and cooperatives such as Umatilla Electric Cooperative in the Pacific Northwest.

“The simple answer is that Amazon data centres are not being subsidised by other utility customers,” Ulrich said. The study projects that Amazon’s data centres will generate $33,500/MW of surplus value in 2025, increasing to $60,650/MW by 2030.

For a typical 100-MW Amazon data centre, that translates to $3.4 million in surplus revenues in 2025 and approximately $6.1 million by 2030. These surplus funds—revenues above the utility’s regulated rate of return—can be used by utilities to modernise grid infrastructure, improving reliability for all customers.

Grid Investment Benefits All Customers

The study found that Amazon data centres are driving investments in grid infrastructure that support not just their own operations but also local residential and commercial growth. Ulrich pointed to Entergy Mississippi as a prime example, where the utility is using investments from Amazon and other large customers to fund a $300 million “Superpower Mississippi” grid reliability campaign—at no cost to residential customers—targeting a 50% reduction in outages within five years.

Innovative Rate Structures Prevent Cost-Shifting

While the E3 study validates that existing rate policies have been effective in preventing cross-subsidisation, Ulrich emphasised that AWS continues to work with utilities on innovative approaches to ensure large industrial customers pay their fair share.

She highlighted a Northern Indiana Public Service Co. (NIPSCO) project as a “groundbreaking model.” Under this first-of-its-kind agreement, Amazon is investing in 3 GW of electrical capacity, with 2.4 GW dedicated to data centre operations and 600 MW reserved specifically to support grid reliability for all NIPSCO customers.

The structure creates a separate generation company (GenCo) that operates under a “commercial contract term,” Ulrich explained. By operating as a separate entity, GenCo isolates the cost of new growth to data centres. “The data centre companies that drive new demand for electricity will fund the generation and transmission infrastructure they require, ensuring that regular customers don’t shoulder those costs, even if the customer leaves before contract completion,” NIPSCO said in a Nov. 24 press release.

“NIPSCO’s existing customers will have no financial responsibility for powering Amazon data centres,” Ulrich said. NIPSCO said, “This structure is expected to provide value to customers by generating approximately $1 billion in cost savings that will be returned to current NIPSCO customers as credits on monthly electric bills over the project’s 15-year duration.”

Partnering with Communities

In the Pacific Northwest, AWS announced a self-supply agreement with Umatilla Electric Cooperative (UEC) in 2023 that allows Amazon to take responsibility for sourcing its own energy supply, enabling the company to include additional renewable resources in its portfolio. Meanwhile, UEC has lauded AWS as a strong supporter of the entire community. It said the companies have collaborated “to provide energy assistance, support local aid organisations, and bolster student connectivity and virtual learning.”

“AWS continues to be an outstanding community partner for the Umatilla Schools and this community,” Heidi Sipe, Umatilla School District Superintendent, said in a spotlight post on UEC’s website.

Efficiency as Part of the Strategy

AWS is also focusing on fundamental efficiency improvements. Ulrich noted that the company designs its own purpose-built chips, with Graviton-based instances using up to 60% less energy for equivalent performance. More than 70,000 customers have adopted these chips. The company’s Inferentia2–based instances offer up to 50% better performance per watt for artificial intelligence (AI) workloads.

On the facilities side, AWS has achieved innovative designs that provide 12% more compute power per data centre, more efficient cooling systems that reduce mechanical energy consumption by up to 46%, and the use of lower-carbon concrete and steel that has cut embodied carbon by 35%, Ulrich reported.

The results show in AWS’s global power usage effectiveness (PUE) score of 1.15 in 2024—significantly better than the 1.25 public cloud industry average and far below the 1.63 average for on-premises corporate data centres.

Carbon-Free Energy at Scale

AWS has positioned itself as the largest corporate purchaser of renewable energy for five consecutive years, enabling more than 600 renewable energy projects globally—enough to power 8.3 million U.S. homes, according to Ulrich. She said the company achieved its goal of matching 100% of electricity consumption with renewable energy seven years ahead of schedule.

Beyond renewables, AWS has invested billions in nuclear energy, including projects in Pennsylvania and Washington state. The company has also invested in 11 solar-plus-battery storage projects to deliver stored solar energy during peak demand periods.

Looking Ahead

As data centre demand continues to grow—driven by AI adoption, streaming services, and increasing digital dependence—the question of who pays for infrastructure will remain a key policy debate. The E3 study and AWS’s innovative agreements with utilities offer one model for how large electricity consumers and utilities can work together without burdening residential customers.

“We want to ensure that we’ve got the right reliable power to support [our customers], and we want to do that in a way that is collaborative with our local utility partners,” Ulrich said. “We intend to be there for the long haul.”

 

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