Amazon's electricity rate discounts have pushed up utility costs

https://www.bloomberg.com/news/articles/2018-08-20/amazon-isn-t-paying-its-electric-bills-you-might-be

by petethomas • 8 years ago

247 180 8 years ago

SilasX3• 8 years ago

To save you the time, it's talking about how Amazon negotiates cheaper rates with electric companies, effectively passing off utility costs to the general userbase.

It starts with a story about how Amazon wanted to get power lines through a data center, and the community forced it to expensively route around a historic site, and the user base ended up getting a rate hike to pay for it (despite most of them not needing that part of the grid).

pc86• 8 years ago

It's only effectively passing costs off to other consumers if Amazon is paying less than the total cost in the first place. If they're paying something heavily discounted but still profitable for the electric company, nothing is being passed on to others.

PakG1• 8 years ago

It sounds like that's what was happening.

SilasX3• 8 years ago

True, but their story at the beginning, despite not following the general pattern, would count as passing off costs, because everyone had to pay a rate hike that was only necessary for one user.

flixic• 8 years ago

While it doesn’t seem ethical or “good”, in a certain way I kind of have to appreciate the way how Amazon pits different municipalities or companies against each, extracting maximum value for itself. They play from a clear power position, and by doing so remain in this position.

astrodust2• 8 years ago

It should be illegal for municipalities to throw huge tax breaks at companies so they don't have to fight to the death for each and every scrap.

This should also apply to stadiums where, for reasons I cannot even fathom, small cities throw billions into a building that they don't own, that has an astonishingly short life-span, and for which they derive very little in the way of actual benefits.

gbrown• 8 years ago

Completely agree - it's a classic prisoners dilemma, and the solution is to regulate cooperation.

ocdtrekkie• 8 years ago

Stadiums are a huge peeve of mine, because the people who paid for them can't even use them without paying for tickets! Pretty much every other public building my taxes fund I can make use of.

late2part• 8 years ago

Why?

dsfyu404ed2• 8 years ago

This. If you want to attract business by having low taxes those low taxes should apply to ALL businesses (i.e the actual tax rate should be low), not just the ones big enough to negotiate their own rate. This mark it up to mark it down nonsense just hurts the small players.

coastal-fiesta• 8 years ago

What is the lifespan of a sports stadium?

ryandrake• 8 years ago

I don’t understand it. It seems like all upside for companies like Amazon. Tax breaks, cheap utility bills, reduced red tape. What’s in it for the municipalities? It couldn’t just be the promise of jobs, could it? It doesn’t take that many humans to run a warehouse or data center.

throwawayjava2• 8 years ago

It's absolutely the promise of high-paying tech jobs.

People see salaries of FAANG engineers and think that those companies pay well in gneeral, and furthermore that the tech industry pays well in general.

I've seen this first-hand: people were super excited about an Amazon distribution center being built in a town I used to live in. The thought process goes something like: "Amazon says they'll be hiring hundreds of people and that they will train people on the job. Also, Amazon engineers make 100k. Therefore Amazon will hire me, train me, and I'll be making 100k!"

I think the ship has now sailed on Amazon; people today realize that an HQ full of engineers is different in kind from a distribution center.

But the cycle continues with other low-skill and medium-skill "tech" jobs. For a particularly striking example, see some of the rhetoric around the Foxconn plant in Wisconsin...

maym865• 8 years ago

I'm not suprised. This is what they do. When you think about it a lot of Amazon's business is partially subsidized by the tax payer. They pay less for the roads the drive on, they get huge tax breaks to open new wearhouses and headquarters and their workers' low wages are subsidized by welfare. The great deal you get and their ability to kill their competition is partially paid for by your taxes.

http://www.businessinsider.com/amazon-not-paying-taxes-trump...

https://www.politifact.com/truth-o-meter/statements/2018/may...

usaphp• 8 years ago

They don't pay for the roads

They do pay taxes...

vuln3• 8 years ago

Which taxes?

https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-20...

johnchristopher• 8 years ago

As much as any citizen or much less ?

Reedx2• 8 years ago

Amazon, and Walmart before it, is far from alone. Entire industries are subsidized by the tax payer, with larger externalities (e.g., fossil fuels or sugar).

toomuchtodo5• 8 years ago

Whatboutism. It does not make it right, nor should we support it.

hjnilsson• 8 years ago

Also the proliferation of the internet has been heavily tax subsidized to give access to the masses. Even more benefit is gained from being based in states without sales tax. Something brick and mortar stores can’t do to compete.

0xmohit4• 8 years ago

They kill competition which enables them to exploit their own workers. Meanwhile, we help them by giving them more business.

https://apnews.com/1d62290004b340feac5c359d59b86823

wmfiv4• 8 years ago

Are you suggesting that by winning in ecommerce and cloud computing they're gaining a monopoloy on jobs? Seems like a stretch.

There have always been and probably always will be unpleasant jobs. I watched 6 guys replace the roof of my neightbor's house yesterday in Houston. It was 100 degrees on the ground so I'd imagine it was intensely unpleasant working 8 hours on the ashphalt shingle roof. Does that make the roofing business exploitive? Should we all abandon our roofs?

knuththetruth3• 8 years ago

I think one of few good outcomes of monopolistic tech companies, like Amazon, is the degree to which they expose the lie that is American free market Capitalist ideology. There’s never been anything other than highly-subsidized State Capitalism and it’s outcome is massive, private command economies in the form of corporate dictatorships. These dictatorships then seek to assume the power of the state so as to achieve a monopoly on subsidization, while at the same starving the ability of the state to subsidize others and provide a challenge to their control.

mattnewton• 8 years ago

I think most of these state sponsored companies are unintentionally so, at least in the beginning. Amazon was built on state taxes not being applicable to internet purchases in the beginning, which was an unintended subsidy.

Apocryphon2• 8 years ago

Maybe this backlash will lead to a class consciousness forming in the startup community, at least in a weird Frankenstein left-libertarian-ish message of "the big guys are too big, they're harming free market competition"? While Silicon Valley skews 'socially liberal, fiscally conservative', that doesn't mean they are on the side of the monopolies by default.

mortenjorck• 8 years ago

It’s incredible to me how many comments here citing this sort of thing as common practice are made with the implication that we should be less upset because it’s just how business works, rather than more upset because these injustices are so widespread.

themagician2• 8 years ago

Not just tax dollars but investment dollars as well. Amazon is the big winner for almost every web based startup, whether they succeed or fail, because Amazon still gets paid.

It’s pretty hard to have a business of any size and not touch Amazon in anyway. Amazon, in many ways, has becoming embedded the as GE once was.

ronnier• 8 years ago

Amazon also gave many of us good paying jobs and opportunities to grow and get even better paying jobs.

s73v3r_10• 8 years ago

Which is completely and utterly irrelevant.

gojomo2• 8 years ago

Deceptive [original] headline ["Amazon Isn’t Paying Its Electric Bills. You Might Be "]: Amazon is surely paying all the bills it negotiated.

Economically-questionable conclusions: although individual secretive utilities might on occasion make dumb deals, they'll charge households whatever the market & regulators will allow, and then charge Amazon whatever the market & regulators allow.

And utilities would like Amazon as a customer because of the efficiencies of scale it'd provide. They'd not want Amazon at-a-loss, that then requires making other customers to pay more – and if utilities already had the market-power or case-to-regulators to charge others more, they'd already be doing it.

dang5• 8 years ago

OK, we've replaced the title with the article's subtitle, which is more specific.

gojomo2• 8 years ago

The subhead is less sensationally figurative, but still has factual problems: this "one customer's discounts necessarily push rates up for others" is not strongly supported by the article, or by economic reasoning. (Often scale can drive everyone's rates down: that's the whole mechanism of utility monopolies!) And it's certainly not supported in the inflammatory "everyone else" formulation.

And even in the particular leading anecdote of the article, it's not so much Amazon's rates that have caused a regulator to approve a new assessment on other customers - it's neighbors' demands for more-expensive underground transmission lines. Even if Amazon received no discounts, the lines would still be needed, and the regulator would allow this sort of capital outlay to be passed-through to ratepayers.

haney• 8 years ago

  Economically-questionable conclusions: although individual secretive utilities might on occasion make dumb deals,
  they'll charge households whatever the market & regulators will allow, 
  and then charge Amazon whatever the market & regulators allow.

Because most utilities are monopolies that are allowed by regulators I'm not sure that the market's invisible hand has that much of an impact is this particular situation. The consumers who need electricity for their homes don't have much choice here.

Edit: formatting

kwhitefoot2• 8 years ago

most utilities are monopolies

That's interesting. In Norway and UK, etc., You can buy your electricity from any operator you like. The only monopoly is the power cable. So I get two bills, one for energy and the other for the transport of it.

jrockway• 8 years ago

I feel like this is nothing new. Every few years, some major sportsball team threatens to leave their city unless the taxpayers fork over mega-billions for a new stadium. Despite any measurable economic benefits to having a stadium, the cities fall for it every time. It's the same thing, right? Amazon says "give us free electricity and we'll make jobs", and the politicians buy it even though it's very unlikely to be true.

Maybe someday we'll get an itemized tax bill, so you can see that you paid $4.12 for Amazon's electricity and $1.23 for a new sports arena, and can vote for someone else if that upsets you. Now that I think about it, that will never happen. And so, the cycle continues.

bcohen5055• 8 years ago

To be fair they don't pay for it every time... The chargers are now in LA, not SD

brandonmenc• 8 years ago

tbf, anyone saying "sportsball" isn't even going to know who the chargers are

dev_dull• 8 years ago

Sonics now in Oklahoma.

gamblor9562• 8 years ago

LA is not providing any money for the Rams/Chargers stadium, nor did it pay for any part of the LA Football stadium. We told the teams they could build a stadium if they wanted the second-largest media market in the US to call home, or they could shove it. They did the math and now LA has 2 football teams and 2 futbol teams.

wgerard2• 8 years ago

LA (along with NY and maybe Chicago) is the exception that proves the rule.

Most cities that tell teams to shove it just end up losing their teams to other markets: In this case, San Diego and St. Louis.

opo• 8 years ago

While their is less public subsidy for the Rams/Chargers stadium than many other stadiums, it doesn’t look like it is zero:

..."There will be no public dollars, no taxpayer dollars used for this project," he said. "The entire project has been privately capitalized and is being privately funded." The nuance between that statement — similar claims were made by Inglewood Mayor James Butts — and tax breaks that could reach $100 million lies in the fine print of a 185-page initiative plan filed by the developers earlier this month. It includes two paragraphs of how Inglewood would eventually reimburse the project for the costs of roadwork, utility work and public parks on the nearly 300-acre site. Meany estimated those costs at $60 million. The city would also reimburse costs of security, medical services and shuttles to off-site parking during stadium events, which Butts estimated at about $8 million a year.

http://www.latimes.com/sports/la-sp-stadium-tax-break-201501...

siruncledrew• 8 years ago

It's pretty easy to pull off.

Step 1: Make a threat about jobs/money to get lawmakers to pay attention.

Step 2: Get favorable legislation passed. Hold hands with lawmakers in photo-op for the papers.

Step 3: Stall on delivering on promises until lawmakers leave office or come up with excuses.

Step 4: Profit.

ErikVandeWater• 8 years ago

Step 0: Donate to both parties to gain favor with the implicit threat it will be removed if favorable legislation is not passed.

kartan• 8 years ago

and the politicians buy it even though it's very unlikely to be true.

For who are this measures passed? Interesting explanation:

https://www.youtube.com/watch?v=rStL7niR7gs

dionidium6• 8 years ago

Despite any measurable economic benefits to having a stadium, the cities fall for it every time

Yes, just like they "fall for" municipal operas, art museums, Shakespeare in the Park, and any number of other cultural amenities that don't have obvious and immediate economic impact.

Perhaps your complaint is less about public investment in cultural benefits than it is an issue with one particular kind of culture?

s73v3r_10• 8 years ago

Those things don't receive anywhere near the amount of funding that stadiums and arenas do.

ProAm• 8 years ago

When Bezos said "Your margin is my opportunity." he was talking to consumers and not completion. Amazon is killing off small business and forcing tax payers to take up the brunt of Amazons expansion.

wmfiv4• 8 years ago

What are examples of the small businesses that survived Walmart/Target but are now being killed by Amazon? Small hosting providers maybe.

ImAtWorkLol• 8 years ago

Specialty brick and mortar. No need to drive to a store specializing in your quirky hobby when you can get any supplies you need in 2 days off Amazon. Not exactly a bad thing, but those stores tend to serve as knowledge centers/gathering spots for the hobby. So some groups make it a point to shop brick and mortar, the whole FLGS (friendly local game store) in the tabletop community thing comes to mind.

donkeyd2• 8 years ago

It's interesting how this sort of means that the cost of Amazon is in a way socialized (including all the tax breaks for building a new office somewhere), while it's impossible to socialize healthcare in the US.

maym865• 8 years ago

The cost is socialized but the gains are not.

donkeyd2• 8 years ago

I can't say that I fully agree with that. The Amazon store and AWS have made a lot of stuff possible that otherwise might not have been possible. AWS for example gives out free services to startups, some of which might have major impact on many lives.

Sure, I'm playing the devil's advocate here, but in the end it's also really hard to define what is 'good spending' on tax dollars. For all we know, Amazon venturing into health care will end up being a great substitute for socialized health care. It could become Bezos' ultimate philanthropy. It could also be what gives him super villain-like power over the US.

partiallypro• 8 years ago

You're joking, right? Something like 65% of healthcare outlays are socialized in the US.

kerbalspacepro• 8 years ago

Those are rookie numbers, kid.

jdshutt• 8 years ago

Interesting that the regulations they're running up against were built to constrain the railroads, since this looks almost identical to the railroad rebates that Standard Oil and other gilded age trusts used to pump up their monopolies at the expense of smaller competitors and regular people. Basically, if you're a big enough customer, you can play service providers (railroads, power companies, municipal governments, etc.) against each other to get absurdly below-market rates and stick the bill to someone with less bargaining power. The railroad regulations were passed after a series of exposés of Standard Oil and other monopolists that took advantage of secret rebates.

More on Standard Oil, rebates, and the breakup of the trust: https://repository.law.umich.edu/cgi/viewcontent.cgi?referer...

I also recommend Titan, the well-researched John D. Rockefeller, Sr. biography by Ron Chernow.

james_niro• 8 years ago

I am listening to Titan at the moment great book

trumped• 8 years ago

Hopefully Facebook will die first, but maybe Amazon will be next...

sailfast• 8 years ago

I'm empathetic to those impacted by preferential and redacted rate negotiations, but not to my fellow Virginian complaining about rate hikes.

The community wanted it buried at a higher cost? Well, Dominion has a right as a regulated utility to negotiate rates for the following year to match infrastructure and other costs. This is so they can recoup / respond to storms and other issues. It's a part of utilities regulation.

Now, if they get a sweetheart deal on top that's certainly a different story, but the infrastructure cost passed on to the consumer thing has been part of the deal for a long time. It would likely only be higher for that following year, and then rates would return higher but closer to normal as the buried pipe went into O&M mode.

0xmohit4• 8 years ago

Brace yourself for an updated version of this post:

"Jeff Bezos Becomes the Richest Man in Modern History, Topping $150B"

https://www.bloomberg.com/news/articles/2018-07-16/happy-pri...

superkuh2• 8 years ago

This article is behind a computational* paywall. Paywall articles are against the general spirit of Hacker News. It should be replaced with a mirror of the text or removed.

* A computational paywall is one where you have to run arbitrary code from an untrusted source in order to access the content.

ctvo• 8 years ago

I... think you made up everything in your post.

You made up the term computational paywall, made up that paywall articles are against the spirit of HN (the "web" button specifically helps with getting cached versions of articles or bypass some paywalls through Google redirect. It's available on each thread).

A quick Google search shows you're are the only person who has used the term computational paywall.

superkuh2• 8 years ago

I did make up the term. Times change and new words are needed to describe new practices. But it isn't the first time I've used it. I've done so 2 or 3 times on HN.

Paywalls are against the spirit of HN. They always get switched out with non-paywall sources if possible.

The 'web' button unfortunately does not help in this case. The only source is bloomberg.

patrickg_zill• 8 years ago

Put "amazon tax abatements" in your favorite search engine and prepare to be surprised ...

tempotemporary• 8 years ago

bxtt• 8 years ago

But, this is not just Amazon specific. Even when discussing on renewable energies (e.g solar), this is the same argument that most conservative lawmakers and utilities make about applying a tax on residential solar. You have users of the grid that are not paying the same as others, but it's still utilizing the same grid as everyone else, therefore increasing the cost for everyone else that are not discounted, etc.

mmagin• 8 years ago

Kind of like what they've done to shipping costs!

bitxbit• 8 years ago

Took something as big as Amazon to topple Walmart. It’s going to take something even bigger to topple Amazon in the future. That should scare people. Scale begets scale.

dsfyu404ed2• 8 years ago

Walmart isn't exactly on the ropes. Also the customer bases are fairly different.

deadmik3• 8 years ago

this is the exact same issue with bandwidth costs. when you have major companies using up to 90% of the world's bandwidth it squashes on the resources of the little guys. this is why net neutrality was, in some aspects, not that great.

ChuckMcM• 8 years ago

I have always felt that these sorts of issues were behind the simple elegance of Google (another prodigious power user) creating a wholly owned subsidiary that was a registered power company. Sure it started as an argument between a local power company's onerous demands, but as a result Google just pays the inter-power company transfer rate, and the agreements are all private between power companies and not between a company and a "retail" user.

deathanatos• 8 years ago

I know I am supposed to feel sorry for this person in the article, and this doesn't justify anything Amazon is doing, but,

She was already struggling to pay her monthly $170

Her bill is 2x mine in the winter, and 5x it in the summer, and I pay 2x per kWh¹ more than she does. Am I unusual, or is this an absurdly high electric bill?

¹https://www.electricitylocal.com/states/georgia/gainesville/ ; Gainesville electric rates appear to be 11.6¢/kWh; I'm paying over 20¢/kWh

compuguy• 8 years ago

That links to the wrong Gainesville. Your looking for Gainesville, Virginia. The closest city to Gainesville is Haymarket, VA: https://www.electricitylocal.com/states/virginia/haymarket/

mmt3• 8 years ago

And that page says the average for Virginia is... 11.64c/kWh. I'd say the OC's mistake ends up being incidental.

mmt3• 8 years ago

Am I unusual, or is this an absurdly high electric bill?

You're unusual.

Or, rather, her bill is high, though not absurdly so, especially if it includes more than just the per-kWh charge (e.g. a fixed/per-meter charge or even additional utilities like water) and if it's her only household energy source (i.e. no natural gas, propane, or heating oil).

Virginia gets warm and humid in the summer and cold (enough) in the winter. Using resistive heating can really jack up an electric bill. The absurdity of that form of heating is at least debatable.

$34 in the summer mean 170kWh, which is remarkably low. It implies no AC, no or very light use of appliances like a dishwasher, clothes washer, or dryer, and either little use of hot water (or "cheating" with a gas-fired water heater).

A single 100W light bulb (remember incandescent bulbs?) left on 24x7 would use 73kWh in a month.

kwhitefoot2• 8 years ago

The problem of transparency seems to be getting worse everywhere. Local authorities in the UK regularly refuse to reveal details on the ground that the information is confidential even when the deal has to be debated in public.

Amazon's electricity rate discounts have pushed up utility costs

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