Data centers boost Southern’s profits. After midterms, changes at PSC loom.
Leaders from Southern Co. and the Georgia chapter of a national environmental advocacy group publicly celebrated wins this week — for very different reasons.
For Southern, parent of Georgia Power, data centers and manufacturers drove its third-quarter profits to $2 billion. That’s up from $1.7 billion during the same time a year ago. A hot and humid summer across the Southeast propelled Southern’s electricity sales to its highest in generations, Chris Womack, Southern chairman, president and CEO, said.
“The third quarter was one of the warmest quarters in our service territory over the last 50 years, and we delivered electricity sales that were higher than any prior quarter on record,” Womack told investors and analysts.
In a conference call earlier in the day, Georgia Conservation Voters cheered the work that their political arm did to help get a Democratic majority for Georgia Power’s regulator for the first time in decades.
The three Democrats on the five-member panel, the group’s leader said, will be a check protecting existing customers from having to pay for the power needs of those data centers.
Brionté McCorkle, executive director of Georgia Conservation Voters, said the new-look Public Service Commission board will push for more affordable and emission-free sources of energy.
“We now have to deliver on what people are concerned about,” she said. “They have high bills, they are concerned about data centers; a lot of people are concerned about climate change.”
Southern presented its third-quarter earnings two days after midterm elections, where Democrats in Georgia won every statewide race, including governor and the PSC and the House flipped to blue.
Voters elected Democrat Shelia Edwards to the PSC, which regulates the rates and profits of Georgia Power and Atlanta Gas Light. Incumbent Peter Hubbard was reelected.
Governor-elect Keisha Lance Bottoms, campaigned on a temporary statewide moratorium on data centers. Democrats made high power bills, clean energy and stricter scrutiny of data center contracts the focus on their races.
Demand growth
The Georgia PSC under Republican leadership enacted six rate hikes in recent years that added about $43 to the monthly bills of ratepayers.
Georgia Power and the PSC later agreed to rate freezes and said new rules by the commission will protect ratepayers from absorbing costs to serve data centers.
Southern has made it clear that data centers, will be the driver of its revenue and profits in the years to come. Georgia is now the No. 1 state for data center construction, and Womack told Wall Street analysts that growth is moving west into Alabama and Mississippi, where the energy giant also operates electric companies.
Data center growth is up 52% compared to a year ago, Womack said. More people moving to the Southeast and more than $25 billion in economic investment announced in the last three months, including an Audi plant planned for Middle Georgia, is further driving up electricity demand, he said.
Georgia Power and its sister utility in Alabama are soliciting bids for more power generation into the next decade. While various factors will come into play, if the utilities end up building that power infrastructure themselves, that could take Southern’s projected five-year, $85 billion capital expansion to $100 billion, said David Poroch, the company’s chief financial officer.
That figure also includes projected growth from other Southern subsidiaries, including its wholesale power unit and Southern Company Gas, which owns half of pipeline giant Kinder Morgan.
Critics fear the cost of expansion could fall on other ratepayers, particularly if data center projects fall through.
The massive growth, combined with a changing political leadership across all parts of state government, is setting up Georgia Power, consumer and environmental groups for what could be major battles at the Legislature and the PSC over who pays for power grid infrastructure and whether the electricity comes from emission-free sources or fossil fuels.
The profit drivers that Southern’s executives touted to Wall Street — revenues from data centers and high electricity sales because of an extra hot summer — are the very issues that consumer and environmental advocates want lawmakers and regulators to address.
During the election season, climate groups pushed the message that planet-warming emissions fossil fuels and from fossil fuel-powered power plants are driving up utility bills. Meanwhile, Georgia Power has reversed course on closing most of its coal-fired power plants by the end of the decade.
Georgia Power is also embarking on an unprecedented grid expansion. While some solar and battery storage is part of that mix, most of the expansion will be powered by gas.
GCV and others argue that additional electricity demand, for data centers and other growth, can be met with renewables, battery storage and other clean energy technologies. Those power sources have been made more affordable in recent years and do not have planet-warming emissions.
“There’s a sentiment that … renewables do not work or will not work to meet what data centers need in this time, and that is not true,” McCorkle said in a postelection debrief online.
Georgia Power has made promises that data center developers will absorb the cost of the electricity they use and that the revenue collected from them will help offset future rate increases for residents and other non-data center users.
“We are committed to holding base rates flat in Alabama and Georgia to at least 2029,” Womack said.
Working with regulators
The first question to Womack from Wall Street analysts was what newly elected regulators in Georgia and Alabama meant for Southern and its electric utilities there.
Unlike Georgia, the Alabama regulators remain all Republican. Womack said executives will “spend time with the commissions,” and repeatedly said he was confident that the companies’ ability to capitalize on growth and freeze rates will resonate with them.
“We’re going to continue doing the work that we’re doing, making sure we’re providing and being very sensitive in hearing the issues and concerns of our customers and providing them with great service, but also with benefits on the affordability side,” he said.
He also said company executives spoke with Bottoms during her campaign. Womack said he hopes to change the sentiment around data centers and ease concerns about their impacts on air, water and power bills.
GCV is ready to hold the utility and the PSC accountable to that. That can happen with Democrats at the table, McCorkle said.
“What’s changed is that we have people who are reasonably weighing the interests of the public and not just going with whatever the business community needs at this moment,” she said.
A note of disclosure
This coverage is supported by a partnership with Green South Foundation and Journalism Funding Partners. You can learn more and support our climate reporting by donating at AJC.com/donate/climate.