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Amazon's electricity rate discounts have pushed up utility costs
- SilasX 8y agoTo 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 8y agoIt'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 8y agoIt sounds like that's what was happening.
- SilasX 8y agoTrue, 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.
- ryneandal 8y ago>Late last year, Amazon dangled 12 more in exchange for reduced electricity rates, and AEP exempted it from surcharges other Ohioans must pay. “That’s de facto cost-shifting,” says Ned Hill, an economist who teaches economic development policy at Ohio State University. Sounds cut and dry for the Ohio anecdote as well.
- scarejunba 8y agoIf people want to play this game, then I don’t want to pay for rural and suburban electricity lines. They have higher cost to provide and I don’t need that part of the grid.
- SilasX 8y agoI would agree that, in a sense, these are getting a subsidy too, but far less lop-sided than the Amazon example.
- flixic 8y agoWhile 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.
- astrodust 8y agoIt 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 8y agoCompletely agree - it's a classic prisoners dilemma, and the solution is to regulate cooperation.
- ocdtrekkie 8y agoStadiums 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 8y agoWhy?
- throwawayjava 8y agoTax breaks make a lot of sense when they make previously unprofitable economic activity profitable. Especially if that economic activity is a net good for the local community. Unfortunately, many corporate tax breaks are created to compete with the municipality next door for economic activity that would occur in any case. The key point is that even if all municipalities banded together and agreed not to TIF, then the economic activity would still occur. Concretely, here's a list tallying the value of Wal-Mart TIFs: http://www.walmartsubsidywatch.org/state_tallies.html http://www.walmartsubsidywatch.org/state_tallies.html Now, here's the key question: would Wal-Mart (or a competitor) have built all those stores and distribution centers without TIFs? I.e., is Wal-Mart profitable without tax subsidies? The answer is obviously yes: those stores would still be enormously profitable, so Wal-Mart would still build them. Which means these tax breaks are not creating new value or spurring economic activity that would otherwise not occur! These TIFs are simply a wealth transfer from local taxpayers to Wal-Mart executives and shareholders, orchestrated by playing municipalities off of one another. Hundreds of millions of Americans pay extra taxes and/or receive inferior services because municipalities won't cooperate in a game of prisoner's dilemma. Great for the Waltons, though. TL;DR: because allowing municipalities to compete using TIFs results in wealth transfers from local communities to large corporations without creating new economic activity that wouldn't have occured anyways.
- maym86 8y agoI'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-bezos-2018-4 http://www.businessinsider.com/amazon-not-paying-taxes-trump... https://www.politifact.com/truth-o-meter/statements/2018/may/03/bernie-s/amazon-paid-0-federal-income-taxes-2017/ https://www.politifact.com/truth-o-meter/statements/2018/may...
- themagician 8y agoNot 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.
- usaphp 8y ago> They don't pay for the roads They do pay taxes...
- gojomo 8y agoDeceptive [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.
- dang 8y agoOK, we've replaced the title with the article's subtitle, which is more specific.
- gojomo 8y agoThe 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.
- dang 8y agoIf you or anyone can suggest a better title—i.e. one which is accurate, neutral, and uses representative language from the article—we'll happily change it again.
- haney 8y agoEconomically-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
- jrockway 8y agoI 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 8y agoTo be fair they don't pay for it every time... The chargers are now in LA, not SD
- brandonmenc 8y agotbf, anyone saying "sportsball" isn't even going to know who the chargers are
- s73v3r_ 8y agoRight, but then that just makes their argument that much weaker.
- Dylan16807 8y agoBah. They're not even using the term to display any lack of knowledge, because there are multiple sports involved.
- amerkhalid 8y agoI have heard term "sportsball" before. It seems that it is used mostly in context of making fun of people's addiction to their favorite teams.
- dev_dull 8y agoSonics now in Oklahoma.
- ProAm 8y agoWhen 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.
- wmfiv 8y agoWhat are examples of the small businesses that survived Walmart/Target but are now being killed by Amazon? Small hosting providers maybe.
- ImAtWorkLol 8y agoSpecialty 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.
- NathanKP 8y agoFrom what I see people tend to shop brick and mortar for things that they enjoy shopping for, and at places where the shopping experience is enjoyable. Going to the friendly local game store is an experience. The local store in my neighborhood hosts gaming nights, and scavenger hunts, and all sorts of nice things. These types of brick and mortar stores are still successful. But buying toilet paper, towels, and other random supplies is not a fun or enjoyable experience. There is nothing fun about going to a big box store, walking down crowded aisles, loading up a rickety, squeaky cart, and pushing it to a checkout lane with a long line. No one likes going to the store to shop for boring stuff so Amazon delivery is a clear winner there. But brick and mortar isn't going anywhere. It will always continue to be successful for sales that are actually fun and enjoyable things to buy.
- donkeyd 8y agoIt'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.
- maym86 8y agoThe cost is socialized but the gains are not.
- donkeyd 8y agoI 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.
- knuththetruth 8y ago>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. Most social services in developed European countries that allow people to be better off and not squeezed and abused by companies like Amazon? Healthcare, transportation, public housing, higher education? Literally almost anything besides what is spent on the USA’s unwinnable, forever wars? It’s not hard as soon as you set aside American Exceptionalism as having any legitimacy.
- frockington 8y agoWhat about America as a culture, economy or military is unexceptional. People all over the world wear blue jeans, trade on the NYSE, have iPhones and Androids and are protected by the United States. I don't think American Exceptionalism is not legitimate. Some countries may have more welfare but I don't think anyone in America is trying to claim otherwise
- jdshutt 8y agoInteresting 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=https://duckduckgo.com/&httpsredir=1&article=1125&context=articles 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 8y agoI am listening to Titan at the moment great book
- trumped 8y agoHopefully Facebook will die first, but maybe Amazon will be next...
- sailfast 8y agoI'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.
- 0xmohit 8y agoBrace 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-prime-day-jeff-amazon-ceo-s-net-worth-tops-150-billion https://www.bloomberg.com/news/articles/2018-07-16/happy-pri...
- superkuh 8y agoThis 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 8y agoI... 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.
- superkuh 8y agoI 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 8y agoPut "amazon tax abatements" in your favorite search engine and prepare to be surprised ...
- tempotemporary 8y ago.
- bxtt 8y agoBut, 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 8y agoKind of like what they've done to shipping costs!
- deleted 8y ago[deleted]
- bitxbit 8y agoTook 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.
- dsfyu404ed 8y agoWalmart isn't exactly on the ropes. Also the customer bases are fairly different.
- deadmik3 8y agothis 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 8y agoI 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 8y agoI 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/ https://www.electricitylocal.com/states/georgia/gainesville/ ; Gainesville electric rates appear to be 11.6¢/kWh; I'm paying over 20¢/kWh
- compuguy 8y agoThat 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/ https://www.electricitylocal.com/states/virginia/haymarket/
- mmt 8y agoAnd that page says the average for Virginia is... 11.64c/kWh. I'd say the OC's mistake ends up being incidental.
- mmt 8y 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.
- sealthedeal 8y agodidnt they make a Silicon Valley episode about this?
- kwhitefoot 8y agoThe 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.