Data Center Power Rate Increases

by | Colocation

Data Center Power Rate Increases impact San Diego and Southern Orange County

Data Center Power Rate Increases Hurt The Data Center Market – SDG&E And Southern California Edison – The California Public Utilities Commission (CPUC) approved power rate increases of 12 per cent for San Diego Gas and Electric and 9 per cent for Southern California Edison which will dramatically affect Southern California data center customers. It is estimated that the rise in utility cost to business and homeowners will be $500 Million for the total utility energy expenses.

San Diego Gas And Electric Rate Increases

San Diego Power Rate Increases - 2013

From the California Public Utilities Commission Website 2000-2011

Data Center Power Rate Increases Impact Clients

This rate increase will impact clients in data centers starting September 1, 2013. When you compare the current utility rates in the United States without this planned rate increase, other than Hawaii, the utility rates are the highest electricity rates in the nation. This will cause many companies colocating their data center equipment in Southern California to consider other locations outside California.

Factored into the company’s expenses for the now current rate period are increased liability insurance costs, stemming from the 2003 and 2007 wildfires that swept through San Diego County. The 2007 fire was determined to have been caused by SDG&E in the San Diego back-country resulting in a $27 million settlement with the City of San Diego. The settlement itself and the shutdown of the San Onofre Nuclear GeneratingData Center Power Rates Station, of which the SDG&E owned a 20 percent stake, are not factored into the rate increases. The burden of the rate increases will fall largely on the business customers. Data centers are large consumers of electrical power. SDG&E and Southern California Edison were granted a 7.6 percent revenue increase starting in 2012. The hike will be collected retroactively, so many bills will rise by more than that percentage to catch up.

Well known is the fact that  SDG&E has the highest rates in the nation. Before this current rate increase, the cost for 1000 kilowatt-hours at San Diego Gas was $272.02, compared to seven years ago for the same 1000 kilowatt-hours the rate was $211.50. In the Sempra 2012 annual report (SDG&E’s parent company), SDG&E’s profit added up to more than half of Sempra’s. Over the past 10 years, the total return has been 305 per cent, this is nearly twice the total return of the S&P’s Utilities Index and three times the return of the general stock market.

How This Data Center Power Rate Increase Negatively Impacts Data Center Clients

If customers look closely at their Master Service Agreement contract with a data center facility, there is a clause in virtually all of those contracts that read something like:

The fees set forth in the Master Service Agreement may be increased to Client for increased charges imposed by its providers of utility power. The increase in utility power shall be proportional to the increase imposed by the utility provider.

With the recent changes in remote access to servers and other colocation equipment by clients, many are considering moving their data center operations to other states with much lower and more stable utility power providers. Since the cost of power for colocation is approximately (50%) fifty percent (power to equipment and the required cooling) many companies are reconsidering moving to other states with much lower utility rates and lower data center real estate space. The challenge to many companies is knowing who the good data center providers are in other states, understanding the occurrence of natural disasters and added tax benefits by state. This research can take months of already strained internal resources and time away from their core business. In the end, the cost benefits can be dramatically worth the effort.  is a free service provided to clients for selecting the right data center, colocation or cloud facility for their requirements. DataCenterAndColocation is one of the largest colocation site consulting firms in the United States. They represent approximately 3000 data centers and colocation centers. At no cost to clients, they identify specific space, location, power and security requirements, solicit proposals, professionally analyze the responses, compare the strengths and weaknesses, negotiate pricing and deliver highly competitive bids for colocation. They also perform comparative analysis for in-house vs. design build services, wholesale data center space and data connectivity.