photograph by steve jones
The Colossus supercomputer.
It’s a classic David versus Goliath story.
Goliath, in this telling, is Elon Musk, the world’s richest man, who has built and is continuing to expand his supercomputer in South Memphis.
David is Boxtown, a proud South Memphis neighborhood of about 3,000 which has long struggled against intractable poverty, neglect, and exploitation.
Boxtown residents, with support from environmental activists, oppose Musk’s supercomputer, Colossus, concerned by Musk’s reputation for ignoring regulations and shrouding information behind non-disclosure agreements.
Located only a few miles from each other, the supercomputer and the neighborhood are worlds apart. Goliath has the tax breaks and lower electricity rates to prove his power.
The Greater Memphis Chamber said Colossus is a $12 billion project, but according to reporting by The Daily Memphian, xAI will pay taxes on a $2.2 billion assessment — an 82 percent reduction by the county assessor’s office. Homeowners in Boxtown — and the rest of Memphis, for that matter — will get no discounts on their tax bills.
Colossus has been approved for enough electricity to power 100,000 homes, the equivalent of all the homes in the six municipalities outside Memphis. Musk has said he will likely be asking for more. Although experts are raising alarms about the risk of supercomputers and data centers capsizing the country’s electrical systems, Memphis Light, Gas and Water Division says Colossus’ consumption will not affect its customers.
“We have one of the highest energy burdens in the country and citizen morale is low for so many thousands of Memphians. We do not need something like this to add to the ugly side of the city’s legacy that reeks with racism, lack of integrity, and accountability to its citizens.” — Pearl Walker
Whatever amount of electricity Colossus consumes, its rate will be half of that paid by Boxtown’s human residents. That’s the difference between MLGW’s industrial rate and its significantly higher residential rate.
It’s a dichotomy in rates that applies to every homeowner in Shelby County:
TVA charges MLGW $60/MWh (megawatt hour) and MLGW in turn increases it by 6.7 percent for a final industrial rate in Memphis and Shelby County of $64.
For residential customers, TVA charges MLGW $88/MWh and MLGW increases it 38.6 percent, charging residential customers $122.
The gap in rates led Pearl Walker, member of Memphis City Council District 3, co-chair of the council’s MLGW committee, and board member of the Southern Alliance for Clean Energy and the Green Bank, to call it “concerning, predatory, and indefinitely not acceptable.”
“We have one of the highest energy burdens in the country and citizen morale is low for so many thousands of Memphians,” Walker said. “We do not need something like this to add to the ugly side of the city’s legacy that reeks with racism, lack of integrity, and accountability to its citizens.”
More than 48 percent of Memphians face high energy burdens, and 30,000 families pay more than 20 percent of their incomes for energy.
MLGW has the discretion to set the final electricity rates, according to a TVA spokesperson: “TVA sets the wholesale rates and the local power companies pass those on. Local power companies have the ability to add their own charges on the retail level.”
Put another way, if the industrial rate was increased by MLGW at the same percentage as residential rates, industries would pay $83/MWh rather than $64/MWh, raising the question of whether MLGW could then decrease the residential rate.
MLGW has 76 industrial customers, and president and CEO Doug McGowen defends the difference in electricity rates, saying the costs of providing electricity for homes is much more involved than it is to industry. He said: “MLGW’s cost to serve varies among class based on the complexity and quantity of infrastructure necessary to serve that class of customer. In short, there is significantly more infrastructure per KWh (kilowatt-hour) necessary to serve residential customers when compared to the infrastructure per KWh necessary to serve industrial customers.” That residential infrastructure requires significantly more circuits, transformers, poles, fuses and switches, and circuit breakers, he said.
TVA’s propensity to stonewall Freedom of Information Act requests makes it difficult to trace the evolution of the industrial rate, although 1933’s TVA Act does say that it “shall be considered primarily for the benefit of the people of the section as a whole and particularly the domestic and rural consumers to show the power can economically be made available, and accordingly, that sale to and use by industry shall be a secondary purpose.”
That’s why the late David Freeman, former TVA board chair, complained that industrial rates fly in the face of TVA’s founding mandate to “improve the lives of low-income families with cheap electricity” and charged that residential customers are being used to subsidize industrial customers. “They are doing just the opposite of what the TVA Act requires. For 70 years or more, TVA earned the love and affection of people in the Tennessee Valley and now, they are doing the opposite of what the TVA Act requires.”
Dr. Stephen A. Smith, executive director of the Southern Alliance for Clean Energy, agreed: “The industrial rate was created to subsidize low residential rates, but industrial customers started lobbying TVA and threatened to move to other states. It resulted in sweetheart deals from TVA. After all, industrial customers have unique access to TVA and to local utility companies like Memphis Light, Gas and Water and that helps explain the sweetheart rates. TVA is hiding the ball on how it’s manipulating rates to the advantage of big industrial customers at the expense of families and small businesses.”
Meanwhile, TVA’s board increased its base power rates by 5.25 percent last year after a raise of 4.5 percent the year before. The cumulative increase of 9.75 percent over two years kept TVA from reaching the 10 percent threshold that would have allowed local power companies like MLGW to renegotiate their contracts.
Effective January 3rd, MLGW’s increased its electricity rates by 4 percent, part of the 12 percent hike approved over three years. The disparity between industrial and residential rates was not addressed.
Tom Jones is the principal of Smart City Consulting, which specializes in strategic communications, public policy development, and strategic planning. He tends the 20-year-old Smart City Memphis blog and is an author with experience in local government. He can be reached at tjones@smartcityconsulting.com
