Entergy is looking for ways to “mitigate the impact” of a $1.8 billion gas plant purchase it has asked Louisiana regulators to approve, CEO Drew Marsh told analysts on Wednesday. The company has come under pressure regarding the potential bill impacts associated with the purchase of the 1.26-GW Cottonwood plant in Texas, and whether it will be used primarily to power new data centers.
“We know that Cottonwood isn't the shiniest new plant out there, but it is the most economic opportunity for our existing customers and the non-data center industrial growth that we are seeing,” Marsh told analysts during the company’s second-quarter earnings call.
The purchase must be approved by the Louisiana Public Service Commission and is under additional scrutiny following a June PSC staff analysis that found the deal could add upwards of $7 to the bill of a customer using 1,000 kWh/month. The staff report spurred a local news article questioning whether Meta should pay for the purchase, as the company is developing data centers in Entergy’s service territory.
The article, in turn, brought a response on social media from Louisiana Gov. Jeff Landry, R, that “the PSC should not allow anyone to take advantage of power markets at the expense of our ratepayers.”
The need for Cottonwood goes beyond data centers, Marsh said. “We think it's the best option to help with the steel mills and LNG facilities and petrochemical facilities that are continuing to grow in Louisiana,” he told analysts.
Jefferies equity analyst Julien Dumoulin-Smith said the Cottonwood deal is “increasingly in doubt” in a Wednesday report. “The emerging question is whether Entergy can find an incremental customer able to support Cottonwood and reduce the customer bill impact.”
Cottonwood is owned by Atlas Holdings and “it’s for sale now,” Marsh added. “It’s not for sale at the ideal time, when all of these customers are arriving that aren’t data centers.”
“It offers megawatts today,” CFO Kimberly Fontan told Utility Dive in an interview, and the utility is not ready to give up on the deal.
“We're working with all the parties ... how that plays out, we'll have to see in the regulatory process. But we think it's a really good asset if you compare that to what it would cost, and the time that it would take, to build a new asset. It’s quite competitive.”
The company is hoping to complete the deal in the first quarter of next year. Ultimately, a deal with Meta will help lower customer bills, Entergy says. The technology company will pay grid maintenance and upgrade costs that save residential and small business customers more than $2.65 billion dollars over the next two decades, Marsh said in a statement responding to the Cottonwood controversy.
Meta’s data center plans, announced in March, added about $15 billion to Entergy’s capital investment plan, which now sits at $67 billion. Entergy did not announce any additions to its capital plan in its earnings, though Marsh said since the company’s June investor day “interest in potential large-scale projects throughout our service area has continued to grow.” The interest remains early stage, he noted.
The deal with Meta pushed Entergy’s data center pipeline to 7-12 GW of potential load, and it also was not expanded.
New data center additions may be slowing, according to analytics consultancy Wood Mackenzie.
The firm on Thursday published new analysis showing 36 GW of data center capacity was added to the U.S. pipeline in the first quarter of the year, down 19% from fourth quarter additions “as established developers shift attention to their existing project pipelines amid a more challenging development and regulatory environment.”
