Hochul’s gigawatt-sized gaslighting on AI information facilities

Beware the coming artificial-intelligence boom, says Gov. Kathy Hochul: The new tech will spawn “massive data centers” poised to scarf up electricity “faster than the grid can keep up,” boosting residential bills in the process.

If you’re getting déjà vu, it’s because Hochul pulled from this same playbook a year ago when she blamed “institutional investors” for local families’ inability to buy their own homes.

Only a microscopic share of single-family housing stock is owned by large firms, and Hochul never produced evidence that they were affecting home prices in New York.

But it provided a handy PowerPoint slide about “affordability”; now data-processing facilities are letting her swing at another populist piñata.

The downside here, as with housing, is that every press conference and X video treating data centers as the boogeyman distracts from the far more complicated, but fixable, problems that are driving state electricity costs into the stratosphere.

Residential electricity rates have been surging across New York since 2019.

COVID-related disruptions played a role, but even since mid-2021, rates are up over 30%.

Most recently they’ve been rising at an average annual rate of about 8%, close to triple the rate of inflation.

Environmental rules, renewable energy requirements, taxes and climate mandates have all helped put New Yorkers’ electric bills on steroids — but Hochul’s “massive data centers” aren’t to blame.

If they were, Virginia — the epicenter of recent data-center growth — should have seen its rates surge above the national average, or at least rise faster than inflation. Neither has happened.

There’s a kilobyte of truth though behind the governor’s gigawatt rhetoric, which she aims to deploy in Tuesday’s State of the State address.

New York’s electricity market would have difficulty accommodating any new large customers, whether it’s data centers or factories, because the state has been blocking the sorts of new power plants necessary to meet rising load, or demand.

That’s helped push up prices in recent years — and that’s the side of the ledger state officials should be worrying about.

When prices rise for any commodity, such as housing or electricity, more people look to make money by selling their product at that high price.

But New York has long been purposefully unwelcoming to new large-scale power projects, not only those driven by fossil fuels like natural gas but also to hydroelectric and nuclear power plants.

(Hochul recently signaled support for limited nuclear power, but the lead time on establishing such plants will be considerably greater than that of most proposed data centers.)

Obstacles to in-state generation, and physical limits on importing electricity and delivering it, are already posing problems for New York City — and that’s without data centers.

In the past, rising electricity demand was not just tolerated but welcomed, since greater demand meant improved quality of life (think the rise of air conditioning) and economic growth.

Micron, the memory-chip manufacturer that Hochul herself has touted, would be both New York’s biggest-ever corporate welfare recipient and its biggest electricity user — drawing more juice than some entire states — if it someday opens its factory near Syracuse.

AI data centers are pushing that discussion into new territory, because the local benefits are more limited: They create just a fraction of the jobs that an automotive manufacturer or a food processor would.

They also test the boundaries between different regulators — while the feds oversee the wholesale electricity market, whose products flow across state lines, states regulate the local utilities that deliver electricity.

Large electricity customers coming online in one state, under that state’s rules, can cause distortions across entire regions.

If Hochul is so concerned about data centers, her first move should be to examine the extent to which the state is subsidizing them.

For instance, regulators were slow to respond when cryptocurrency operations popped up in rural upstate municipalities that get discounted electricity from the Power Authority’s large hydroelectric dams at Niagara Falls and Massena.

Local agencies regularly give tax breaks originally crafted for factories to commercial operations like data centers that create few jobs.

And don’t forget that New York has gotten itself into the electricity-hungry artificial intelligence business with its state-funded “Empire AI” initiative.

But as with New York’s high electricity prices and housing supply obstacles, serious interrogations about the Power Authority, or economic development incentives, or state capital spending can’t match the social-media draw of demagoguery.

And Hochul, along with the rest of New York’s political class, will seek to safeguard herself from accountability as long as she can blame her favorite villain: “them.”

Ken Girardin is a fellow at the Manhattan Institute.