Trump’s Ratepayer Protection Pledge is a Pinky Swear That Doesn’t Solve Electricity Issues

During the State of the Union, Trump called on tech companies to sign a “ratepayer protection pledge” to shield consumers from higher electricity prices driven by AI data centers. And last week, several executives from these companies — including Amazon, Google, Meta, Microsoft, xAI, Oracle, and OpenAI  — gathered at the White House to sign the pledge. But what does this all actually mean for consumers?

Trump himself noted that the AI industry needs “some PR help,” so the idea that this was a stunt is certainly not far-fetched. Trump also gave a distinctly Trumpian explanation of the electricity price increases: “People think if a data center goes in, their electricity prices are going to go up, and that’s not happening. It’s not going to happen. And for the areas where it did happen, it won’t happen anymore.” It didn’t happen, and also it won’t happen anymore.

According to the administration, companies that sign the pledge commit to meeting new energy demands by building, purchasing, or otherwise acquiring the necessary new generation resources and electricity. They agree to pay the tab for these resources, either by building new power plants just for them or by buying the power they need. Plus, where they can, these companies promise to boost the general public supply by adding more capacity. The companies also promise to pay for infrastructure upgrades and pay rates whether they use electricity or not.

So far, that sounds great. But like most promises made by the Trump administration, looks may be deceiving.

The first problem is that it’s a pinky swear with no enforcement mechanisms. Per the White House language, “companies agree to protect American consumers from price hikes due to data center energy and infrastructure requirements.” Sure, tech executives might also agree that creating products that are harmful to teenagers’ mental health is a bad idea, but then turn around and push those products on teenagers. It is entirely possible these tech companies could issue press releases publicizing this “ratepayer protection pledge,” but then fail to take any substantive action. No part of this pledge enforces any of the commitments.

The second problem is with how companies will achieve these promises — and this is where the tech companies might run into opposition from the administration. Trump has fought renewable energy since day one, calling it part of the “Green New Scam.”  Among the many, many cuts he has made since returning to office is the elimination of $2.5 billion from the Department of Energy’s Energy Efficiency and Renewable Energy program and $80 million for the Department of the Interior’s renewable energy programs.

Tech companies, however, are not opposed to renewables. In fact, Microsoft and Google have often touted their efforts to convert operations to 100 percent renewables, and both companies rank high (3rd and 2nd, respectively) on Energy magazine’s list of top companies adopting clean energy. These actions may cause issues with Trump because approval for most energy infrastructure projects requires sign-offs from local, state, and federal regulatory bodies.

Permitting is a complex process. At the local level, a project sign-off can take the form of a land-use permit and community consent. State-level permitting processes vary, and typically require reviews by the state’s environmental protection or transportation office. An environmental review is typically conducted to ensure that the project will not negatively impact land, air, or water through pollution. The federal permitting process is much more complicated and spans many categories and agencies. Brookings has published a table that highlights many, but not all, triggers for a project to require federal permits. All of these triggers depend on the scope and location of a project. For instance, interaction with endangered species requires consultation with the National Marine Fisheries Service or the US Fish and Wildlife Service. Similarly, projects near waterways, wetlands, or harbors need permission from the US Army Corps of Engineers. Offshore wind construction on the Outer Continental Shelf specifically requires permits from the Bureau of Ocean Energy Management.

Of course, the administration has stated it will not approve any new wind or solar power projects. What will this mean for companies that wish to generate their own electricity but don’t want to rely on fossil fuels? The pledge doesn’t make any of this clear. The administration has made it clear that it is going all in for fossil fuels, so it might leverage its influence over the companies to go this route. This scenario leads to the final problem: more fossil fuel plants will equal more pollution and a worsening climate.

Remember all the layers of necessary permitting? State and local governments have an opportunity to push back on any new fossil fuel projects. Historically, this method hasn’t worked out so well for poorer, marginalized neighborhoods, with wealthy communities using NIMBY tactics to move pollution-generating factories and plants into areas with less political power. This scenario has been playing out in South Memphis, where Elon Musk’s xAI built a massive data center near a historically black neighborhood, adding to the already high air pollution.

The best way to protect communities from higher electricity rates linked to the rapid buildout of data centers is not to build data centers in the first place, but tech companies are moving ahead whether the public asks for it or not. A runner-up would be for the administration to include audits of energy consumption, financial penalties or regulatory fines for noncompliance, or public reporting requirements in its pledge. That’s not going to happen either. Unfortunately, for the time being, the local and state levels remain the most effective arena for residents to oppose these projects. This is where organizers are already building political power. The president and CEOs make a lot of promises, but real control should be in the hands of communities.

This first appeared on CEPR.