March 21, 2002 -- For electric utilities, skepticism about huge power requests from carrier hotels proved critical to their mission.
In 2000 and 2001, power companies in major cities were overwhelmed with requests for huge capacity from telecom hotel projects, according to Steve Rosenstock, of the Edison Electric Institute (EEI), an industry group representing power companies.
Most of those utilities insisted that carrier hotel developers share the financial risk of adding additional capacity, a move that insulated the power companies when projects tanked and demand never approached projected levels.
"No one is seeing 300 watts per square foot," said Rosenstock. "No one is seeing 200 watts per square foot. When I see it, I'll believe it and I'll build it for you."
Energy issues are a hot-button topic whenever telecom developers gather at industry events. At the IMN Forum on Carrier Hotels and Internet Data Centers earlier this month in New York, Rosenstock provided the utilities' perspective.
Initial requests for additional generation and transmission capacity for carrier hotels and data centers surprised the utility industry, Rosenstock said.
At one point, Chicago's Commonwealth Edison had requests for power from 31 planned telecom facilities, which projected the need for an additional 1,164 megawatts of system load. In New York, 46 proposed facilities sought to add 500 megawatts of demand to ConEdison's system.
Existing electric infrastructure would not have been able to handle that demand, and adding additional capacity is expensive, ranging from $400 to $1,000 per kilowatt, according to EEI. Even at the low end of $400, supplying the 1,164 megawatt request for Chicago facilities would cost $465 million.
"It's like turning two-lane roads into superhighways," said Rosenstock. "Who's going to pay for that?"
Alarmed by these numbers, EEI began working with its members to track power usage by carrier hotels. The goal was to craft a strategy that could meet these customers' unique needs without incurring speculative upgrade costs that might wind up being borne by the utilities' other customers and shareholders.
Utilities soon began requiring security deposits from carrier hotel developers to offset the cost of upgrading systems to meet capacity requests. ComEd, PSE&G and Florida Power & Light are among the power companies requiring these deposits, which are generally refunded once loads reach certain milestones.
Not surprisingly, the data thus far shows demand has amounted to a fraction of requested capacity.
In California, PG&E has seen an increase of 50 megawatts, well short of the 341 megawatts requested by telecom developers, according to EEI's numbers. In Austin, Texas, a projected 100 megawatts of additional demand dwindled to just 5 megawatts of actual use.
Rhetoric about the high financial cost of facility downtime is often laden with hype, according to Rosenstock, who noted that some service providers asserted that data center downtime would cost them $1 million an hour.
"A million dollars an hour equates to $8.76 billion a year," noted Rosenstock, who was skeptical that any providers were bringing in that kind of revenue.