Overview:
- The Michigan Senate's approval of tax breaks for data centers is praised by DTE Energy but faces criticism from environmental groups, citing setbacks for ratepayers and climate goals.
-This legislative move aligns with increased scrutiny of DTE's political spending, as a DTE-linked nonprofit contributed $100 million to Citizens for a Better Michigan, associated with Michigan House Speaker Joe Tate.
-Environmental advocates question the political rationale of granting tax breaks to wealthy companies.
Tax breaks for data centers approved by the Michigan Senate last week are being hailed by DTE Energy but criticized by environmental groups as a setback for ratepayers and climate goals. The legislation’s passage also coincides with revelations of $100 million in political spending by a DTE-affiliated nonprofit, fueling debates over the utility’s influence on state policy.
DTE Energy sent out a business update Monday that touted its deals with data center operators and the Michigan Senate’s recent approval of data center tax breaks. In the update, DTE said it had “strongly advocated for legislation to provide sales and use tax exemptions for data centers that was passed by Michigan lawmakers (and) will be sent to the Governor for signature.”
The passage of the data center bills coincides with new scrutiny of DTE’s political spending. The Detroit News reported Tuesday that a DTE-linked nonprofit, Michigan Energy First, gave $100 million to Citizens for a Better Michigan, an account linked to Michigan House Speaker Joe Tate (D-Detroit).
In response to questions about the donations, company spokesperson Jill Wilmot told Planet Detroit that, “While DTE has contributed to Michigan Energy First in the past, we can’t speak on behalf of MEF or the contributions the organization makes.”
The Detroit News noted MEF’s donation to the Tate-linked account came as lawmakers and residents were calling for accountability following the 2023 ice storm that left 700,000 residents without power for days.
Bills to improve outage credits for customers, provide greater transparency in utility bills and create greater oversight of utilities’ grid and distribution investment plans never came up for a vote in the House following the donation.
However, DTE also said it has been lobbying for the data center tax breaks, which have been an important point of discussion on recent earnings calls.
Charlotte Jameson, chief policy officer for the Michigan Environmental Council, said utility support was important for the passage of the bills.
“The bills wouldn’t have gotten as far as they did if the utilities weren’t also pushing for them,” she said. Jameson noted that many legislators have received hefty donations from investor-owned utilities in the state.
In 2023, Bridge Michigan reported that in the past five years, Consumers Energy and DTE Energy gave nearly $2 million to 102 of the state’s 148 currently serving lawmakers, roughly 70 percent of all legislators.
Environmental groups say tax breaks help the wealthy and hurt residents
Environmental advocates have questioned the political wisdom of giving tax breaks to some of the wealthiest companies in the world after an election where many cited cost of living concerns as an important issue.
Microsoft and Google, which have frequently been cited as likely beneficiaries of the tax breaks, are currently valued at $3.2 trillion and $2.2 trillion respectively.
Abby Clark, Midwest campaign manager for the Natural Resources Defense Council, noted that the legislation was passed “in dark of night” with little notice, indicating lawmakers may not be looking to publicize their support for the tax breaks.
The data center sales tax exemption, HB 4906, passed with 22 yeas and 13 nays, and the use tax exemption, SB 237, passed with 23 yeas and 12 nays.
“I think people are frustrated that the playing field is being rigged in favor of the wealthy and big corporations,” Clark said of voter sentiment.
In a statement, the Michigan Environmental Justice Coalition encouraged Michigan Gov. Gretchen Whitmer to veto the bills in their current form, saying the legislation lacked protections for ratepayers and the environment.
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Michigan Senate approves data center tax breaks that environmental advocates say will kill the state climate plan
The Michigan Senate has approved tax breaks for large data centers run by tech giants like Google and Microsoft, amid worries over environmental impact and rising utility rates.
Democrats ‘blew a hole’ in Michigan climate plan with data center bills, advocate says
The Michigan House approved a bipartisan measure exempting large data centers from sales tax, sparking debate over environmental impacts on the state’s climate goals and water resources.
Are Virginia’s power-hungry data centers a warning for Michigan?
As Michigan considers tax breaks for data centers, Virginia environmental advocates warn data centers could kill state climate goals while thousands of generators may cause a spike in air pollution.
“As we’ve seen in other states around the country, incentives for data centers risk serious backtracking on our climate goals and give utilities an excuse to further invest in dirty fossil fuel infrastructure,” the statement said.
Bringing more power-hungry data centers to the state could trigger off ramps in the state’s renewable energy legislation that allow fossil fuel production to stay online if there’s not enough energy to meet demand, advocates have warned.
Consumers Energy appeared to support this conclusion in testimony related to its pending electric rate case submitted in November.
“The rapid advancement of artificial intelligence (“AI”) and the need for more large data centers to support this technology has had an impact on the Company’s delivery forecast (and) could create challenges to the Company’s ability to achieve the (renewable portfolio standard) compliance targets,” the company wrote.
Clark previously told Planet Detroit that Michigan residential ratepayers would pay more to subsidize lower industrial rates for data centers.
Maryland People’s Counsel David Lapp, a state appointee who monitors utilities, predicted a similar impact in his state, saying residents could pay $40-$50 more on their monthly utility bills as Mid-Atlantic data centers increased energy demand in the region.
DTE touts data center investments and expects the Governor’s support
DTE emphasized recent deals with data center operators in its Monday business update, including a potential agreement for a Switch data center complex that could include multiple large, “Hyperscaler” tenants. The utility also reached an agreement with the University of Michigan for a 110 MW data center to support artificial intelligence research and “high-performance computing.”
These efforts could receive a boost from the tax incentives that are now on the Governor’s desk. DTE CEO Jerry Norcia previously indicated on earnings calls that he expected the Governor to sign the bills. Jameson agreed.
“Her overall economic development strategy is based on tax credits for companies,” she said, pointing to the Governor’s support for the $2 billion Strategic Outreach and Attraction Reserve (SOAR) fund to attract businesses to the state.
Gov. Whitmer’s office did not respond to a request for comment.