Data Center Execs Aren't Jolted by Rising Utility Bills

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January 16, 2006 (Computerworld) -- Utility costs are shooting up because of tight fuel supplies, and that could be bad news for data center owners, who sometimes pay for electricity by the megawatt.

The rising electricity costs may prompt some IT shops to become more aggressive about energy conservation and the adoption of systems that use low-power chips and variable-speed motors. But several data center managers said last week that energy costs aren't one of their biggest concerns and that the ongoing increases are unlikely to lead to a relocation of IT facilities to regions where power is less expensive.

Baltimore-based Thomson Prometric, a testing and assessment services firm that is part of The Thomson Corp., is moving its data center. But the new facility will be located just three miles from the existing one because the company doesn't want to lose its IT workers, said Bob Williams, who runs the data center.

The monthly electric bill to run Thomson Prometric's 1,000-server data center is about $15,000. Williams said he's concerned about possible rate increases that could follow deregulation efforts in Maryland and the recent purchase of the main Baltimore utility by Constellation Energy Group Inc. in Juno, Fla. But he said other issues, such as the reliability of power supplies, are more important.

"The cost [of electricity] is one thing," Williams said. "But an outage is devastating and will cost me a lot more than the increase in energy costs."

Bill Hunter, data center manager at a telecommunications company in the state of Washington that he asked not be identified, said the most important factors in locating data centers are environmental issues—such as the risk of earthquakes, tornadoes or hurricanes—and the avail-ability of reliable power, sufficient water supplies and skilled labor.

Large companies with data centers on the order of 100,000 square feet can try to curb energy cost increases by negotiating their own rates, Hunter said. He added that there are other things data center managers can do to control electricity costs, such as using cooling pumps with variable-frequency drives that work only as needed.

Users in the Northeast, in particular, are seeing big energy-cost increases. In Connecticut, for instance, electric rates for both commercial and residential customers have so far risen more than 17% this month—and they're scheduled to go up by another 5% in April. Electricity costs vary widely depending on fuel sources, with customers in states that rely on natural gas typically paying the most, according to Robert Burns, a senior research specialist at the National Regulatory Research Institute at Ohio State University in Columbus. For instance, power costs have always been high in the Northeast because of the region's dependence on fuel supplies from elsewhere.

Connecticut officials believe that the state's higher rates "are right in line" with increases elsewhere in New England, said Beryl Lyons, a spokeswoman for the Connecticut Department of Public Utility Control in New Britain.

"I don't care where you go—the price of generating electricity has gone through the roof because for the most part, it uses fossil fuels," Lyons said. "There wasn't anything we could do on this one."

Nationally, electric costs are projected to go up about 8% this year, Burns said. The states seeing the smallest increases are those in the northern Midwest, where coal-fired plants generate much of the electricity.

Energy spending tends to account for a relatively small percentage of overall IT budgets, said Frank Scavo, president of Computer Economics Inc. in Irvine, Calif. Facility costs and infrastructure maintenance expenses, including the cost of power, typically amount to only about 4% of a company's IT budget, he said.

For a company that's in the process of deciding where to locate or relocate a data center, "electrical costs could be a factor in choosing one location over another," Scavo said. But, he added, "I would say that the reliability of the power supply would be more of a concern than cost is."

Scott Good, technologies director at Gilbane Building Co.'s regional headquarters in Lawrenceville, N.J., offered a similar view.

"I don't think [utility costs are] a major factor," said Good, who is also president of the Philadelphia, New Jersey and Delaware chapter of AFCOM, an association for data center managers. "There are just too many companies out there that are basing their business model on where [power supply] reliability, the people and the systems are rather than on the cost associated with keeping those systems online."

Purchasing Power

Select average electric rates in cents per kilowatt hour for commercial users as of September (the latest figures available): Kansas 6.81 Massachusetts 13.13 New Jersey 11.69 North Carolina 7.01 Rhode Island 11.85 Texas 8.67 West Virginia 5.37 Source: U.S. Energy Information Administration

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