As opposition to data centers grows around the country and electricity bills become a key election issue, utilities and developers are facing heightened scrutiny over the cost of building infrastructure to power the AI boom. In Arkansas, a controversy over those costs has pushed a utility and a hyperscaler to revise a financing arrangement that they’ve struggled to explain to the public.
Google and Entergy Arkansas announced this week that they are amending their agreement to power a data center in West Memphis, on the border of Arkansas and Tennessee. The updated deal will let the campus use more power, sooner, and also attempts to resolve a months-long controversy over how the utility is financing the construction of a massive new power plant.
The original power supply agreement for the data center, announced in 2025, included a $1.6-billion solar and battery project. Google committed to $443 million in accelerated payments, as well as minimum ongoing payments of $83 million per year over the contract’s 20-year term, bringing total payments to about $2.1 billion — more than Cypress Solar’s estimated construction cost
Nevertheless, Entergy’s existing ratepayers saw an additional charge appear on their monthly bills over the summer, partly to cover the cost of building Cypress Solar.
Controversy and confusion ensued. Local news outlets and industry stakeholders criticized the approach, arguing Entergy was sticking its existing ratepayers with the bill for the project on the front end.
The criticisms ultimately came down to accounting: whether Google’s payments should directly and immediately reduce the plant investment on which Entergy earns a return, or instead count as utility revenue credited against customers’ costs over time.
Under an Arkansas state law called the 2025 Generating Arkansas Jobs Act, utilities can charge customers for financing infrastructure projects while they’re still under construction. Those charges appear on bills through the so-called “GAJA rider.” That’s the pathway Entergy selected for getting Cypress Solar built; in 2026, the utility plans to collect roughly $33 million to fund the project from existing customers through that mechanism.
Meanwhile, Google’s payments, including both the $443 million in accelerated payments and its monthly electricity bills, are all being treated as utility revenue, rather than as a construction contribution for Cypress Solar, which would have reduced the plant investment on which the utility earns a return.
According to Entergy, this all means that Google’s revenues will eventually lower bills for other customers, because they’re showing up as an offset to total system costs. But it also means that other customers are paying construction financing charges now, before the benefits Entergy projects have materialized. And in a moment where electricity bills are in the spotlight, that has proven an unpopular approach.
Taking a different approach
In filings to the Arkansas Public Service Commission this week, Entergy sought to “correct the misinformation and inaccurate reporting” on the issues of whether Google is actually paying for Cypress Solar, and how the amortization of its up-front contributions is benefiting existing customers.
Under the amendment, Cypress would leave the GAJA rider when the project begins operating in late 2028, and its costs would instead be recovered through base rates. It would not remove the construction-related charges from customers’ bills, but it would eventually bring the plant’s costs and all of Google’s payments into the same regulatory bucket so that they offset one another.
In addition to that change, the “enhanced partnership” increases the overall maximum demand of the data center campus, and accelerates the pace at which Google can ramp up to that demand. That will be made possible by adding 1,400 megawatt-hours of battery projects, expanding a substation near the data center, and building two new transmission lines to serve the larger campus. Google has also signed a 440-MW solar PPA from the Big Island Project for additional power.
Given the blowback over the accounting approach used for Cypress Solar, none of those projects will be funded using the GAJA rider. Google will cover the batteries’ construction financing costs through scheduled payments, for example, rather than leaning on ratepayers.
The two battery projects together are estimated to cost about $550 million. When the projects come online, their ongoing costs will be placed directly into the regular rate setting process and offset through the higher monthly fixed charges on Google’s electric bill, as in the initial deal. Entergy plans to return that money to its other customers by lowering their rates, starting in 2032.
So why didn’t Entergy use that approach the first time around? Critics point out that doing so would have reduced Cypress Solar’s booked cost, meaning Entergy couldn’t get a rate of return on the project. But Entergy argued it would have also lowered Google’s negotiated monthly bills, lessening the long-term impact that the large load would have on suppressing rates.
Emerging payment structures
Across the country, more and more utilities are pushing large loads with special contracts onto standardized tariffs, which generally come with more transparency. Arkansas has taken a hybrid approach: It has no data center-specific tariff, so all large customers sign custom contracts, and then the plants built partly to serve them can be charged to all customers during construction through the GAJA rider. (Arkansas isn’t alone in taking this approach to attracting large loads; similar laws exist in Georgia, Mississippi, Missouri, and South Carolina.)
One issue with this approach, explained Nick Zenkin, director of research at Latitude Intelligence, is lack of transparency. While the GAJA rider itself is public, passed early last year as part of Arkansas’ effort to attract large loads like data centers to the state, individual contract terms, including the contract between Entergy and Google, are not. In fact, details about Google’s payments only emerged after the Arkansas Democrat-Gazette published figures from the sealed contract in late August, prompting Entergy to sue the paper in federal court.
The amended filing doesn’t change the black-box nature of these deals: Entergy asked regulators to waive earlier calls for more disclosure, and filed the updated agreement, including details of how Google’s electricity rates were set, under seal. “It was a step in the right direction, but isn’t as transparent as a tariff because most of the terms are still hidden,” said Zenkin.
Despite the uproar, the strategy Entergy was pursuing isn’t unique. According to data from Latitude Intelligence, it’s becoming quite standard for the utility to build and own the plants while the customer signs a long contract and pays its own transmission costs.
What’s unusual in Arkansas, Zenkin explained, is counting a large Google pre-payment as rate revenue to be credited back later, while other customers pay construction financing through a rider — all under a contract that’s mostly sealed.
Using upfront payments to cover the cost of building transmission and minimum bills to cover generation over time is pretty common, he added. What’s unusual in Arkansas is that Google’s large pre-payment counts as rate revenue and is credited back to customers later, while other customers pay the plant’s construction financing in the meantime.
