Entergy says Google's $550.6 million battery build costs ratepayers zero, and the Arkansas PSC tests it

On Thursday, Entergy▲+0.13% — Entergy, up 0.13 percent today Arkansas, the utility that will supply Google's new data center campus at West Memphis, asked the state's Public Service Commission to approve two battery storage systems↗ for the site's expansion: a 250-megawatt unit near Osceola and a smaller 100-megawatt unit in Hot Spring County ¹. The combined construction cost is $550.6 million. ¹ Google▼−0.82% — Google, down 0.82 percent today, building a $4 billion campus there, has committed in Entergy's filings to cover the construction costs, and the utility calculates the bill impact at "zero dollars across all customer classes." ¹

Next Wednesday and Thursday, the commission holds public evidence hearings in Entergy's pending rate case, the first forum where that arithmetic is tested under oath. ¹

The zero-dollar figure is an Entergy projection

The promise rests on the utility's calculation that Google's expected payments will exceed the projects' revenue requirement. ¹ Entergy also chose to fold the battery costs into its formula rate plan, the mechanism that lets it raise rates up to 4% a year without a formal case, rather than a Google-specific rider that would put the project's costs on a line of their own. ¹

The same structure has already produced one shortfall: state regulators have found that customers will pay $308 million more for Cypress Solar↗ than if Google's money had gone to construction. ⁶ Cypress is the $1.6 billion solar-and-battery field feeding Google's campus. ¹

The record so far: ratepayers pay first

Residential bills already carry an extra $5.77 a month on average, charged since June under a state law that lets Entergy bill customers while three projects are still under construction. ¹ A February rate filing could add another $1.16 a month, and the commission hears it next week. ¹ The same week's news shows both ends of the pattern. Entergy Louisiana began a $2 million shareholder-funded bill-credit program↗ for customers below the cost of living. ³ Entergy Mississippi announced a gas plant costing more than $2 billion↗, which it says serves existing customers. ⁴

Capex has more than doubled while cash flow lagged

For investors, the weight of this build-out shows in Entergy's filings: capital spending has more than doubled in two years while operating cash flow has not, and free cash flow has been negative in most recent quarters.

The board raised its quarterly dividend 6.3%↗ the same day the battery filing went in. ² The stock trades near 28 times trailing earnings, well above its five-year median, and insiders have been net sellers to the tune of about $13 million over the past year. ²

Whether Google pays gets decided in public next week

I am firmly pro-AI, and Arkansas is right to court these data centers. But the deal only works for everyone else if the AI customer actually pays, and Entergy's structure sends ratepayer bills out first and Google's payments later, which is how the Cypress gap opened. Next week's hearings will test the battery deal's math in public for the first time. Judge ETR on one question: do the bills go out before Google's payments arrive?