Microsoft's Brad Smith pushes Big Tech to 'pay our way' for AI data centers amid rising opposition

It won’t be easy for Big Tech companies to win the hearts and minds of Americans who are angered about massive artificial intelligence data centers sprouting up in their neighborhoods, straining electricity grids and drawing on local reservoirs.

Microsoft is trying anyway.

The software giant's president, Brad Smith, is meeting with federal lawmakers Tuesday to push forward an approach that calls for the industry, not taxpayers, to pay the full costs of the vast network of computing warehouses needed to power AI chatbots like ChatGPT, Google's Gemini and Microsoft's own Copilot.

President Donald Trump gave Microsoft's effort a nod in a Truth Social post Monday evening, where he stated that he does not want Americans to “pick up the tab” for these data centers and pay higher utility costs.

“Local communities naturally want to see new jobs but not at the expense of higher electricity prices or the diversion of their water,” Smith said in an interview with The Associated Press.

Smith's campaign comes as data center developers are increasingly running into hostility in towns where they want to build and meeting defeat at municipal boards that must approve zoning applications or construction permits.

Rising electric prices are one problem. Heavy water usage by data centers to cool electronic equipment has also elicited concerns from local residents that they’ll see their wells run dry or their water utility bills spike.

The defeats have spread alarm among data center allies and spurred efforts to ramp up the amount of money that operators are willing to offer communities in exchange for approval.

“People are asking not just pointed questions but completely reasonable questions and it’s our job, I think, to acknowledge them and address them head on and show that we can do this and pursue this expansion in a way that fully meets their needs,” said Smith, who is also Microsoft's vice chair and has spent decades leading its legal and political work.

In the mid-Atlantic region grid that encompasses all or parts of 13 states, ratepayers have been paying higher prices on their bills since at least June because of data centers, according to utilities and analysts.

Electricity bills are expected to keep rising as payments to power plant owners grow to entice the construction of new power sources to meet demand from new and yet-to-be-built data centers in hot spots like Virginia, Ohio and Pennsylvania.

Another source of friction is that big data center developers can strike bulk power deals with local electric utilities that are profitable for utilities, but also kept confidential. That means it may never be clear whether data center operators really are paying for their electricity — or foisting the cost onto the rest of the utility’s ratepayers, consumer advocates say.

Data center projects have also met objections in communities where people are worried about losing open space, farmland, forest or rural character, or are concerned about the damage to quality of life, property values, environment or their health.

In Hobart, Indiana, last week, the City Council approved a tax-abatement package for a multibillion-dollar Amazon data center planned there. In turn, the deal promises Amazon will make two payments of $5 million each for issuing a pair of building permits, plus another series of payments totaling $175 million over three years at various project milestones.

Opponents say the money unduly influences the decision-making of city officials.

In Wisconsin, where Smith grew up and the home of what Microsoft has called “the world’s most powerful AI datacenter,” the company has encountered hurdles in expanding its construction projects near the shores of Lake Michigan. The company has promised the centers will employ hundreds of people when they’re finished. Democratic Gov. Tony Evers has touted the projects he says will put Wisconsin “on the very cutting edge of AI power.”

But environmentalists and consumer groups have warned that the centers will consume unprecedented amounts of electricity, driving up rates across the Midwestern power grid, and could use hundreds of thousands of gallons of Lake Michigan water daily. Company officials have pledged that the centers’ impact will be minimal and will contribute carbon-free energy to the power grid.

Environmental group Clean Wisconsin has called for government officials to pause data center approvals until the state develops a comprehensive plan to regulate them. Francesca Hong, one of several Democratic candidates for governor — Evers is not seeking re-election in November — has developed a proposal she calls CONTROL ALT DELETE that calls for a moratorium on data center construction until “we know how to protect ourselves from their environmental and energy costs.”

In the interview with AP, Smith talked about data center projects in Wisconsin and elsewhere. This interview has been edited for clarity and length.

Smith: We don’t use nearly as much water as we do electricity. Electricity is a heavier lift. It’s a larger investment. And it comes after several decades where electricity production in the United States was basically flat. If you look at the approach that we’re taking in terms of partnering with utilities, paying our own way, I think we can address this problem to the satisfaction of local communities. At the end of the day, it requires the approval of the utilities commissions.

Smith: I shouldn’t name names. First of all, we wholeheartedly agree with the positive impact that AI is going to create for the future. But we don’t think that the public should be devoting tax dollars to pay for the improvements in the electricity grid that are needed to serve data centers. Private companies can incorporate that into their financial planning, especially when you look at things like improvements on the transmission side or improvements in substations.

Smith: We set a goal for ourselves in 2020 of being what we call carbon-negative by 2030. That requires that we reduce the amount of carbon emissions that we create, and that we then remove from the environment each year, beginning in 2030, more carbon than we emit. We have not changed course on that. There are times when the power that is coming to our data centers is generated by something like natural gas. We can work with a utility to ensure that it’s cleaner natural gas, but beyond that, we also invest in bringing to the regional grid new sources of carbon-free energy as well, whether it’s nuclear, solar, hydro or others.

Smith: On the carbon commitment, we have a clear path to reach our goal in 2030. As we often say, progress is lumpy, not linear. A lot of what we’re doing in the middle of the decade is making the investments that will benefit us at the end of the decade. It’s not like walking upstairs, where every step is the same length. But overall, I continue to be confident in our ability to meet our goals at the end of the decade.

Smith: We are supportive of Wisconsin developing a comprehensive electricity plan. I don’t think our project should be paused to wait for that. We’re partnering to build out and improve the electricity grid in southeastern Wisconsin. A rate tariff that we have proposed to the public utility commission would impose on Microsoft additional costs that we would help pay for in the state. And because of other investments we’re making, including a 150-megawatt solar farm.

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AP writer Todd Richmond in Madison, Wisconsin, contributed to this report.

FILE - Microsoft President Brad Smith speaks before President Joe Biden delivers remarks on his "Investing in America agenda" at Gateway Technical College, May 8, 2024, in Sturtevant, Wis. (AP Photo/Evan Vucci, File)

WASHINGTON (AP) — Inflation cooled a bit last month as prices for gas and used cars fell, a sign that stubbornly elevated cost pressures are slowly easing.

Consumer prices rose 0.3% in December from the prior month, the Labor Department said Tuesday, the same as in November. Excluding the volatile food and energy categories, core prices rose 0.2%, also matching November's figure. Increases at that pace, over time, would bring inflation closer to the Federal Reserve's target of 2%.

Many economists had expected inflation to jump last month as the government resumed normal data collection after the six-week shutdown last fall, so the modest increases that matched the November figures came as a relief. The price of manufactured goods was flat in December, a sign that the impact of tariffs may be starting to fade.

“Distortions caused by the government shutdown have made the inflation data harder to interpret, but the recent run of figures suggests inflation has peaked,” Michael Pearce, chief U.S. economist at Oxford Economics, wrote in a note to clients.

Signs that inflation is cooling could make it more likely that the Federal Reserve will reduce its key interest rate later this year, which could translate into lower borrowing costs for mortgages, auto loans, and credit cards.

Even so, the large price increases in recent years for necessities such as groceries, rent, and utilities have left many American households feeling squeezed, turning “affordability” issues into high-profile political concerns. Food prices have jumped about 25% since the pandemic.

President Donald Trump, stung by last year's election results that suggested voters are souring on his handling of the economy, has responded with an array of initiatives intended to address rising costs, including a proposed ban on Wall Street firms buying homes, a 10% cap on credit card interest rates, and the suspension of many tariffs on imported foods, such as coffee and pasta.

Tuesday's report is the first clear measure of inflation since September. The six-week government shutdown last fall suspended the collection of price data used to compile the inflation rate, and the government didn't issue a report in October and November's figures were partially distorted by the impact of the closure.

Most prices in November were collected in the second half of the month, after the government reopened, when holiday discounts kicked in, which may have biased November inflation lower. And since rental prices weren’t fully collected in October, the agency that prepares the inflation reports used placeholder estimates in November, that may have biased prices lower, economists said.

Still, Tuesday's report suggested that inflation didn't change even with newer, more comprehensive figures. Consumer prices rose 2.7% in December, compared with a year ago, the same figure as November, while core prices increased 2.6% from a year earlier, also unchanged.

Inflation has come down significantly from the four-decade peak of 9.1% that it reached in June 2022, but it has been stubbornly close to 3% since late 2023. The cost of necessities such as groceries is about 25% higher than it was before the pandemic, and other necessities such as rent and clothing have also gotten more expensive, fueling dissatisfaction with the economy that both President Donald Trump and former President Joe Biden have sought to address, though with limited success.

The Federal Reserve has struggled to balance its goal of fighting inflation by keeping borrowing costs high, while also supporting hiring by cutting interest rates when unemployment worsens. As long as inflation remains above its target of 2%, the Fed will likely be reluctant to cut rates much more.

The Fed reduced its key rate by a quarter-point in December, but Chair Jerome Powell, at a press conference explaining its decision, said the Fed would probably hold off on further cuts to see how the economy evolves.

Trump, meanwhile, has harshly criticized the Fed for not cutting its key short-term rate more sharply, a move he has said would reduce mortgage rates and the government's borrowing costs for its huge debt pile. Yet the Fed doesn't directly control mortgage rates, which are set by financial markets.

In a move that cast a shadow over the ability of the Fed to fight inflation in the future, the Department of Justice served the central bank last Friday with subpoenas related to Powell's congressional testimony in June about a $2.5 billion renovation of two Fed office buildings. Trump administration officials have suggested that Powell either lied about changes to the building or altered plans in ways that are inconsistent with those approved by planning commissions.

In a blunt response, Powell said Sunday those claims were “pretexts” for an effort by the White House to assert more control over the Fed.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said.

FILE -American Giant clothing is displayed at the company's showroom in San Francisco, April 17, 2025. (AP Photo/Jeff Chiu, File)

FILE -A cashier rings up groceries in Dallas, Aug. 28, 2025. (AP Photo/LM Otero, File)