QUINCY, Wash. -- Set in the dry hills and irrigated farmland of central Washington, Grant County is known for its robust harvest of apples, potatoes, cherries and beans. But for Microsoft, a prime lure was the region's other valuable resource: cheap electrical power.
The technology giant created a stir here in 2006 when it bought about 75 acres of bean fields to build a giant data center, a digital warehouse to support various Internet services. Its voracious appetite for electricity would be fed by hydroelectric generators that work off the flow of the nearby Columbia River, and Microsoft officials pledged to operate their new enterprise with a focus on energy efficiency and environmental sensitivity.
You're talking about one of the largest corporations, said Tim Culbertson, who was the general manager of the local utility at the time. You're talking Microsoft and Bill Gates. Wow!
But for some in Quincy, the gee-whiz factor of such a prominent high-tech neighbor wore off quickly. First, a citizens group initiated a legal challenge over pollution from some of nearly 40 giant diesel generators that Microsoft's facility -- near an elementary school -- is allowed to use for backup power.
Then came a showdown late last year between the utility and Microsoft, whose hardball tactics shocked some local officials.
In an attempt to erase a $210,000 penalty the utility said the company owed for underestimating its power use, Microsoft proceeded to simply waste millions of watts of electricity, records show. Then it threatened to continue burning power in what it acknowledged was an unnecessarily wasteful way until the fine was substantially cut, according to documents obtained by The New York Times.
Microsoft was in violation of an obscure provision called Rate Schedule 99.
Utilities perform a constant balancing act, matching the demand from its customers with its supply of power. The Grant County utility must carefully plan for how much its big customers need or risk losing money it could earn by selling the excess power elsewhere -- a cost all of its customers would have to absorb.
After several years of poor forecasts based on input from the large industrial users, the utility instituted the provision. It requires large industrial customers to file load forecasts each fall for the next calendar year and face a penalty if they are off by a significant margin in either direction.
At the end of last year, said Morford, the utility spokeswoman, just two customers were in line for penalties for using less energy than they had asked the utility to set aside for them: data centers operated by Yahoo and Microsoft.
Yahoo paid its $94,608 penalty, Morford said. Microsoft took a different tack.
That is when Microsoft threatened to waste tremendous amounts of power by simply running giant heaters for no purpose, according to utility officials who said they were briefed on the matter by Microsoft, unless the penalty was largely forgiven. The idea was to burn the power fast enough to move closer to the forecast before year's end.
Documents related to the case and interviews with utility officials show that Microsoft started burning roughly an additional 5 million to 7 million watts -- well over half of the consumption of the entire town of Quincy -- in mid-December.
It was very well recognized by the board as well as management that this was a very unusual situation, said Kevin Nordt, the utility's chief financial officer. The utility board, he said, focused on avoiding wasted energy without shifting costs to the utility's other customers. In a special weekend session, the board voted 4 to 1 to waive all but $60,000 of the penalty.
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