Microsoft Accused of Wasting $70K in Power to Avoid Fine

[Rob Williams]

Imagine receiving a cell phone bill, only to find out that you under-utilized what was offered to you. Now imagine receiving a bill later that charges you 3x as much simply due to that fact. It'd be hard to fathom, right? Well, the New York Times is claiming that Microsoft faced just such an issue, but it involved power and much more money than a simple cell phone bill would require.

Read the rest of our post and then discuss it here!

[RainMotorsports]

This doesn't seem too far off from something I encountered working for Ford.

Dealers are given a discount on parts as long as they keep that inventory moving. Somehow in this convuluted scheme its not just about the dealer having the room to store a minimum order. While Ford has a return program for parts not every dealer is enrolled.

So you actually have dealers throwing parts in the dumpster and writing them off to keep the discount. Worse yet they destroy the parts to make sure employees do not sell them off. Don't get me wrong metal is sold for scrap and is recycled but the rest is wasted. I am amazed the obsolete parts vendor in Michigan has any parts.

[Rob Williams]

Ugh, that's ridiculous. I'm thinking that this isn't uncommon at -all-.

[Optix]

It's just a way to gouge companies for more money. It's like getting a ticket for driving too slow, only this doesn't have any dangerous consequences. I know that the power companies are in it to make money, but if Microsoft used less power than what they thought they would I say give them a little bit of a bonus.

Thanks for not polluting the air with more shit from the generating stations and saving fossil fuel in the process.

What a fucked up world. We let murderers go free and penalize companies for being responsible.

[Rob Williams]

Originally Posted by Optix

We let murderers go free and penalize companies for being responsible.

Fiona Apple was arrested not long ago for the possession of pot. I can't imagine the number of people she put at risk...

But it's cool Microsoft, go ahead and waste all that power.

[Jakal]

Working in the industry field I understand the why this happened.

Microsoft has a contract with their power supplier for so many kW hours at such a price. Power plants produce based on expected customer demands. Using less results in the power company not meeting an expected income target. I've seen similar contracts in my field; we call them "Take or Pay". You ask for so much product, we produce the product. If the customer doesn't buy the product we lose out. So to limit this with problem customers we enforce they either take all the product they've requested, or they pay for it.

Yes, I agree it's asinine, but think about if you were in the supplier's position. At least they didn't use up the entire $210K of power.

I've seen million dollar plus electric bills, and no, it's not difficult in large industry.

[Rob Williams]

I understand how it happens also, but that doesn't overshadow the fact that MS could have just been charged the excess amount without having to use it. If the power company allocates a certain amount to Microsoft, then that amount should be Microsoft's minimum bill each month. Instead, it seems the company just wants to try to score extra cash.

[madmat]

Originally Posted by Rob Williams

I understand how it happens also, but that doesn't overshadow the fact that MS could have just been charged the excess amount without having to use it. If the power company allocates a certain amount to Microsoft, then that amount should be Microsoft's minimum bill each month. Instead, it seems the company just wants to try to score extra cash.

Agreed. It shouldn't be allowed to fine a company for being responsible and using less energy. Especially in this day and age when everyone is going on about conserving our natural resources by curbing energy usage.

[Jakal]

Originally Posted by madmat

Agreed. It shouldn't be allowed to fine a company for being responsible and using less energy.

Then be upset with the power company. Microsoft was saving money by using $70k of power.

Originally Posted by Deathspawner

MS could have just been charged the excess amount without having to use it.

I agree, but it's possible they needed the power for production.

Originally Posted by Deathspawner

...it seems the company just wants to try to score extra cash.

I wouldn't call it 'extra' cash. It's money they expected to make based on projected power consumption, i.e. income, that they would have missed out on otherwise.

This is slightly opposite of the 'suppply and demand' theory we're all taught. There again, if the energy isn't consumed it raises costs to the power company, raising rates for the general consumer.

[madmat]

Originally Posted by Jakal

Then be upset with the power company. Microsoft was saving money by using $70k of power.

Did I say I was upset with M$? Did I even imply it? No, I said it's wrong to fine them for not using X amount of power. If anything they should be on a minimum charge per month type of plan where they pay $X no matter what unless they go over and pay more based on usage. I've worked several places that were set up that way. They paid a base rate regardless of whether they used the power to warrant it or not, if they went over the alloted power for that rate then they paid more. They weren't fined for not using the power, they paid for it if they used it or not.

[Jakal]

Sorry MadMat if that's what it seemed I was implying. I meant no offense.

I was just trying to point out it was the power company forcing Microsoft's hand.

You have a good point, and I've seen the same type of contractual use pricing/charges. Still, Microsoft took the most cost-effective route. The power company was going to produce the $70k worth of power whether MS used it or not, but they were probably producing the power based on contractual expectations from MS.

This is all speculation, we don't know the inner workings between the two companies.. Only that MS did what they had to do to not pay the $210k fine.

[Rob Williams]

Originally Posted by Jakal

I wouldn't call it 'extra' cash. It's money they expected to make based on projected power consumption, i.e. income, that they would have missed out on otherwise.

It's 'extra' when the company tries to charge MS $210,000 instead of the $70,000 for the power they didn't use.

[Kougar]

Originally Posted by Jakal

Working in the industry field I understand the why this happened.

Microsoft has a contract with their power supplier for so many kW hours at such a price. Power plants produce based on expected customer demands. Using less results in the power company not meeting an expected income target. I've seen similar contracts in my field; we call them "Take or Pay". You ask for so much product, we produce the product. If the customer doesn't buy the product we lose out. So to limit this with problem customers we enforce they either take all the product they've requested, or they pay for it.

Yes, I agree it's asinine, but think about if you were in the supplier's position. At least they didn't use up the entire $210K of power.

I've seen million dollar plus electric bills, and no, it's not difficult in large industry.

That's the catch... I am not that knowledgeable about intricacies of the power system, but power is not "generated" and then not used. The power grids are fed in real time and generation plants are cycled on/off or adjusted to maintain a healthy supply, while avoiding a deficit or a huge surplus of electricity.

Electricity is not a "product" in that it is not produced ahead of time and stored, so I don't agree with the supplier example here. If the demand is not there, the power companies would tone down the supply (generation) of electricty to match the current demand level. Very little power would have therefore been "generated" and wasted as a direct result of Microsoft's actions.

As a business major this isn't the first time I've heard of such contractual agreements, they are unfortunately still very common. But that doesn't make this particular contract any less asinine or utterly wasteful. I am sure the power company may have incurred some higher costs anticipating the need for the power generation, but it wouldn't approach what the fine would have been or the $70K in power burned. There's a better way to work such an agreement out for both involved parties.

[Tharic-Nar]

The word people are looking for is 'perishable'. If it's produced and not used, it is wasted. This is the single biggest problem with power generation, hence the desire for a national battery grid using Electric Vehicles. There are various methods for temporary storage of power using giant batteries, flywheels, hydro-electrics and heat-banks, but all those methods are very inefficient. Power is wasted through the act of storage, while in storage and when finally released.

This is not so much Microsoft's fault, nor was the power actually wasted - it would have been produced and paid for regardless due to contract; how it's used after is up to the customer. However, I still think near 300% surcharge to be extreme for this, it really should be just a flat contract rate for X units per month + excess over-usage. Producing something that a customer requested, it being paid for, not being used and then charging for the lack of use despite it being paid for is asinine. I blame the contract for this, rather than either company - but then I can blame both companies for agreeing to such a silly contract in the first place.

[madmat]

Originally Posted by Tharic-Nar

Producing something that a customer requested, it being paid for, not being used and then charging for the lack of use despite it being paid for is asinine. I blame the contract for this, rather than either company - but then I can blame both companies for agreeing to such a silly contract in the first place.

I can't say as I blame M$ for the contract as I'm certain they weren't the architects of it. All they likely did was get to either agree to it or have to set up shop elsewhere. That's the problem with the way our power is marketed in the US, each company has what amounts to a monopoly in the area they service. There is no alternative so you either suck it up and pay what they charge you or GTFO and move to another area.