Microsoft center wearing out its welcome in Quincy?

QUINCY – 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.

“For a company of that size and that nature, and with all the ‘green’ things they advertised to me, that was an insult,” said Randall Allred, a utility commissioner and local farmer.

A Microsoft spokeswoman said the episode was “a one–time event that was quickly resolved.”

Internet-based industries have honed a reputation for sleek, clean convenience based on the magic they deliver to screens everywhere.

At the heart of every Internet enterprise are data centers, which have become more sprawling and ubiquitous as the amount of stored information explodes, sprouting in community after community.

But the Microsoft experience in Quincy shows that when these Internet factories come to town, they can feel a bit more like old-time manufacturing than modern magic.

Over the last few years, Quincy has become an unlikely technology outpost, with five data centers and a sixth under construction. Far from the software meccas of Northern California or Seattle, Quincy has barely 6,900 residents, two hardware stores, two supermarkets, no movie theater and a main drag, state Route 28, whose largest buildings are mostly food packers and processors. Its tallest building is a grain elevator.

The remarkable scale of the Quincy data centers, and their power demands, have made this town something of a test tube for studying the planet’s exploding need to house and process digital information.

The data centers, which also include Yahoo and Dell facilities, wound up in Quincy by way of the Columbia. The river flows 1,200 miles from the mountains of British Columbia to the spectacular gorge between Oregon and Washington, where the water crashes into the Pacific Ocean.

Along the way, about a dozen large hydroelectric dams tame the river, providing irrigation for farms and the cheap, plentiful power that has become a magnet for large agricultural operations and heavy industries like aluminum, steel, paper and chemical plants.

When Microsoft was searching the country for a location for its new installation, the Grant County Public Utility District, which owns two of the dams, says it offered the company rates that would range from 2.5 cents to 3.8 cents per kilowatt-hour in its first five years – far below the national industrial average of 6 cents to 7 cents, according to the Electric Power Research Institute.

The power from dams is highly reliable, a critical factor for data centers, which can crash with the slightest interruption.

Beyond power, Washington state has awarded the industry lucrative tax breaks, ostensibly to promote growth in rural areas.

Although the initial expectations that private fortunes would be made on land sales and housing developments were quickly dashed, Quincy’s revenue from property taxes, which data centers do pay, has risen from $815,250 in 2005 to a projected $3.6 million this year, paying for a library and repaved streets, among other benefits, according to Tim Snead, the city administrator.

The ribbon cutting on April 16, 2007, for Microsoft’s “server farm,” as the buildings containing thousands of modular computers or servers are often called, had all the trappings of a proud civic unveiling, with speeches by dignitaries from around the state. Michael Manos, the company’s general manager for data center services at the time, walked away with a small bag of beans from the field’s final crop. It carried a message: “Preparing the Site for Another Farmer: Microsoft.”

Just three days after the ribbon cutting, Microsoft began flexing its muscle. Manos wrote to the utility commissioners complaining that they were slow in building a substation to provide 48 million watts of electrical capacity to Microsoft. That would be enough to power about 29,000 U.S. homes, according to an analysis based on federal figures conducted by the Electric Power Research Institute – about four homes for every person in Quincy.

Manos said the pace of construction “dramatically affects our agility as a business,” adding that “our confidence is becoming quite shaky.”

If construction could not be accelerated, Manos asked, would Microsoft be eligible for $700,000 in reimbursements?

Some local officials were taken aback at what Culbertson, the former utility general manager, called “a level of arrogance.”

The stakes for Microsoft were high. According to current and former company employees, its Quincy servers ran Bing – its challenge to Google’s search engine – the Hotmail service and other so-called cloud functions.

While the term “cloud” is often used loosely to refer to remote memory or other computing services accessed by the Internet, it is hardly some vaporous formation.

“Quite simply, data centers are the cloud,” Eric S. Laschever, a Microsoft lawyer, said during the legal challenge to its backup generators.

Microsoft’s operation has now spread to four buildings and is the largest of Quincy’s data centers. Taken together, Microsoft and Yahoo’s operations overwhelm all nonindustrial electric usage, utility figures show. All residential and small commercial accounts in Quincy consumed an average of 9.5 million watts last year, while Microsoft and Yahoo used 41.8 million watts, the utility said.

The loads are growing so fast that some local residents and business owners – particularly irrigation farmers, who also depend on low-cost electricity – are concerned. With other industries also chasing low electricity prices, the increases could lead to higher prices or even a shortage of available power from the dams.

Sarah Morford, a spokeswoman for the utility, said that it did not expect the capacity of the dams to be exceeded “in the foreseeable future.”

Even so, the growing data centers have given the city of Quincy’s website a new motto: “Where Agriculture Meets Technology!”

Morgan, the president of Double Diamond Fruit, said the positive impact overall had been far less than many people imagined. As for all the digital services that data centers power around the country, Morgan said, “I understand that it’s a necessary situation for us as a society and the way we want to live.”

“But I don’t think it’s benefiting Quincy,” he said. “I think we’re taking one for the team, to tell you the truth.”