# D001 Thesis — Google's Generation Payments Are Properly Classified as "Other Form of Payment" Under § 23-4-1304(x)(2)(B) ## Claim Google's generation-related payments to [[Entergy Arkansas]] under the Altitude Capital Special Rate Contract are not Contribution in Aid of Construction. They are service-rate payments — amounts paid for electric service under a negotiated tariff during Google's ramp-up to full load — that the statute itself separately recognizes as "other form of payment" under Ark. Code Ann. § 23-4-1304(x)(2)(B). The 9-part Staff–EAL stipulation recorded in [[Google SRC Order No. 5 Cypress Inextricability|Order No. 5]] is the correct accounting and regulatory response to that statutory category: defer the SRC-generated revenues to a regulatory liability, exclude that liability from rate base and from the WACC until [[Arkansas Cypress|Cypress Solar]] is in service, amortize the liability over the SRC term, flow the Investment Tax Credits to all customers through Rate Schedule 73 (the [[Generating Arkansas Jobs Act (GAJA) rider]]), and route Google's payments back through Rate Schedules 38 and 47 as offset revenue over Cypress's useful life. The asymmetric treatment of Google's transmission contribution (CIAC, immediate rate-base deduction) and Google's generation-related payments (other form, revenue recognized over Cypress's life) is not an inconsistency to be explained away — it is the correct application of two different statutory subparagraphs to two structurally different payment streams, ratified by the Attorney General's non-opposition and embedded in the very SRC framework the General Assembly built to encourage these deals. ## Argument **The statutory text creates two categories, not one.** Ark. Code Ann. § 23-4-1304(x)(2) draws an express line between (A) "contribution in aid of construction" — which "shall be deducted from the cost of the strategic investments capitalized and recovered through rates" — and (B) "other form of payment" — which is "recognized over the life of the strategic investments." If the General Assembly had wanted every dollar a strategic-investment customer pays the utility to be CIAC, subparagraph (B) would not exist. The legislative draftsman who wrote two subparagraphs presumably intended two outcomes. Statement A simply takes the statute at its word: Google's transmission payments — funding the construction of single-purpose interconnection facilities dedicated entirely to Google — fall under (A); Google's generation-related payments — paid under SRC rate schedules during a ramp period that funds, in part, a 600 MW solar plus 350 MW battery resource that will serve the entire EAL portfolio — fall under (B). The "other form" category is precisely the home for service-revenue arrangements that produce a net offset benefit but are not lump-sum construction grants. **The payments are structurally "for electric service" because that is what the SRC charges them as.** [[Palmer Direct on the Google SRC|Palmer]] testifies that "the SRC commits EAL to develop, and Google to financially support through the rates included in the SRC, Cypress Solar to add generation to the Company's resource portfolio" ([[Palmer Direct on the Google SRC]], p. 12, emphasis added). The operative phrase is "through the rates included in the SRC." Google does not write Entergy a check labeled "construction grant." Google pays a negotiated rate for electric service under a contract that the Commission's own Promotional Practice Rules require it to scrutinize for ratepayer impact. The rate is higher than what Google would pay under the standard Large General Service tariff during the ramp period; that delta — the "second category of payments" — is structurally service revenue paid on a kilowatt-hour and kilowatt basis under the SRC. Calling that revenue stream a "contribution in aid of construction" would collapse every above-cost industrial tariff in the state into CIAC, which is precisely what subparagraph (B) was written to prevent. **The Staff–EAL stipulation is conservative, transparent, and protects current customers.** The nine-part stipulation recorded in [[Google SRC Order No. 5 Cypress Inextricability|Order No. 5]] does not let EAL pocket Google's payments. It defers them to a regulatory liability, excludes that liability from rate base and the weighted-average cost of capital until [[Arkansas Cypress|Cypress]] is in service, and then amortizes them as offset revenue through Rate Schedules 38 (Energy Cost Recovery) and 47 (Capacity Cost Recovery) — the very vehicles by which other customers' energy and capacity costs are billed. Investment Tax Credits flow to customers through the GAJA Rider as an offset to the revenue requirement. The unamortized ITC liability is reflected in the WACC as zero-cost capital, which is to say current customers earn the full benefit of the ITC stream rather than EAL's shareholders. The [[Office of the Arkansas Attorney General|Attorney General]] — the statutory representative of ratepayers — did not oppose the stipulation. That non-opposition is not a procedural formality; it is the consumer advocate's substantive assent to the accounting treatment. **The asymmetric treatment of transmission and generation tracks an asymmetry that is real in the underlying assets.** The transmission built to serve Google is single-purpose: a high-voltage tap to one customer's load, whose entire cost is wholly attributable to that customer. CIAC treatment of that cost is straightforward — Google pays 100%, the rate base is reduced 100%, and no other ratepayer is on the hook for a dollar of facilities dedicated to one user. [[Arkansas Cypress|Cypress Solar]], by contrast, is a 600 MW solar array plus a 350 MW battery — a system resource designated by the Commission as a Strategic Investment under § 23-4-1303(10)(C), found to "benefit all customers" and integrated into the entire EAL portfolio. The Commission in [[Cypress Order No. 4 CECPN Approval]] approved Cypress on findings that it "is crucial to EAL's long-term resource plans for all customers" (p. 4) and that EAL "retains adequate dispatchable resources" alongside it. RECs are retired proportionately on Google's behalf only during the SRC term; the energy and capacity flow to the system. The asset's economic life — likely 30 to 40 years for the PV array and a separate horizon for the BESS — will extend well past the SRC term. To deduct Google's payments from rate base immediately as if Cypress were single-purpose Google infrastructure would mischaracterize a portfolio resource as a customer-dedicated facility, and would in effect transfer to Google the long-tail economic value of an asset other customers will still be using for decades after the SRC has expired. **The mechanism actually preserves the regulatory value of Google's contribution.** Under the "other form" treatment, Google's payments are recognized as revenue offsetting Cypress's revenue requirement over Cypress's useful life — which is the period during which all EAL customers will be paying that revenue requirement through the GAJA Rider and through routine fuel and capacity riders. The match between when costs are recovered (over Cypress's life) and when offsets are recognized (over Cypress's life) is the textbook regulatory accounting answer. Immediate deduction from rate base, by contrast, would collapse a multi-decade benefit stream into a single accounting moment — front-loading the gain to today's customers at the expense of every customer who will pay Cypress's revenue requirement through year 30. The "other form" treatment is intergenerationally fair; immediate CIAC deduction is not. **Finally, the SRC framework is the operative legal instrument the General Assembly designed for exactly this situation.** The Generating Arkansas Jobs Act (Act 373 of 2025) was enacted specifically to enable Arkansas to compete for large-load economic-development customers by giving Entergy a rider mechanism for new generation and by recognizing the SRC as the contract vehicle for the customers driving that generation. Two statutory categories under § 23-4-1304(x)(2) — CIAC and "other form" — were preserved precisely because the General Assembly understood that some customer payments are construction contributions and some are service revenue. To classify every dollar a strategic-investment customer pays as CIAC would render subparagraph (B) surplusage and would undo the legislative design the parties relied on in negotiating the deal. Statement A respects the statute. The stipulation is the statute correctly applied. ## Evidence 1. **The statutory two-category architecture.** Ark. Code Ann. § 23-4-1304(x)(2)(A) (CIAC, immediate deduction) and (x)(2)(B) ("other form of payment," recognized over the life of the strategic investments) — the bifurcation that anchors Statement A's reading. (Cited in the [[psc/docket-25-055-p-special-contract-2026-05-22/_overview|Docket 25-055-P production overview]] and reflected in the Staff–EAL stipulation in [[Google SRC Order No. 5 Cypress Inextricability]].) 2. **The 9-part Staff–EAL stipulation, recorded in [[Google SRC Order No. 5 Cypress Inextricability|Order No. 5]] (Doc. 55, 2025-11-03):** "(a) approve SRC as in public interest; (b) defer certain revenues to a regulatory liability, amortized over SRC term; (c) exclude regulatory liability from rate base / WACC until Cypress in service; (d) begin amortizing regulatory liability per Elbe's Exhibit CKE-4 (HSPI); (e) amortize ITCs over Cypress Solar useful life; (f) flow ITCs to customers via Rate Schedule 73 (GAJA Rider) as offset to revenue requirement; (g) reflect unamortized ITC liability in WACC as zero-cost capital; (h) include amounts paid by Google in Rate Schedule 38 (Energy Cost Recovery Rider); (i) include amounts paid by Google in Rate Schedule 47 (Capacity Cost Recovery Rider)" ([[psc/docket-25-055-p-special-contract-2026-05-22/_overview|Docket 25-055-P production overview]], Staff–EAL stipulation summary). 3. **Attorney General non-opposition.** "[[Google SRC Order No. 5 Cypress Inextricability]] (Doc. 55) records the Joint Motion to Submit for Approval filed by EAL and Staff (with AG non-opposition) with a 9-part stipulation" ([[psc/docket-25-055-p-special-contract-2026-05-22/_overview|Docket 25-055-P production overview]]). 4. **Palmer Direct on the SRC structure as service-rate financial support.** "Q: Does EAL have sufficient capacity to serve Google? A: **No.** It is for this reason that the SRC commits EAL to develop, and **Google to financially support through the rates included in the SRC**, Cypress Solar to add generation to the Company's resource portfolio." ([[Palmer Direct on the Google SRC]], quoting Palmer at p. 12, emphasis in source.) 5. **Cypress as a portfolio resource, not a Google-dedicated asset.** "EAL states that Cypress Solar is crucial to EAL's long-term resource plans for all customers, but particularly an economic development customer, Altitude Capital, LLC, a subsidiary of Alphabet, Inc (Google), that requires Cypress Solar to be included in EAL's generation portfolio as a condition for locating in EAL's service territory." ([[Cypress Order No. 4 CECPN Approval]], p. 4, quoting EAL Application at 3 and Dalrymple Direct at 2.) 6. **Dalrymple Direct on system-wide benefit.** "Cypress Solar is critical to support service to Google's new data center and it will help service the load and energy needs of all other EAL customers... renewable energy credits (RECs) generated by Cypress Solar will be retired proportionately on behalf of Google during the term of the Special Rate Contract (SRC)... the incremental energy capacity and resource diversification from Cypress Solar will yield net benefits to all EAL customers." ([[Cypress Order No. 4 CECPN Approval]], p. 4, summarizing Dalrymple direct testimony.) 7. **Strategic Investment designation under § 23-4-1303(10)(C).** Cypress is designated a Strategic Investment under "Ark. Code Ann. § 23-4-1303(10)(C) (renewable resource clause). The Commission finds (a) Cypress benefits all customers, and (b) EAL retains adequate dispatchable resources." ([[Cypress Order No. 4 CECPN Approval]].) The designation is a finding that Cypress is a portfolio resource — not a single-customer interconnection — which is the predicate for "other form" treatment rather than CIAC. 8. **The Promotional Practice Rule framework treats SRC payments as service revenue.** [[Google SRC Order No. 4 SRC Suspension]] (Doc. 41, 2025-10-03) suspends the SRC "pursuant to PPR Rule 6(a)" — the same rule that governs every "proposed promotional practice" — which by its terms applies to rate offerings, not to one-time construction contributions. The Commission's own procedural posture treats the SRC as a tariff-like instrument subject to promotional-practice review, which is consistent with the "for electric service" framing. 9. **Act 373's institutional design.** The SRC was filed "under Act 373 of 2025... and EAL will use its proposed Rate Schedule No. 73, Strategic Investment Recovery Rider ('SIR Rider'), to help facilitate the deployment of incremental renewable resources needed to support the provision of service under the SRC." ([[Palmer Direct on the Google SRC]], quoting Palmer at p. 6.) The "provision of service" language is the statutory hook: Google's payments are paid as part of, and in connection with, the provision of electric service. 10. **The "inextricability" finding — Cypress and the SRC are one regulatory bargain.** "Given the importance of this Docket and its inextricability with the pending decision regarding EAL's request for a Certificate of Environmental Compatibility and Public Need in Docket No. 25-054-U, the Commission defers for now a decision on the Parties' Joint Motion to cancel the evidentiary hearing." ([[Google SRC Order No. 5 Cypress Inextricability]], quoting Order No. 5.) The Commission's own framing treats the SRC and Cypress as one integrated proceeding; the SRC is the contract by which a portfolio resource is partially financed by an economic-development customer's service rates. ## Anticipated counterarguments A reasonable opponent will press at least three lines that Statement A cannot pretend do not exist. **First**, the parallelism objection: if Cypress Solar is "needed to serve Google" — and [[Cypress Order No. 4 CECPN Approval]] says exactly that, with Cypress designated as a condition for Google locating in Arkansas — then it is hard to articulate a principled basis on which transmission built for Google is CIAC but generation built for Google is not. An opponent will argue that the "system resource" framing is rhetorical; that Cypress only exists because Google demanded it; and that the statute draws no asset-class distinction between transmission and generation in § 23-4-1304(x)(2)(A). **Second**, the timing objection: how can payments made during a pre-service ramp period — before Google's West Memphis data center is constructed and energized — be characterized as "for electric service" when there is, by definition, no service yet being rendered? An opponent will argue that calling pre-service payments "service revenue" is a label that the underlying economic reality does not support; a payment that funds construction of a generation asset before any kilowatt-hour flows is functionally a construction contribution, whatever rate schedule carries it on the books. **Third**, the ratepayer-impact objection: the "other form" treatment leaves Cypress's full revenue requirement in the GAJA Rider charged to all 738,836 retail customers starting now, with Google's offset recognized over decades. Even if the present-value math washes out, the near-term cash impact on current ratepayers is materially larger under "other form" than under CIAC — and current ratepayers are already absorbing base-rate increases and Rider FRP charges in 2026 and 2027. The Commission has been pressing whether the "other form" approach actually inures to current customers' benefit relative to immediate CIAC deduction; the [[Google SRC Order No. 8 RIM and MBSA|Order No. 8]] direction for revised RIM scenarios suggests the Commission is taking that quantitative question seriously. These are real objections. The antithesis will engage them.