Virginia mulls shifting major grid costs to data centers
Virginia regulators are considering proposals to shift the multibillion-dollar cost of electricity grid upgrades, primarily driven by data center demand, from state residents to data center developers. This follows an estimated $2.8 billion paid by residents for data center-related transmission lines since 2021. Tech companies like Amazon and Microsoft are urging caution and alternative approaches, while advocates push for data centers to bear more of the infrastructure costs.
Virginia's State Corporation Commission is holding hearings in a significant utility case to re-evaluate who should pay for the extensive grid upgrades necessitated by the state's booming data center industry. Since 2021, Virginia residents have shouldered an estimated $2.8 billion in costs for transmission lines directly linked to data centers, with total costs indirectly tied to data center growth reaching $6.2 billion.
The administration of Gov. Abigail Spanberger, along with consumer and environmental advocacy groups like Appalachian Voices and the Piedmont Environmental Council, argue that data center developers should bear a greater share of these infrastructure costs, particularly for projects that would not have been built "but for" their electricity demand. This approach, they claim, would have saved residents billions of dollars.
Conversely, major tech companies such as Amazon and Microsoft are advocating for regulators to take more time to study the complex issue. They suggest enabling companies to voluntarily fund their own infrastructure, with Amazon proposing that such payments could prioritize projects in Dominion Energy's interconnection queue. Dominion Energy, the state's largest utility, estimates a pipeline of 70,000 megawatts from data centers, potentially requiring 230 substations costing $6 billion to $12 billion.
Regulators are expected to rule on an annual transmission rate rider, which aims to recover about $1.5 billion in costs, by August 1. However, broader discussions on long-term cost allocation policies may extend beyond this date. Dominion Energy has already begun implementing policies to shift some costs to data centers, including a higher rate starting next year, which is projected to reduce the typical household's transmission rider increase.