Electricity Price Increases Hit Different in Virginia

Electricity prices are escalating across the PJM Interconnection territory, encompassing 13 states and 67 million people, sparking a political crisis that transcends party lines. Governors in New Jersey, Pennsylvania, and Indiana have voiced strong concerns and taken actions to address rising utility costs. A recent review by Lawrence Berkeley National Laboratory attributes a significant portion of the increase in retail prices in many Mid-Atlantic states to higher capacity prices within the PJM region for 2025. The article notes that Virginia, home to the country's most active "data center alley" in Loudoun County, exemplifies this trend. While data centers contribute to increased demand, a deeper analysis reveals a complex interplay of factors beyond just data center growth. For instance, utilities in Maryland and Washington, D.C., have seen more substantial generation price hikes due to reliance on external gas and mandates for renewable energy, with the D.C. Public Service Commission approving rate hikes partly driven by PJM capacity auctions and a "Capacity Price Adder. In contrast, Virginia's Dominion Energy customers experienced an 11.6% price growth in the past year, less than that in New Jersey and Maryland, which lack the same concentration of AI facilities. Appalachian Power in Virginia even saw a slight price drop. Virginia's electricity rates remain below the national average, largely due to its generation mix dominated by natural gas and cheap nuclear power, and a more localized generation system that reduces grid congestion. While Dominion has attributed its price increases to inflation, its base rate is seeing its first rise since 1992, leading to projected monthly rate hikes for customers. The Virginia State Corporation Commission recently rejected a Dominion request to shift capacity purchases to the fuel charge, a decision that could affect how smoothly rates adjust. Public complaints about utility bills are widespread in Virginia, particularly after the base rate increases took effect.