Virginia to offload more grid costs onto data centers
Virginia regulators have ordered Dominion Energy to implement a new process for directly assigning electric transmission costs, such as substations, to data centers, shifting these expenses away from general ratepayers. This decision is expected to move hundreds of millions of dollars in costs to the energy-intensive sector. Data centers will now be required to make upfront payments for direct connect transmission facilities.
Virginia regulators have directed Dominion Energy, the state's largest utility, to implement a new policy requiring data centers to directly bear the transmission costs associated with their substantial electricity consumption. This landmark decision by Virginia's State Corporation Commission (SCC) aims to shift hundreds of millions of dollars in electric service costs, particularly for infrastructure like substations built to meet data center demands, away from general ratepayers.
The move marks a significant victory for environmental groups, consumer advocates, and Virginia Democrats, including Governor Abigail Spanberger's administration, who have long argued for Big Tech to contribute more to the energy grid's expenses. Governor Spanberger hailed the decision as a crucial step in addressing rising energy costs for Virginians. The SCC's order also leaves open the possibility for data centers to pay a greater share of upstream transmission costs in the future.
While hyperscalers, including Amazon and Microsoft (represented by the Data Center Coalition), have publicly committed to covering their energy costs, they had advocated for voluntary approaches and urged regulators to allow existing policies, like a new large-load rate class, to mature. The Data Center Coalition's director of Virginia government affairs, Nicole Riley, stated the order would likely accelerate the trend of large users contributing more to transmission infrastructure costs.
Under the new order, Dominion Energy must, within 90 days, propose an amended line-extension policy that includes a "contribution in aid of construction" (CIAC) framework. This would require data center developers to make upfront payments for "direct connect" facilities, such as substations and power lines, that link their operations to the main transmission system. Regulators acknowledge that this initial step may not fully address all higher-order transmission costs and plan to consider further changes to ensure a fair allocation of costs across the entire system.