The world capital of data centers is reconsidering who foots the multibillion-dollar bill for grid upgrades.
Virginia regulators on Tuesday and Wednesday heard arguments in a blockbuster utility case that could reformulate who pays the cost of transmission projects. The State Corporation Commission is considering whether — and how — data center developers should shoulder more of those costs, which are currently spread across the public.
“This is not a typical transmission rate rider proceeding,” said Kat King, an attorney representing the advocacy group Appalachian Voices. Virginia’s data center boom, she said, “has raised big questions about cost allocation and affordability across the board.”
Officials from the administration of Gov. Abigail Spanberger (D) made a rare appearance before the independent commission to argue, alongside consumer and environmental advocates, that data centers should shoulder the cost of infrastructure that would not have been built but for the industry’s electricity demand — known as a “but-for” test.
Big Tech companies, on the other hand, urged Virginia to take more time to study the issue — and to enable companies to voluntarily pay for their own infrastructure. Amazon argued the state should move projects that make such payments to the front of Dominion’s interconnection queue.
Dominion Energy, the commonwealth’s largest utility, has estimated its pipeline of data centers’ requested demand totals about 70,000 megawatts. If those data centers come online, Dominion could be looking at building about 230 substations at a cost of roughly $6 billion to $12 billion.
“These costs are currently socialized among all customers in the Dominion zone,” William Reisinger, an attorney representing the Piedmont Environmental Council, told regulators Tuesday.
“Without a policy change,” he said, “Virginia’s residential customers and small business customers will continue to bear a substantial share of the costs Dominion incurs solely to serve data centers.”
The kind of test sought by Spanberger and advocates would have saved Virginia residents billions of dollars if it had been in place earlier in the data center boom.
State Corporation Commission staff testified that 25 of the 59 transmission lines built by Dominion since 2021 were directly related to specific data centers, costing about $2.8 billion.
Adding transmission projects indirectly tied to data center growth raises that number to $6.2 billion — more than half of Dominion’s projects, and about three-quarters of its transmission spending.
“The main takeaway is that data center development has become a significant driver of Dominion transmission line cases since 2021,” Neil Joshipura, the commission’s senior utilities engineer, said Wednesday.
Big Tech companies argued the questions of allocating transmission costs were too complex for the proceeding, which was focused on an annual adjustment of Dominion’s transmission rate rider.
Regulators have until Aug. 1 to rule on the rider — which seeks to recover about $1.5 billion in transmission costs — although several parties argued deliberations on broader cost-allocation policies could continue beyond that date.
Cliona Mary Robb, an attorney representing Microsoft, compared Virginia’s three-month proceeding to Pennsylvania taking more than a year to develop its new large-load tariff.
“Answers to basic questions regarding the proposal to directly assign transmission costs to large customers are not adequately addressed by the evidence in this proceeding,” she said Tuesday.
“The Pennsylvania Public Utility Commission may well provide a road map for this commission in this proceeding,” she added. “But this commission, in fairness to all parties, must start at the beginning of that road map — and not at the end of that road map.”
Hyperscalers also argued it was premature to change transmission cost structures because Dominion has only recently begun to implement other policies designed to shift costs toward data centers.
For instance, Dominion will begin charging data centers a higher rate next year. That has allowed the utility to decrease its estimate for how much more a typical household will pay for the transmission rider. The rider, which now costs average households $12 a month, will rise less than $1 instead of almost $3.
Dominion also said it might be too early to pile more changes onto how it treats data centers. But the company did offer regulators two proposals if they chose to push ahead: Dominion could recover data center-driven costs from specific facilities, or it could spread those costs over the entire GS-5 rate class, the utility’s new category for large loads like data centers.
Tech companies said they would prefer a process that allows them to voluntarily pay their infrastructure costs, a policy known as contribution in aid of construction.
“I think there’s definitely a risk of, you know, call it an overcorrection or an overprotection,” Cameron Brooks, a witness for Amazon, said Tuesday. “Especially when you have a number of different mechanisms that you know are kind of overlapping.”
