Monthly Archives: April 2025

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Will special rate classes protect Va. residents from the costs of serving data centers?

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Data center between housing community and a bike path
A data center in Ashburn, Virginia. Photo by Hugh Kenny, Piedmont Environmental Council.

For the past few years, observers have been warning that the huge surge in demand for electricity to serve data centers will mean higher electricity bills. In its December 2024 report on data centers in Virginia, the Joint Legislative Audit and Review Commission (JLARC) confirmed projections that the increased demand for power and the need for new infrastructure to serve data centers would raise rates for everyone, not just the data centers. 

Right on cue, on March 31 Dominion Energy Virginia filed a request with the State Corporation Commission to increase the rates it charges to all customers. If granted, the increase would amount to an additional $10.50 on the monthly bill of an average resident. In a separate filing on the same day, Dominion asked to increase residents’ bills by another $10.92 per month to pay for higher fuel costs.  

Either out of a monumental failure to read the room, or because Dominion executives feel they might as well be hung for a sheep as a lamb, the rate filing also asks for an increase in the company’s authorized rate of return, from 9.7% currently to 10.4%.

But it’s not all bad news. Along with the rate increase request, Dominion filed a proposal to create a new rate class for large-load customers like data centers. The move coincides with enactment of new legislation requiringthe SCC to examine whether electric utilities should separate data centers into their own rate class to protect other customers, something the SCC was in fact already doing. 

And Dominion is not alone. Virginia’s other major investor-owned utility, Appalachian Power, filed a similar proposal on March 24, following onefrom Rappahannock Electric Cooperative (REC) on March 12. The proposals reflect a growing consensus that ordinary residents should not be forced to bear the cost of building new infrastructure needed only because of data centers. Moreover, if data centers close up shop before the costs of the new infrastructure are fully paid for, residents should not get stuck paying off these now-stranded assets.  

In Dominion’s case, there is good reason to worry. In the first day of testimony at the SCC regarding the company’s 2024 Integrated Resource Plan (IRP), a Dominion witness admitted that of the $7.6 billion worth of planned new transmission infrastructure listed in the IRP, residential customers will pay 55%, including for infrastructure that serves only data centers. 

It’s not immediately clear how much setting up a new rate class for data centers will change that outcome. Dominion proposes creating a new large-load class for customers using at least 25 MW at capacities of 75% or more (meaning that they have a consistently high level of electricity use, as data centers do). These customers would be subject to a number of new requirements, including posting collateral and paying for the substation equipment that supplies them. They would also have to sign 14-year contracts (including an optional 4-year ramp-up period) obligating them to pay for the greater of actual electricity use or 60% of the generation and 85% of the transmission and distribution capacity they sign up for, even if they use less.

Dominion says the proposed generation demand charge is much lower than that for transmission because transmission and distribution assets must be designed for 100% of capacity, while generation is only planned for 85% actual metered load. Based on that, though, you might think the correct demand charges would be set at 100% for transmission and 85% for generation. It’s also not clear whether 14 years is long enough to recover all the costs incurred to build new infrastructure, or whether that’s even the outcome Dominion is striving for. 

There are sure to be a lot more of these kinds of questions when the SCC takes up Dominion’s rate case. The SCC will have to evaluate Dominion’s proposed large-load tariff against a worst-case scenario: an industry-wide disruption that suddenly and dramatically reduces data center demand across the state, leaving a utility with excess generation and transmission capacity that can’t be backfilled and that other customers will be stuck paying for. 

Fortunately, Dominion’s proposal doesn’t have to be considered in isolation, since the SCC will be able to compare it to those from APCo, REC and utilities in other states. According to APCo’s filing, its new rate class would be limited to the largest new customers (those with at least 150 MW in total or 100 MW at a single site). These customers would be required to pay a minimum of 80% of contracted demand even if they use less, which the company says is a significant increase from the demand charge of 60% that applies to existing customers. (You’ll notice it’s also a lot more than the 60% demand charge Dominion is proposing for data centers.) 

APCo’s filing notes that its proposal is consistent with a data center tariff it recently agreed to in settling a case in West Virginia; in both cases, customers would have to sign 12-year contracts, following an optional ramping-up term of up to 4 years, with requirements for posting collateral and stiff exit terms. 

APCo has other experience to go on as well. Its parent company, American Electric Power (AEP), made news when its subsidiary in central Ohio proposed to charge data center customers at least 90% of contracted demand or 90% of their highest demand over the preceding 11 months, whichever is higher, and committing them to contract terms of at least 10 years, after a ramp-up period of up to four years. Data centers pushed back hard on these terms, and the Ohio Public Utilities Commission is considering different settlement proposals with somewhat lower demand charges. 

REC’s filing takes an entirely different approach. REC is the largest of Virginia’s co-ops, serving a territory that stretches from Frederick County in northwest Virginia down through Spotsylvania and as far east as King William County. As data center development pushes outward from Northern Virginia, REC finds itself overwhelmed with new demand. It now expects up to 17 gigawatts of data center demand by 2040, up from near zero in 2023, dwarfing all other customers’ loads.  

Like other utilities, electric cooperatives have an obligation to serve all comers in their territory, so if a new data center moves in, they have to provide the power. But unlike Dominion and other investor-owned utilities, co-ops are customer-owned nonprofits. They are highly motivated to protect their existing customers from the costs – and risks – involved in serving new ones. 

REC is a distribution cooperative only, with no generation of its own. Today, REC gets all its electricity from Old Dominion Electric Cooperative (ODEC), a sort of umbrella organization that owns generating plants and supplements those with power purchased on the PJM wholesale market. But when ODEC learned how much new data center load REC was expecting, it told REC to look elsewhere for the power. 

REC’s solution is to silo off big data centers and other customers with more than 25 megawatts in demand, and keep all the costs and risks involved within that space. According to the proposal the co-op filed with the SCC, data centers that want to get power from REC will have to post collateral, contribute to the cost of new infrastructure and sign two agreements, one for the power supply and one for its delivery. REC (or an affiliate it plans to create for this purpose) will buy electricity from PJM on the open market and pass through the cost. Alternatively, the data centers will be able to buy electricity from competitive service providers, allowing them, for example, to procure renewable energy.  

REC’s proposed delivery contract is similarly designed to ensure the data centers pay all the grid costs the utility will incur in serving them. In addition to contributing to the cost of new infrastructure, data centers will have to sign contracts with terms that must “be structured to recover the full cost of distribution and/or sub-transmission plant investment, maintenance and operation.” This includes payment of a demand charge that isn’t specified but appears to be as high as 100% of peak demand – meaning, there would be no risk that these grid costs would end up on the tab of residents and other customers outside the class.

REC’s approach might be seen as a sort of gold standard for protecting other ratepayers from the costs and risks involved in providing energy to data centers. It’s not a perfect antidote for rate increases, because the tight supply of generating capacity within PJM is already pushing up costs of electricity even for existing customers. And buying electricity on the open market may cost data center customers more than buying it from a utility that owns its own generation, as Dominion and APCo do. But that isn’t a concern that will keep REC’s other customers up at night. 

The very different approaches proposed by REC, on the one hand, and Dominion and APCo, on the other, reflect the difference between a nonprofit distribution cooperative and investor-owned utilities that build and own generation. Building stuff is how investor-owned utilities earn a profit. The bigger their customer base and the more electricity those customers demand, the more the profit. The data center industry looks to them like a big, fat golden goose. 

It isn’t surprising, then, that neither Dominion nor APCo are proposing solutions that put all the risks involved with serving data centers onto the industry, the way REC’s proposal does. As a new Harvard Law School reportdetails, the utility profit motive and the political muscle of Big Tech inevitably lead to a cost shift onto other customers.  

Maybe there is something different about data centers in Virginia that justifies involving ordinary residential customers in this risk. Dominion will surely make that pitch when the SCC takes up the case. 

It will be interesting to observe, but color me skeptical.

Originally published on April 25, 2025 in the Virginia Mercury.

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With vetoes and destructive amendments, Youngkin acts to deepen Virginia’s energy woes

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This year’s General Assembly session notably failed to produce legislation addressing the widening gap between electricity demand and supply in Virginia. Legislators shied away from measures that would address the growing demand from data centers, but they also couldn’t bring themselves to improve the supply picture by supporting landowners who want to host solar facilities. By the time the session ended, a mere handful of bills had passed that could improve our ability to meet demand.  

Still, the initiatives that did pass offered positive steps forward on energy efficiency, distributed generation, interconnection of rooftop solar, energy storage, EV charging and utility planning. In addition, two data center-related bills passed requiring more planning and transparency during the local permitting process and tasking utilities with developing a demand response program to relieve some of the added burden on the grid.

Sadly, however, Republican Gov. Glen Youngkin decided to use his powers of veto and amendment to water down or scuttle the limited (and mostly bipartisan) progress legislators made. The only two data center bills were effectively killed, as were most energy bills – some by veto, others by amendments that made them worse than no action at all. 

There’s nothing very subtle going on here. The governor loves data centers and isn’t about to limit their growth, regardless of the consequences to residential ratepayers and communities. He’s also stuck in a rut of attacking the Virginia Clean Economy Act (VCEA), which prioritizes low-cost renewable energy over legacy fossil fuels. He won’t be in office when the chickens come home to roost in the form of an electricity shortfall and skyrocketing rates, but he’s setting up his party to cast blame on the liberal climate agenda.   

Data centers

The General Assembly failed to pass legislation that would have shifted responsibility for sourcing clean energy onto the data center operators. The only bill to pass that even makes energy a consideration in the siting of data centers is HB 1601, sponsored by Del. Josh Thomas, D-Gainesville. In addition to site assessment provisions at the permitting stage, it requires the utility serving the facility to describe any new electric generating units, substations and transmission voltage that would be required.

Limited as these provisions are, the governor proposed amendments to further weaken the bill, then added a clause requiring that for the bill to take effect, it has to be passed all over again in 2026. That’s a veto by another name. 

SB 1047 from Sen. Danica Roem, D-Manassas, requires utilities to implement demand-response programs for customers with a power demand of more than 25 MW, a way of  relieving grid constraints during times of high demand. The governor vetoed the bill, deeming it unnecessary. 

The only data center-related bill that did get the governor’s approval is one of questionable utility. HB 2084 from Del. Irene Shin, D-Herndon, merely requires the SCC to use its existing authority during a regular proceeding sometime in the next couple of years to determine whether Dominion and Appalachian Power are using reasonable customer classifications in setting rates, and if not, whether new classifications are reasonable. The SCC seems to be doing this already anyway, but maybe this lets our leaders claim they are doing something to protect residential ratepayers. Plus, they can now call it a bipartisan effort!

Utility reform

 With Virginia fixed on a collision course between growing demand for energy from data centers and our leaders’ refusal to support low-cost solar to provide the power, it is more important than ever that our utilities engage in transparent and comprehensive planning through the integrated resource plans (IRPs) filed with the State Corporation Commission. Over the course of last fall, the Commission on Electric Utility Regulation hammered out what I think is truly good legislation to ensure Dominion and APCo present the information the SCC and the public need to be sure our utilities are making the decisions that will improve our energy position and put the needs of ratepayers ahead of corporate profits. 

In vetoing SB 1021 from Sen. Scott Surovell, D-Fairfax, and HB 2413 from Del. Candi Mundon King, D-Dumfries, the governor offered this muddled statement: “The State Corporation Commission has the expertise and the authority to make requirements and changes to the integrated resource plan process. The Virginia Clean Economy Act is failing Virginia and those that champion it should stop trying to buttress this failing policy. But rather should be focused on procuring the dependable power needed to meet our growing demand through optimizing for reliability, affordability, and increasingly clean power generation.”

We get it: Johnny One-Note doesn’t like the VCEA. He said that already. But right now, APCo isn’t filing IRPs at all, and the SCC has been so frustrated with Dominion’s filings that it didn’t approve the last one, and demanded a supplement to the most recent one even before it was filed. Clearly the SCC could use a little help here.  

Distributed energy sources

Advocates for small-scale solar were more successful this year than their colleagues who focus on utility-scale projects. Bipartisan majorities seemed to agree that if we can’t or won’t site large solar farms, at least we should make it easier to put solar on rooftops and other small sites close to users.

Sadly, however, only one bill survived the governor’s scrutiny relatively unscathed, though it’s an important one for customer-sited solar. HB 2266 from Del. Kathy Tran, D-Springfield, resolves the interconnection dispute that has stalled commercial solar projects in the 250 kW to 3 MW size range, which includes most rooftop solar on schools. Tran’s bill requires the SCC to approve upgrades to the distribution system that utilities say are needed to accommodate grid-connected solar, a safeguard that will prevent the utility from larding on costs. The utility must then spread the costs across all projects that benefit from the expanded capacity. 

Youngkin’s proposed amendment rearranges the language a bit and places it into a new section of code, but does not otherwise change it. He then adds a provision in the tax code to make grid upgrades tax-deductible. I would have thought they would be anyway, as business expenses, but it can only be helpful to spell it out.  

Unfortunately, that’s it for the good news. 

HB 1883 from Del. Katrina Callsen, D-Charlottesville, and SB 1040 from Sen. Schuyler VanValkenburg, D-Richmond, contain several provisions aimed at increasing the amount of distributed solar in Virginia. Among other things, the legislation increases the percentage of Dominion’s renewable portfolio standard (RPS) obligation that must be met with renewable energy certificates (RECs) from behind-the-meter small solar projects, a change that would make rooftop and other distributed solar more profitable for homeowners and businesses. 

HB 1883 also increases to 3 MW from 1 MW the size of solar projects that could qualify for this favored category. Additionally, for the first time it would give all residential ratepayers the right to use power purchase agreements (PPAs) to install solar with no money down, and would increase the amount of electricity Dominion would build or buy from solar facilities on previously developed project sites. To give the market a chance to ramp up, Callsen’s bill excuses Dominion from having to meet its REC obligations from Virginia projects for an additional two years, pushing that date from this year to 2027. 

Among all those changes, the only one the governor liked is the idea of softening the requirements around REC purchases. His proposed amendment would make all REC compliance voluntary for four years. Effectively, Virginia would have no renewable energy requirements until 2028, undercutting solar development of any size. His preferred version scraps all of the provisions of Callsen’s bill, leaving no provisions to support solar development and replacing them with an open attack on the VCEA. 

I checked in with Callsen by email to get her reaction. She responded, “We sent the administration bipartisan legislation that protects ratepayers, gives Virginians more options for solar on our homes and businesses, and saves rural land. Rather than sign HB 1883 into law,” Callsen wrote, “the governor used this opportunity to attack the Clean Economy Act from 2020. Instead of looking at the past, our Administration should look around; we have a developing energy crisis and are reliant on importing energy to meet our needs.”

The governor also offered a destructive amendment to HB 2346 from Del. Phil Hernandez, D-Norfolk, and SB 1100 from Sen. Ghazala Hashmi, D-Richmond, legislation establishing a pilot program in Dominion territory for virtual power plants (VPPs), which aggregate customer solar and storage resources and demand response capabilities. Although VPPs don’t by themselves add electricity on the grid, they allow time-shifting and other efficiencies that make it easier for utilities to meet peak demand without having to build new generation. The payments utilities make to customers for this service can justify customers’ investments in things like solar, battery storage and smart appliances.  

Instead of improving on the pilot program, however, the governor’s amendment scraps it and calls for the SCC to convene a proceeding to talk about VPPs. On the plus side, Youngkin suggests that the conversation include Appalachian Power as well as Dominion, and consider allowing the service to be provided by either the utilities or third-party aggregators, the latter being the favored approach of many industry members. Still, the amendment pushes off any hope of a program for at least another year, until the SCC has made its recommendations. Since it would have been feasible to both start a pilot program this year and have the SCC consider parameters for a broader program in the future, it’s hard to see the governor’s amendment as a step forward. 

When I asked her for a comment, Hashmi did not mince words, saying it was “incredibly disappointing” that Youngkin chose to offer a substitute instead of signing the legislation.

“This legislation was the result of several months of conversation among a variety of stakeholders, including our utility companies, energy partners, and environmental groups. The Virtual Power Plant has the promise of helping Virginia meet the goals of our increasing energy demands. The Governor’s substitute shows that he is not serious about responding to the growth of Virginia’s energy needs,” Hashmi wrote.

Other solar bills drew outright vetoes, including Mundon King’s HB 2356, establishing an apprenticeship program to help develop a clean energy workforce. The bill requires participants to be paid prevailing wages, a provision that was a certain veto magnet for Youngkin, whose veto statement reads, “This bill will increase the construction costs which will ultimately be passed along to ratepayers, raising costs for consumers.”

Another bill that drew an outright veto was HB 2037 from Del. David Bulova, D-Fairfax. His bill would allow local governments to include in their land development ordinances a requirement that certain non-residential applicants install solar on a portion of a parking lot. 

The governor vetoed it because, he said, it would be expensive for developers, and if it weren’t, they would do it without having to be told. (It’s a strange objection. Does he not understand the whole concept of government acting in the public good? Well, maybe not; see the veto.)

Also vetoed was Shin’s HB 2090, changing the rules around multifamily solar. Admittedly I was not crazy about this bill; although it allows solar facilities to be placed on nearby commercial buildings instead of being restricted to the multifamily building itself, it also imports the requirement for minimum bills that has made other shared solar programs in Virginia unworkable for all but the low-income customers who are excused from the minimum bills. 

Maybe the trade-off would have opened new opportunities for apartment buildings serving low-income households, which would make it a plus on balance. But among his objections to HB2090, the governor noted that excusing low-income customers from high minimum bills would shift costs onto other customers. 

Energy efficiency

The governor vetoed SB 1342 from Sen. Lamont Bagby, D-Richmond, and HB 2744 from Del. Mark Sickles, D-Franconia, that would have pushed Dominion and APCo harder to provide energy efficiency upgrades to low-income homes, setting a target of 30% of qualifying households. 

He also vetoed SB 777 from Sen. Mamie Locke, D-Hampton, and HB 1935from Del. Destiny LeVere Bolling, D-Richmond, which would have established a task force to address the needs of low-income customers for weatherization and efficiency upgrades. The governor said it isn’t needed. 

If you notice a pattern here when it comes to helping low-income households with their energy burden, you are not alone. 

Reached on maternity leave, LeVere Bolling had this to say: “Across our Commonwealth, high utility bills are forcing Virginians to choose between essentials like groceries and medication and keeping their home at a safe temperature during hot summers and cold winters. Virginia has the 10th least affordable residential energy bills in the country. Over 75% of Virginia households have an energy burden higher than the 6% affordability threshold.” She added that the governor’s veto represents a “missed opportunity to address the pressing energy needs of Virginia’s most vulnerable communities.”

 Electric vehicles

The governor offered a substitute for a bill intended to support electric vehicle charging. As passed by the General Assembly, Shin’s HB 2087requires Dominion and APCo to file detailed plans to “accelerate transportation electrification,” including for rural areas and economically disadvantaged communities. It also allows the utilities to file proposed tariffs with the SCC to supply the distribution infrastructure necessary for EV charging stations. 

The utilities are also authorized to develop their own fast-charging stations, but only at a distance from privately-owned charging stations, with the SCC determining the proper distance. This provision responds to the request of gas station chains like Sheetz that say they want to expand their EV charging options, but don’t want to face unfair competition from utilities that can rate-base their investments.

The governor’s amendment would prohibit Dominion and APCo from owning EV charging stations at all; in addition, it would allow retail providers of EV charging stations to buy electricity from any competitive service provider. However, the amendment repeals the section of code that allows the utilities to recover costs of investments in transportation electrification.  

According to Steve Banashek, EV legislative lead with the Virginia Sierra Club, that “negates the purpose of the enrolled bill.” The amendment, he told me in an email, “removes the requirement for utilities to file for tariffs to support implementation of EV charging and to plan for transportation electrification growth via the IRP process, which is critical for speeding up the transition to electric transportation.” 

As for the prohibition on the utilities owning charging stations, Banashek noted that there are areas of the state where private businesses aren’t likely to do it, including in those economically disadvantaged and rural communities. If we don’t want these areas left behind, either the utilities have to step up, or the state does.  

Apparently, however, Youngkin doesn’t intend for the state to do it either. Along with his amendments to Shin’s bill, the governor also vetoed HB 1791 from Sullivan, creating a fund to support EV charging in rural areas of the state.  

Energy storage

The need for more energy storage seems like it would be one area of bipartisan consensus. Batteries and other forms of energy storage are critical to filling in the generation gaps for low-cost, intermittent forms of energy like wind and solar. 

But storage is also required to make full use of baseload sources like nuclear that either can’t be ramped down at times when there is a surplus of energy being produced, or where doing so makes it harder to recover the cost of building the generation. (The already-high projected cost of electricity from small modular nuclear reactors becomes even higher if you assume they don’t run when the power isn’t needed.) 

Sullivan’s HB 2537 increases the energy storage targets for Dominion and APCo, and includes new targets for long-duration energy storage. Unfortunately, Youngkin’s substitute language repeals the entire section of code that includes Virginia’s renewable portfolio standard as well as even the existing storage targets. It’s another bit of anti-VCEA flag-waving that won’t help anyone.  

Just in case you thought Youngkin might be adhering to conservative free market principles with some kind of consistency, I note that he signed HB 2540 and SB 1207 from two Republicans, Del. Danny Marshall of Danville and Sen. Tammy Brankley Mulchi of Clarksville, which provides a $60 million grant to a manufacturer of lithium-ion battery separators. 

I asked Sullivan for a comment on the governor’s action on his bill. He replied, “The Governor’s ridiculous ‘recommendation’ on HB 2537 was disappointing, but hardly surprising. This was not an amendment; he deleted everything – everything – having to do with energy storage, and turned it into a one-sentence bill which would repeal the entire Clean Economy Act.”

Moreover, wrote Sullivan, “HB 2537 was the most closely and extensively negotiated bill among stakeholders that I’ve been involved with since the VCEA. It had broad support – including from Dominion – and should have easily fit into the Governor’s ‘all of the above’ energy strategy and his economic development goals, since it would have brought all sorts of business, jobs, and companies to the Commonwealth.”  

Sullivan concluded, “Needless to say, we cannot agree to the amendment.  We’ll easily pass this bill next session, and I suspect Governor Spanberger will sign it.” 

Sullivan may be right that it will take a new administration before Virginia gets serious about meeting its energy challenges – if it does even then – but this session needn’t have ended in a partisan stalemate and near-zero progress. Most of the bills the governor vetoed or gutted were passed with the help of Republicans, making Youngkin’s actions less of a rebuke to Democrats than to the members of his own party who were simply trying to do their job. The results, sadly, are bad for everyone.

This article originally appeared in the Virginia Mercury on April 1, 2025.

UPDATE May 8: As expected, the General Assembly rejected the governor’s destructive amendments to the bills described. The governor then vetoed all but one. The exception is HB2346 from Hernandez and SB1100 from Hashmi, establishing a pilot program in Dominion territory for virtual power plants (VPPs). That one has been signed into law, along with Tran’s HB2266.