Virginia Governor Amends Bills that Shift Costs Onto Data Centers. Critics Say Her Tweaks Weaken Them.

Why It Matters

The revisions could keep data centers from bearing additional grid costs, preserving their competitive tax advantage while limiting the financial burden on Virginia ratepayers. The outcome will shape the state’s energy financing, utility profitability, and the broader debate over equitable cost allocation for high‑consumption industries.

Key Takeaways

• Spanberger removed cost‑shift provision for data centers in SB 253, HB 1393.
• Opt‑out threshold raised to 10,000 employees, limiting rate‑class switches.
• Power‑line burial program’s rate‑base cap cut from 4% to 2%.
• SCC’s allowed utility return capped at 9.3%, excess returned to customers.
• Legislature must act by April 22; amendments face possible veto.

Pulse Analysis

Virginia’s rapid growth of data‑center campuses has placed unprecedented strain on the Commonwealth’s electric grid, prompting legislators to craft SB 253 and HB 1393 as a way to redistribute the cost of capacity auctions and new distribution infrastructure. The bills would have moved a portion of those expenses onto customers classified under the GS‑5 rate, typically high‑load users such as data centers and large manufacturers, while extending weatherization and bill‑assistance programs for low‑income households. Proponents argued the shift could shave roughly $5.50 off a typical residential bill each month, but it also risked raising high‑load customers’ monthly charges by about 15 percent.

Governor Abigail Spanberger’s amendments fundamentally altered that calculus. By striking the explicit cost‑shift language, she left the State Corporation Commission to weigh any pass‑through on a case‑by‑case basis, effectively weakening the original intent. The opt‑out provision now applies only to facilities with more than 10,000 employees, narrowing the pool of eligible data centers. In addition, the undergrounding program’s permissible rate‑base increase was cut from 4 % to 2 %, curbing Dominion Energy’s ability to fund the remaining miles of buried lines. A new cap on the utility’s return on equity—9.3 % versus the previously approved 9.8 %—means any excess earnings must be rebated to customers, tightening profit margins.

The stakes extend beyond utility economics. Virginia forgoes an estimated $1.6 billion annually by allowing data centers to claim a 5.3 % sales‑and‑use‑tax exemption on equipment, a loophole that lawmakers are now re‑examining amid budget pressures. Spanberger’s changes could preserve that exemption while shielding residential ratepayers from higher bills, but they also risk alienating a powerful industry lobby and the state’s largest utility. With a special session slated for April 22 and a budget deadline of April 23, the General Assembly’s next moves will signal how Virginia balances fiscal responsibility, energy reliability, and the competitive allure of its data‑center ecosystem.