This story was reported and written by VPM News.
An already-controversial energy bill took on a new level of political intrigue Monday at the General Assembly Building.
State Sen. Louise Lucas (D–Portsmouth) is carrying the measure, originally intended to do two things: continue and expand Dominion Energy and Appalachian Power Company's energy bill assistance programs; and continue a strategic undergrounding program for Dominion. That program requires the State Corporation Commission to approve a limited number of power line undergrounding projects — which improve grid reliability, but raise costs for ratepayers.
The new controversy arose at a meeting of the Senate Commerce and Labor Committee — an enactment clause that would effectively require, with approval from state regulators, new data centers and other high energy use facilities (HEUFs) to cover more of the costs required to serve them.
They would be responsible for covering the financing costs of new distribution infrastructure, such as electrical substations, required to connect them to the grid. They would also be responsible for capacity market costs levied in the market operated by PJM Interconnection. These costs go up as the gap between electrical supply and demand shrink — and have been historically high in recent auctions.
Joseph Reid, a McGuireWoods partner representing Dominion, said substations can cost "tens of millions of dollars." But financing for those costs begins before data centers start getting electrical service.
"The issue is it takes several years to construct [substations], and during that time period, there are financing costs which are not insubstantial," Reid said. "And under current protocols, those are being paid by all customers, so the other customers are paying those."
The State Corporation Commission would be responsible for determining whether it is "in the public interest" for those costs to be covered by data centers and high energy use facilities.
If passed, the measure would be the legislature's most direct attempt to prevent smaller ratepayers, like residents or smaller businesses, from bearing the cost of new electrical infrastructure necessitated by the mammoth electrical demand the facilities bring.
"There are more than 200 energy bills this session, and as far as I'm aware, this is the only proposal to actually reduce rates in the near term," Lucas said.
The amendment uses language sourced from the SCC's decision in Dominion Energy's last rate case — "customers with a contracted or measured electric demand of 25 megawatts or greater and an anticipated or measured average annual electric
load factor of 75 percent or greater."
In that case, the SCC moved to create a new customer class called GS-5 (Dominion charges rates based on classes — residential, commercial, industrial, etc.) for data centers and other high-demand customers.
A letter from Kimberly Pate, SCC's director of accounting and finance, estimated that if the commission were to accept the bill's provisions, a residential customer using 1,000 kilowatt-hours per month would save approximately $5.52 each month. Most industrial-class customers would also see a reduction.
On the other hand, GS-5 customers could expect to see costs rise by 15.8%.
Nicole Riley, director of government affairs for the Data Center Coalition, said the advocacy group was aware of cost concerns related to data centers.
"We only received this amendment language yesterday, and are still in the process of socializing with our members, but are hopeful that we will have the opportunity to work with the patron and that she might be amenable to discussing some slight tweaks," Riley said.
The coalition asked for a clearer pathway for developers to self-build distribution infrastructure, keeping it outside of Dominion's rates entirely. It also requested language ordering the SCC to study the share of PJM capacity costs caused by the facilities. And Don Slaiman, representing electricians in IBEW Local 26, cautioned against raising costs enough to drive new data centers to other states.
Lucas' bill passed nearly unanimously; state Sen. Dave Marsden (D–Fairfax) abstained. It heads to the Senate Finance and Appropriations Committee next.
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