This story was reported and written by VPM News.
The data center boom has spread to all corners of the commonwealth, from its origins in the northern part of the state to counties in Central, Southside and Southwest Virginia.
But opposition to the facilities has spread, too, according to Data Center Watch.
The research firm, which tracks data center opposition nationwide, reports that from late March to June 2025, 20 projects valued at an estimated $98 billion were blocked or delayed. The group cites local opposition and tax policy changes as key factors.
In fiscal year 2025 (which ran from July 1, 2024, to June 30, 2025), more than $1.9 billion in total tax exemptions went to data centers in Virginia, according to self-reported data compiled by the state's tax department.
Virginia Democrats are eyeing the state's current data center tax allowances as a possible source of new income in a tight budget year. It's just one of many angles legislators are considering to address concerns over power plant and generator emissions, energy and water consumption and land use.
Despite their newly-cemented trifecta of power in the governor's office, House of Delegates and Senate, many of the proposals present challenges for the party — in 2025, a raft of data center reform proposals were mostly killed before reaching outgoing Republican Gov. Glenn Youngkin's desk.
New regulatory requirements
Del. Josh Thomas (D–Prince William) wants the state's top regulatory body to get more involved in data center decisions.
HB155 would order the State Corporation Commission to review high-power demand facilities (including data centers and advanced manufacturing) for impacts to the electric grid and other ratepayers before those facilities can connect to the grid.
Julie Bolthouse, director of land use with the Piedmont Environmental Council, called Thomas' proposal the "keystone" bill for data center reform advocates.
"We feel like this is a critical review that has not been happening because localities don't look at the grid," Bolthouse said. "They don't really have the ability or the purview to look at grid infrastructure or ratepayer impacts, or any of these other regional implications on air quality."
Senate Majority Leader Scott Surovell (D–Fairfax) said in a press conference Tuesday he does not expect the bill to make it out of the House this year.
"I'm just not sure that requiring a permitting process for specific users is necessarily the solution, but it's definitely part of the conversation. That's all I can say right now," Surovell said.
With a slew of bills under consideration this year that would ease access to renewables and require utilities to expand their clean energy buildout, Thomas framed HB155 as a way to address the "other side of the energy crisis, which is the actual demand."
High demand and a lack of supply threatens to have significant impacts in the near future.
PJM Interconnection, the grid market operator for Virginia, 12 other states and the District of Columbia, did not meet its installed reserve margin target in its December resource auction. That's an estimate of surplus generation capacity needed to prevent multiple unexpected outages over a decade. This does not mean outcomes like rolling blackouts or brownouts are guaranteed — but it does mean they are more likely.
And PJM's market monitor recently told the operator to stop connecting new data center loads.
Freshman Del. John McAuliff's (D–Loudoun) HB503 would order the SCC to deny requests to charge utility ratepayers for transmission and generation infrastructure directly serving data centers, unless the cost is solely or substantially recovered from data center customers.
"It is the customer's extension cord," said Bolthouse, of the Piedmont Environmental Council. "It is solely serving that data center … the impact should be mitigated and it should be paid for by the customer that's necessitating it."
Other lawmakers are looking to establish a demand response program at the SCC, which would incentivize customers to reduce their need for electricity during peak grid hours. For instance, a utility may charge more for electricity when more people are using it, encouraging customers to shift their demand to another time — like running the dishwasher at night rather than right after work.
Currently, most data centers are armed with fleets of backup diesel generators to maintain operations when disconnected from the grid. Bolthouse said approximately 9,000 backup generators are permitted in Virginia, raising concerns about local air quality impacts when the facilities need to go off-grid.
A 2024 report on data centers by JLARC, the General Assembly's nonpartisan research agency, downplayed the impacts of generators, saying most operators reported only running them during testing and during short outage events.
Del. Michael Feggans (D–Virginia Beach) is carrying HB284, which would order the SCC to set up a demand response program focused on clean and renewable energy sources. It would prohibit new diesel generators or other carbon-emitting backups.
State Sen. Danica Roem's (D–Manassas) SB43 would order the Department of Energy to study a demand response program, while Del. Rip Sullivan's (D–Fairfax County) HB906 would order the SCC to study load flexibility in high-demand facilities.
Tax breaks
Data center developers benefit from a sales and use tax exemption on certain computer equipment and software, which has contributed to their rapid growth in the commonwealth.
The tax benefit's yearly cost has grown from early estimates of $80 to $100 million per year to more than $1.9 billion in FY25, as reported by Virginia Tax.
"I guess there are two ways you can look at it — we were foolish in the first place, or it's been enormously successful. We've attracted a lot of data centers to Virginia," said Sen. Creigh Deeds (D–Charlottesville).
Deeds will reintroduce legislation carried by multiple legislators in recent years, which aims to condition the tax break on energy efficiency and clean energy purchase requirements.
Deeds' version would also extend the tax break to 2050, in line with Youngkin's budget proposal.
"In my view, we have to get something for that, and what we have to get, I think, is some assurance from an energy standpoint that they are going to be as efficient as possible," Deeds said.
What are advocates saying?
Bolthouse and the Piedmont Environmental Council are clear: Virginia should stop accepting new data centers while the state figures out how it will serve the new electric demand already in the pipeline. She argued that the SCC or Dominion Energy could make that decision, or the legislature could order it.
In an Oct. 31, 2025, shareholder call, Dominion CEO Bob Blue said the company was in contract talks for an additional 47 gigawatts' worth of data center demand. That additional demand is nearly double Dominion Energy Virginia's all-time winter peak demand: 24.5 gigawatts, set in January 2025.
"This has gotten so large and unwieldy, and honestly, it is complete chaos in terms of planning for the energy infrastructure," Bolthouse said.
The data center industry, meanwhile, is pushing ahead, touting the investment it has brought to the commonwealth.
Nicole Riley, director of Virginia government affairs for the Data Center Coalition, told VPM News in a statement that the facilities bring jobs and tax revenue.
"The data center industry remains committed to collaborating closely with regulators, legislators, and state and community leaders across the Commonwealth to promote smart, sustainable development policies to keep the state competitive," Riley said.
According to an estimate by Virginia Tax, the data center tax incentive has attracted projects that will create $1.3 billion in local tax revenue just from investments made in fiscal years 2024 and 2025. JLARC estimates the industry fills 74,000 jobs annually.
And many, many more
There are almost too many data center-related bills to mention, but these are some others VPM News is keeping its eye on during the 2026 legislative session. Legislators can continue to file new bills until Friday, Jan. 23.
- HB114 – Del. Lee Ware (R–Amelia) proposes SCC study the existing grid infrastructure for opportunities to expand generation and transmission capacity at low cost, including upgrades to existing generation units and transmission infrastructure. The study would also look at allowing expedited grid connections for large load customers that pay for such upgrades.
- HB496 – Del. Elizabeth Guzman (D–Prince William) wants localities to require water use modelling in data center project applications. Questions of state vs. local control on siting decisions were a major stumbling block for both data center reform and renewable energy legislation in 2025.
- HB507 – McAuliff's bill touches on air pollution monitoring and transparency. It would require data centers to use energy storage as their primary backup power source, with diesel generators only being used after batteries are depleted. It would also set notification and monitoring requirements — keeping nearby residents informed of any extended generator use and keeping tabs on the emissions impacts of clusters of generators. Thomas' HB154 also includes transparency requirements for generator use.
- HB591 – Del. Shelly Simonds' (D–Newport News) bill is broad — declaring it the "policy of the Commonwealth to encourage the responsible operation of data centers in the Commonwealth while supporting grid reliability, affordability, and the deployment of renewable resources." It touches on planning around grid impacts, demand response, cost allocation, energy and water usage reporting, and security measures.
- HB658 – Del. Michele Maldonado's (D-Prince William) bill orders the SCC to conduct cost allocation proceedings to determine if big energy users are paying their fair share of the cost of service. The SCC recently approved a new customer class for facilities like data centers in Dominion Energy's service area, and ordered more data on the subject at the next review of the company's rates.
- HB945 – Del. Nadarius Clark (D–Isle of Wight) proposes Virginia Energy and SCC studies on the use of geothermal electrical generation and heating/cooling systems in high energy use facilities.
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