A Senate committee on Monday advanced a bill intended to have Dominion Energy data center customers pick up certain costs in order to lower monthly electric bills for the utility’s other customers.
The bill, which Sen. Louise Lucas, D-Portsmouth, presented as a substitute to her SB 253, would allow the State Corporation Commission to decide if Dominion’s biggest users of electricity, primarily data centers, should be required to pick up the tab for expenses known as capacity costs.
The utility pays these costs to ensure that power is available during peak demand times, such as the hottest summer days and the coldest winter nights. Dominion’s capacity costs have risen in recent years as electricity demand has increased, largely due to the growth of energy-hungry data centers that power governments, businesses and online services from Amazon to Zelle.
The bill also would allow the SCC to decide if these heavy-usage customers must pay for the new electric substations needed to connect them to the grid.
“We have all heard about affordability and energy costs,” Lucas said. “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.”
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The Senate Commerce and Labor Committee voted 13-0-1, with Sen. Dave Marsden, D-Fairfax County, abstaining, to refer the bill to the Senate Finance and Appropriations Committee.
If the bill becomes law and the proposals in it receive the SCC’s approval, the typical monthly bill for one of these highest-usage customers would rise about 16% while the typical bill for residential and other customers would decrease by 3% to 3.5%, according to an SCC analysis.
For a typical residential customer using 1,000 kilowatt-hours of power each month, that would amount to a bill reduction of $5.52, starting Jan. 1, according to the analysis.
Dominion spokesperson Aaron Ruby said in an email to Cardinal News that the utility supports the legislation.
“We want data centers to pay their fair share, and we want to lower costs for our customers. This legislation delivers both. It’s a good thing for our customers,” Ruby said.
Nicole Reilly, representing the Data Center Coalition, told the committee that she hopes the bill can be further amended to give data centers the option to build their own electric infrastructure, which she said would shield ratepayers from paying for it.
Reilly also said the coalition would like the SCC to study how much of Dominion’s rising capacity costs can be attributed to data centers, and she expressed concern that the proposed bill precludes that.
“We recognize and appreciate ongoing concerns and discussions about data centers costs, causation and cost allocation,” Reilly said.
How best to regulate the growth of data centers and who should pay costs associated with infrastructure and other aspects of that growth has been a major topic of discussion in this year’s General Assembly, with more than two dozen data center-specific bills introduced.
The high-usage customers impacted by Lucas’ proposed legislation would be those in Dominion’s newly approved GS-5 rate class. It takes effect Jan. 1, 2027, and covers customers requiring at least 25 megawatts of power.
Dominion said in March that the GS-5 rate class is expected to have 131 data center customers and eight non-data center customers.
The bill would give Dominion’s large traditional manufacturing customers a one-time opportunity to opt out of the new GS-5 rate class, Lucas said.
“These are longstanding customers,” Lucas said. “They are not the ones driving new costs today.”
The SCC approved the GS-5 rate class in November when it also approved a rate increase that is expected to raise the average Dominion residential bill by $13.60, or about 9%, over two years.
Lucas emphasized that if her bill becomes law, it would not automatically enact the cost-shifting changes. Rather, the bill gives Dominion the green light to petition the SCC on July 1 for approval to make such changes. The SCC is not required to accept the proposals.
The bill would have Dominion propose the changes again every two years, lasting through 2033.
Joe Reid of the law firm McGuireWoods, representing Dominion Energy, noted that sunset clause makes the bill a “short-term fix to skyrocketing capacity prices.”
In the long term, Reid said, data centers can bring costs down through the ongoing revenues that they pay the utility.
The portion of Lucas’ bill about data center costs would apply only to Dominion’s service territory.
Dominion, along with the Northern Virginia Electric Cooperative, serves the Northern Virginia market where most of the commonwealth’s data centers have been built.
Appalachian Power, which serves Southwest Virginia, has far fewer but has seen proposals recently as industry interest spreads out across the commonwealth.
Besides addressing data centers and related costs, Lucas’ bill also includes provisions related to programs for low-income customers and a Dominion program that buries distribution lines.
The bill would extend Dominion and Appalachian’s funding of low-income customer energy assistance and weatherization programs for 10 more years, through 2038, and increase how much money each utility puts toward the programs.
It would extend Dominion’s program to move vulnerable overhead distribution lines underground by 10 years, through 2038. Burying lines underground reduces outages but is more expensive than running them overhead.
Kimberly Pate, director of the SCC’s division of utility accounting and finance, said that program currently costs a typical Dominion customer $4.88 per month. All Dominion customers pay toward it even if they are not served by the lines that are placed underground.
Sen. Mark Obenshain, R-Rockingham County, suggested that letting the undergrounding program expire could save customers that money.
Senate Majority Leader Scott Surovell, D-Fairfax County, said that the program saves customers money in a way that isn’t factored into the monthly bill, because having fewer power outages means fewer expenses incurred from circumstances such as spoiled groceries and missed workdays.
Richmond-based Dominion Energy has more than 3.6 million customers in Virginia, North Carolina and South Carolina. Of those, more than 2.5 million are in Virginia, including in Central and Southside Virginia and the Alleghany Highlands.