Virginia SB 253: The Bill That Could Reshape Data Center Economics Nationwide

Feb 19, 2026 Written By Blake Crosley

Seventy-eight percent of Virginia voters blame data centers for their rising electricity bills.¹ State lawmakers have taken notice. Senator L. Louise Lucas introduced an amendment to Senate Bill 253 that would shift billions in grid upgrade and capacity costs from residential ratepayers to data centers and other large-load customers, cutting average household bills by $5.52 per month while raising data center rates roughly 15.8%.²³ The bill represents the most concrete legislative action yet in a growing national movement to make data centers pay for the grid strain they create. At least eight other states have introduced similar measures in 2026, signaling that the economics of data center siting may fundamentally change across the United States.

TL;DR

Virginia's Senate Bill 253 would allow the State Corporation Commission to shift electricity distribution and capacity auction costs from residential customers to data centers demanding 25 MW or more. The SCC estimates a 3.4% reduction in residential rates and a 15.8% increase for data centers, effective January 1, 2027. Data centers now consume approximately 40% of Virginia's electricity, up from less than 5% in 2010, and drove $6.5 billion (40%) of the latest PJM capacity auction costs. Georgia, Maryland, Colorado, Oklahoma, and at least four other states have introduced parallel legislation, creating a nationwide shift in who pays for AI-driven grid expansion.

The Virginia Problem: From 5% to 40% in Fifteen Years

Northern Virginia earned the nickname "Data Center Alley" for good reason. Loudoun County alone hosts 199 operating data centers with 117 more in development.⁴ The region holds 13% of all reported global data center operational capacity and 25% of capacity in the Americas.⁵ Nearly 6,000 MW of active capacity powers the current fleet, with another 6,300 MW in the planning pipeline.⁶

The electricity consumption trajectory tells the story most clearly:

Sources: Piedmont Environmental Council⁷; JLARC⁸; Dominion Energy filings⁹

Dominion Energy's load forecasts paint an even more striking picture. The utility projects 70% summer peak load growth from 2022 to 2045, driven primarily by AI data centers.¹⁰ Dominion has 47.2 GW of additional data center demand under contract beyond current needs, with 5,827 MW already holding purchase agreements and 2,008 MW of substation construction underway.¹¹ By 2038, data center peak power demand in the Dominion zone could reach 13.3 GW, nearly five times current levels.¹²

The Joint Legislative Audit and Review Commission (JLARC) projected in December 2024 that data center growth could drive Dominion residential bills up by $444 per year by 2040.¹³ Virginia electricity prices have already surged 13% due to data center concentrations, outpacing the national average.¹⁴

What SB 253 Actually Does

Senator Lucas's amended bill creates a mechanism for the State Corporation Commission to evaluate whether large-load customers should bear the costs their demand imposes on the grid. The bill targets two specific cost categories that currently spread across all ratepayers:

Distribution costs: The physical infrastructure (substations, transformers, transmission lines) needed to deliver power to data centers.

Capacity auction costs: PJM Interconnection runs periodic auctions where Dominion purchases additional generating capacity from other states to meet demand. Data centers drive the overwhelming majority of new demand.

The bill applies to customers meeting either threshold: demand requirements of 25 MW or more, or annual electric load factors of 75% or more.¹⁵ If the SCC determines the shift serves public interest, the new rate charges would take effect January 1, 2027, and could apply to both new and existing data centers through 2033.¹⁶

How the Numbers Break Down

Source: SCC estimates via Virginia Mercury¹⁷

SB 253 builds on an existing regulatory foundation. The SCC approved a new GS-5 rate class in November 2025 during Dominion's biennial review, establishing the 25 MW / 75% load factor threshold with mandatory 14-year contracts, minimum demand charges at 85% of contracted capacity, and three-year notice requirements for demand reduction.¹⁸¹⁹ The GS-5 class addressed some cost allocation issues but did not cover distribution or capacity auction costs. SB 253 fills that gap.

Dominion Energy fully supports the legislation.²⁰ The bill advanced out of the Senate Labor and Commerce committee and headed to Senate Finance, which Lucas chairs.²¹

The PJM Capacity Crisis

The urgency behind SB 253 becomes clearer through the lens of PJM Interconnection, the regional transmission organization serving 65 million people across 13 states and the District of Columbia. PJM runs the wholesale electricity market that Dominion participates in, and data centers have fundamentally distorted its economics.

In the December 2025 capacity auction, data center load accounted for $6.5 billion, or 40% of the $16.4 billion in total costs.²² Over the last three base capacity auctions, data center-related costs totaled $21.3 billion, consuming 45% of the combined $47.2 billion.²³ For the 2025-2026 delivery year alone, data center demand drove $9.3 billion, or 63%, of the total power capacity bill.²⁴

The 2024 PJM auction saw an 833% price increase for the 2025-2026 market, driven overwhelmingly by AI data center power demand in Virginia.²⁵ The Dominion zone now faces 65% higher capacity fees than the rest of PJM's power grid.²⁶

These costs flow directly to household electricity bills across the mid-Atlantic region. Residential customers in western Maryland pay approximately $18 more per month due to PJM capacity costs, while Ohio residents pay roughly $16 more monthly.²⁷ Across seven mid-Atlantic states, utilities assigned $4.3 billion in data center connection costs to customers in 2024.²⁸

PJM's own forecasts suggest the problem will intensify. The 2025 Long-Term Load Forecast projects 32 GW of peak load growth between 2024 and 2030, with data centers responsible for 94% of the increase.²⁹ The Dominion Zone alone expects 20,000+ MW of data center growth by 2037.³⁰ Meanwhile, PJM forecasts adding 5-7 GW of data center demand but only 2-3 GW of new supply annually from 2027 to 2032.³¹ Starting summer 2026, PJM will operate with just enough power for grid reliability.³²

The Tax Incentive Paradox

Virginia's data center tax incentive program adds another dimension to the debate. Since 2010, data centers have qualified for exemptions from Virginia's sales and use tax, originally estimated to cost the state approximately $1.5 million annually.³³ The actual numbers diverged spectacularly from those projections.

Sources: JLARC³⁴; Data Center Dynamics³⁵; Good Jobs First³⁶

By FY2024, the data center tax exemption accounted for nearly 80% of all economic incentive spending in Virginia.³⁷ The exemption does not sunset until June 30, 2035.³⁸ Qualifying requires a $150 million capital investment plus 50 new jobs, or $70 million plus 10 jobs in a "distressed locality."³⁹

The data center industry counters with economic contribution figures: 78,140 jobs and $31.4 billion in economic output in 2023, according to a Northern Virginia Technology Council study.⁴⁰ JLARC's analysis found 74,000 jobs and $5.5 billion in labor income.⁴¹ A typical 250,000-square-foot data center employs approximately 50 full-time workers, about half on contract.⁴²

The tension between $1.6 billion in annual tax exemptions and $444 per year in projected residential cost increases creates the political environment where SB 253 finds bipartisan appeal.

The National Wave

Virginia's SB 253 does not exist in isolation. At least eight states introduced similar legislation in their 2026 sessions, signaling a coordinated shift in how policymakers view data center economics.

Georgia (Senate Bill 34): Senator Chuck Hufstetler (R-Rome) introduced legislation prohibiting utilities from passing fuel, generation, or transmission costs of data centers to other customers. The bill codifies regulator rules into statute to prevent future weakening and has attracted major bipartisan support in the Senate.⁴³

Colorado: A bill requires large data center operators to build or purchase enough renewable energy to cover annual electricity usage by 2031 and mandates 15-year contracts with utilities covering grid upgrade costs.⁴⁴

Maryland: The utility regulator weighs a new rate structure for data centers and large-load users, including preapproval analysis requirements, separate rate tariffs, and collateral mandates.⁴⁵

Oklahoma: Representative Brad Boles advanced legislation through a House panel ensuring data centers pay for their own infrastructure.⁴⁶

Additional states actively pursuing data center cost-shifting measures include Illinois, Kentucky, Kansas, Ohio, Tennessee, Missouri, Idaho, and Pennsylvania.⁴⁷ At the federal level, Democrats have introduced bills in Congress to regulate data center energy impacts, though bipartisan cosponsors remain scarce.⁴⁸

The nationwide electricity cost data reinforces the trend. Near data center concentrations, electricity costs increased by as much as 267% compared to five years ago.⁴⁹ In states with high data center density, electric bills climbed faster than national averages: 13% in Virginia, 16% in Illinois, and 12% in Ohio.⁵⁰

What Operators and Planners Need to Know

The legislative wave carries direct implications for anyone building, operating, or deploying infrastructure in data centers. Introl's coverage area spans 257 locations globally, and the field engineering teams deploying GPU clusters in Virginia, Georgia, and other affected states see firsthand how power economics shape deployment decisions.

For infrastructure planners evaluating new builds, the cost calculus now includes a variable that did not exist two years ago: the risk that state legislatures will shift grid costs onto data center operators after construction begins. SB 253's retroactive application to existing facilities through 2033 demonstrates that grandfathering protections cannot be assumed.

Key Takeaways by Role

Infrastructure Planners:

• Factor 10-20% electricity cost increases into site selection models for states with pending legislation
• Virginia's 25 MW / 75% load factor threshold defines the trigger point; design below or plan for the premium
• Behind-the-meter generation (on-site nuclear, fuel cells, solar+storage) gains economic urgency as a hedge against rate reclassification
• PJM's 4+ year interconnection queue means new Virginia sites face both cost and timeline risk

Operations Leaders:

• Existing Virginia facilities face retroactive cost shifting through 2033 under SB 253
• Dominion's GS-5 rate class already imposes 14-year contracts with 85% minimum demand charges and 3-year exit notice requirements⁵¹
• Monitor PJM capacity auction results quarterly; each auction directly reprices your operating costs
• Diversify across grid regions to reduce exposure to any single regulatory jurisdiction

Strategic Decision-Makers:

• The political environment has shifted permanently; 78% of Virginia voters blame data centers for rising bills, and 94% rank energy costs as a top concern⁵²⁵³
• Tax incentive programs face growing scrutiny; Virginia's $1.6 billion annual exemption cost now exceeds original estimates by orders of magnitude
• Georgia, Colorado, Maryland, and Oklahoma legislation means the Southeast and mid-Atlantic corridors carry new regulatory risk
• States competing for data center investment will increasingly differentiate on power cost certainty, not just power availability

What Happens Next

SB 253 moves through Senator Lucas's Finance committee during Virginia's 2026 legislative session, which runs from January 14 to March 14.⁵⁴ The bill carries strong momentum: Dominion Energy supports the measure, consumer advocates endorse the cost shift, and polling shows overwhelming voter backing.⁵⁵

The broader Virginia legislative session includes 60+ data center-related bills covering energy, siting, water consumption, air quality, and taxation.⁵⁶ A proposed moratorium on new data center approvals (HB1515) has already been removed from consideration, suggesting lawmakers prefer economic mechanisms over outright bans.⁵⁷ The Piedmont Environmental Council and other advocacy groups have criticized leadership for advancing cost-shifting measures while neglecting siting, water, and environmental reforms.⁵⁸

The four dominant companies in Virginia's data center market, Amazon, Google, Meta, and Microsoft, have invested tens of billions in the state.⁵⁹ Amazon Web Services alone announced $35 billion in Virginia data center campus construction.⁶⁰ The industry generates $31.4 billion in annual economic output, creating the political complexity that makes outright opposition to data centers untenable but cost-shifting legislation increasingly inevitable.⁶¹

For the data center industry, the question has shifted from whether operators will absorb more grid costs to how much and how fast. Virginia's SB 253 provides the template. The states following Virginia's lead will determine whether 2026 marks a permanent repricing of data center economics in the United States.

References