'Immense stress' on power grid as Virginia refuses data center regulation

For most of the industry’s existence in Virginia, approvals for data centers were largely seen as a local issue – with the state and federal governments giving the thumbs up on certain permits.

But as the industry balloons across the commonwealth, those local decisions are triggering statewide implications concerning energy capacity and residents’ rising utility bills.

Two bills in the General Assembly sought to give the State Corporation Commission the authority to review how proposed high-load users — mainly data centers and manufacturing facilities — would impact the environment, energy reliability, and gauge if there is sufficient infrastructure in place to support the power needs.

But House Bill 155, carried by Del. Josh Thomas, D-Prince William, and Senate Bill 619, by Sen. Kannan Srinivasan, D-Loudoun, met with fierce opposition and were both tabled for the year.

Both of the bills directed the SCC to review if a proposed project that would need over 25 megawatts of power would have a material impact on rates, impacts on grid reliability, or hinder the utility’s ability to follow environmental regulation laws like the Virginia Clean Economy Act.

The bills would have also allowed the SCC to examine the environmental and health impacts a project could have on the surrounding communities. Both Thomas and Srinivasan said the bills would not have removed the local review and permitting actions, but rather added a state backup check.

“Localities get to decide what they want to do with the land. The state, since the invention of electrical power, and the creation of a statewide monopoly has an obligation to make sure that we regulate it,” Thomas said in an interview at the state Capitol on Thursday. “But what’s happening now is localities are deciding to use their land for data centers, which require an immense amount of power and the state cannot keep up.”

The measures would have allowed proposed projects to receive quicker consideration from the state if they were compliant with clean energy investments, sending notice to the public, participating in demand response programs and other measures.

The data center industry has been a boon for localities, with some counties reaping millions of dollars for major projects. Loudoun County, the seat of the so-called Data Center Alley, benefits from about $800 million in tax revenue from the data center industry, according to the county’s budget proposal for this year.

Srinivasan said he has watched the industry grow before his eyes and encourages its continuance with a more balanced approach.

“I think everybody understands in Virginia that this industry has been a pivotal thing for the commonwealth. Absolutely no doubt about it. But how do we go forward?” Srinivasan asked.
 ”How do we go forward with a more mature and a more balanced growth strategy? Because we don’t want to be five years from now and ask “why didn’t we do this?”

In a hearing for HB 155 on Feb.10, Nicole Riley with the Data Center Coalition spoke against the bill, stating that it would set up more roadblocks for the industry that already has to go through multiple permitting processes.

“We are concerned that this bill unnecessarily extends time to market for data centers, which collectively invested $80 billion in Virginia over the last two years, along with a number of other large capital intensive industries. It would create tremendous regulatory uncertainty,” Riley said.

Dominion Energy, the state’s largest utility, also spoke against the bill. The company has a mandate to serve customers that request power. But with the explosion of the high-powered users requesting to come on the grid, a long queue has developed as Dominion determines when it can power them up.

Thomas said that his bill’s review process would have helped provide certainty of when power would be made available. But the utility said it would have breached choices that should be up to localities.

“We would submit this bill muddies the water on the role of the State Corporation Commission and local governments, and that it improperly inserts the SCC into local siting decisions,” Dominion representative Christine Noonan said. “The Commission already has the authority to govern the large load interconnection queue process.”

Srinivasan’s bill was able to pass out of the Senate with a bipartisan vote but was laid on the table in a House subcommittee on Tuesday, where HB155 met the same fate earlier in the session. The committee agreed to send a letter to the SCC requesting they investigate how a review program like the one laid out in the bills could be implemented.

Srinivasan said that showed him there is interest for the state to take steps to further regulate the exploding industry. Thomas said their legislation sought to address specific aspects of data center development in the state.

“These are the only bills that sought to address the load side. I mean, there are bills that try to address efficiency, and there’s bills that try to talk about generation,” Thomas said.

“Do we have the political will to tell an industry that has been undeniably doing a lot for locality taxes and may potentially here, really soon do a lot for state taxes, ‘you might need to slow down because of the immense amount of stress that it’s putting on our electrical grid’?”

Both lawmakers hope to revive the measures in the next legislative session once they get a response from the SCC on how to implement a review program.