- Dominion Energy in Virginia is looking to create a new class of electricity customer for ultra consumers like data centers
- Concerns that residential rate payers are subsidizing capital expenditures on new electrical infrastructure for data centers are rising
- Dominion's proposal could provide a template for other utilities and states to protect their regular customers - but it likely won't be approved without a fight
Amazon, Google and the Data Center Coalition are preparing to square off with a utility in a key data center market come September. What exactly are they fighting over, you ask? Just the utility’s proposal to create a new rate class for “high load” customers as a means to protect residential customers who would otherwise be left subsidizing billion-dollar investments in power infrastructure for data center customers.
Virginia electric company Dominion Energy proposed the creation of a new rate class (GS-5) for high energy users who demand a load of 25 MW or greater, which it said is expected to include 131 current data center accounts and 8 non-data center accounts. As the Virginia Mercury newspaper reported, two other electric companies in the state – Appalachian Power and Rappahannock Electric Cooperative – made similar moves.
Dominion also proposed a new 14-year contract term that requires high load customers to pay even if they use less than the contracted amount.
“Creating a separate GS-5 class will allow more transparency going forward to align the principles of cost causation and cost recovery as the GS-5 class grows both in terms of number of customers and as a share of system resource requirements and energy consumption,” Dominion wrote. “These terms are intended to shift the financial risk of nonperformance of obligations to the High Load customers and away from the utility and the remainder of its customer base.”
Who pays for data center power infrastructure?
Fierce has written plenty of stories about the surge of hyperscaler capital spending on new data center facilities, which has risen to the tune of well over $300 billion this year. But we’ve also written about how power procurement is one of the key bottlenecks slowing things down. After all, AI supercomputers gobble up a MONSTROUS amount of electricity.
According to a report by the Electric Power Research Institute (EPRI), data centers will swallow an estimated 4.6% to 9.1% of power generated in the U.S. by 2030. If you believe McKinsey, that number could go as high as 12%.
Of course, easing this bottleneck will require utilities in data center hubs to build new power generation plants and transmission lines. The catch, though, is that those cost money. A LOT of money.
So, what does this mean for electricity rate payers? Well, it kind of depends on where you live. God help you if you’re in Virginia, North Dakota, Oregon, Iowa, Nebraska or Nevada – all of which, according to EPRI, will see 10-29% of their state’s energy go to data centers by 2030, even in a low-growth scenario.
Or maybe they should be praying to their local PUC. Because otherwise every other user on the grid could end up subsidizing the cost to build new power infrastructure for data centers (a prospect which I’d be willing to bet is yet another slap in the face for telcos).
Runaway rates
Take Virginia – home to the largest data center hub in the world – for example. A December 2024 report by the state’s Joint Legislative Audit and Review Commission (JLARC) predicted “unconstrained demand for power in Virginia would double within the next 10 years,” driven primarily by data centers. That forecast squared with one issued by regional power management group PJM. And according to EPRI, that could mean data centers consume 29-46% of the state’s electricity by 2030.
The JLARC report noted that a “substantial amount” of new power generation and transmission infrastructure would be needed to meet even half of the forecast demand.
While the report found data centers pay their fair share today, it noted construction of these new facilities will create new fixed costs that utilities will need to recover. For the sake of time, we’ll skip over all the financial risks utilities and – by extension, their rate payers – take in building out this new infrastructure for a small group of customers. But the long and the short of it is that the report warned data center demand is likely to increase costs for all rate payers in the future, unless utilities do something.
Indeed, a March 2025 paper from Harvard Law School’s Environmental and Energy Law Program came to a similar conclusion that something must be done to protect regular rate payers, though it argued they are already subsidizing energy costs incurred by data centers.
“The very same rate structures that have socialized the costs of reliable power delivery are now forcing the public to pay for infrastructure designed to supply a handful of exceedingly wealthy corporations,” the paper states. “If PUCs allow utilities to follow the conventional approach of socializing system expansion, utilities will impose data centers’ energy costs on the public.”
So, what's to be done? Well, the JLARC study suggested utilities might establish a separate data center customer class as one way to help insulate other rate payers from rising costs.
That's exactly what Dominion Energy is trying to do.
A glimmer of hope
It’s not yet clear how Dominion’s proposal will fare. The State Corporation Commission will hold a hearing on the matter on September 2, 2025. Amazon, Google and the Data Center Coalition have all filed notices to participate. Though they haven’t specified whether their positions are for or against the proposal, we’re willing to bet they’re not in favor.
For whatever it's worth, Dominion seems to have the public's support when it comes to balancing the scales. A number of Dominion customers have already submitted public comments expressing frustration with the idea that all rate payers are essentially subsidizing infrastructure for data centers.
"Make data centers pay for the infrastructure that they will be bringing onto the system rather than having all Dominion customers 'share' in the load," one commenter pleaded.
If Dominion wins approval for its plan, perhaps it could serve as a model for utilities in other states looking to protect their rate payers from footing the bill for billions of dollars worth of infrastructure that is primarily serving data centers.
Follow our coverage of the data center power issue here and here.