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Bipartisan group of lawmakers seeks stricter regulation of data centers

Sen Perry gives remarks
Shaban Athuman
/
VPM News
State Sen. Russet Perry, D-Loudoun, gives remarks about a set of bills that would address the fast growth of data centers and the stress they add to the power grid during a press conference Tuesday, Jan. 14, 2025 at the General Assembly Building in Richmond.

A package of bills would set new review processes and efficiency incentives.

Data centers have disrupted business as usual in Virginia. They’re driving a projected doubling of electric demand over the next fifteen years, guzzling increasingly large amounts of water, and taking up more and more land in sprawling campuses and the transmission corridors that serve them.

They’re also bringing money into the commonwealth and the communities that host them. A Joint Legislative Audit and Review Commission report found the facilities create jobs — mostly during construction — and generate “substantial” tax revenues for the localities they’re built in.

But legislators have lagged behind these massive changes, putting off passing laws until they had more information.

“We aren't here today to talk about reform, because there are no laws to reform.

The data center industry has largely grown unchecked,” said state Sen. Russet Perry (D–Loudoun) in a Tuesday press conference at the state capitol.

Perry is leading a bipartisan group of Virginia legislators attempting to establish rules and regulations around the facilities.

Perry said the coalition aims to set a framework based on four pillars: protecting families and businesses, enhancing transparency, effectively managing resources, and incentivizing efficiency.

Protecting families and businesses

The first pillar could be translated, at least in part, to ensuring fairness in utility rates.

A utility like Dominion has many different rate structures, and the rate you pay depends on the type of customer you are. Homeowners and renters generally pay a standard residential rate, with some exceptions for things like rooftop solar.

But businesses and facilities that use many times the energy of a household require different rate schedules — and some in Virginia argue that the current setup lets the state’s biggest energy users pay below their share.

The State Corporation Commission is already looking into this. It held a conference on rate schedules in December where commissioners heard from representatives of data center developers, electric utilities, ratepayer advocates and environmentalists.

One bill in the package, sponsored by Del. Michelle Lopes Maldonado (D–Manassas), would order the SCC to formally consider changes to rates.

Enhancing transparency

Del. Joshua Thomas (D–Prince William) HB1601 seeks to get more information about the expected impact data centers will have on the environments around them.

It requires high-energy-use facilities to include noise assessments in local permit applications. It also allows localities to set their own reporting requirements on impacts to water, agricultural land, historic sites and forests. That bill faced a subcommittee hearing Thursday morning.

“This bill is very targeted, it is just trying to help increase transparency and ensure that localities have a proper amount of information before them,” Thomas said.

The bill garnered a wide range of support from agriculture, historic resources, and forestry interests, along with Dominion Energy and environmentalists.

It faced opposition from Virginia’s electric cooperatives — the smaller utility companies that serve the places Dominion and Appalachian Power won’t go, usually in rural areas.

The Virginia Economic Development Partnership also opposed it, saying the bill could result in extensive delays and could have knock-on effects in other sectors.

“It could portray to the marketplace that we’re not supportive of other high-energy-use facilities beyond data centers,” said Vince Barnett, vice president of communications for VEDP. “Such as semiconductor manufacturing, electric vehicle manufacturing and battery manufacturing.”

Also opposing the bill is former Del. Glenn Davis (R–Virginia Beach), now director of the Virginia Department of Energy. He said it would force all Virginia localities to operate under rules made for Northern Virginia, where most data centers are concentrated.

Responsibly managing resources

HB2027, also sponsored by Thomas, would set statewide review processes for the industry. That includes comprehensive evaluations of grid reliability, cost impacts and environmental compliance.

Although data center buildout so far has been concentrated in Northern Virginia, the impacts will be felt throughout the entire commonwealth for decades to come.

Developers are pursuing projects in Central and Southwest Virginia, and rural counties are faced with the prospect of large solar farm build- outs to support the growth in demand.

The rapid expansion of data centers and other energy-intensive facilities is particularly disruptive to the state’s plans for decarbonization.

Dominion Energy, the electric utility providing electrons to the majority of Virginians, says projected demand growth will be impossible to meet without adding additional fossil fuel generation – even with the significant solar and wind power buildout the utility is planning.

The coalition argues this measure would help prevent an overload of the electrical system, responding to a JLARC finding that it would be “difficult or very difficult” to meet demand.

Incentivizing efficiency

HB2578, sponsored by Del. Rip Sullivan (D–Fairfax), seeks to encourage high-volume energy users to find ways to reduce their use and reuse resources by tying tax exemptions for the facilities to performance standards.

“My view is, if we're going to have an industry that's sucking so much power, requiring so much power, let's at least take steps to make sure it's requiring as little power as technologically possible,” Sullivan said at the conference.

Among the requirements: phasing out the banks of large diesel generators that serve as backups during power outages.

It also requires data centers to determine uses for their waste heat — not unlike a Brooklyn spa that harnesses the energy output from Bitcoin mining to heat its saunas and pools.

It’s not clear how Republican Gov. Glenn Youngkin will act on these measures — though he indicated support for local decision-making power during his State of the Commonwealth address this week.

“We should continue to be the data center capital of the world and make sure Richmond is doing what is necessary to support that goal,” Youngkin said. “Different communities will make different decisions on data centers, but these must be their decisions.”

And some legislators are taking their own approach to the issue, such as state Sen. Danica Roem (D–Manassas), who has carried legislation on data centers in previous sessions.

“It's very simple, if they are to exist at all, only going into industrial areas. Industrial areas then don't belong next to our schools, our parks, our homes, and quite frankly, you shouldn't be bulldozing the woods to develop them, either,” Roem said during the press conference this week.

She admitted she wasn’t sure her measure would get the votes to pass — and said she’s concerned bills that do pass may be met with vetoes.

Corrected: January 17, 2025 at 4:37 PM EST
A previous version of this story incorrectly identified state Sen. Russet Perry's district.
Patrick Larsen is the environment and energy reporter for VPM News.