Dominion Energy and Big Tech Maneuver Over Pivotal Rate Decision in Virginia

RICHMOND—The long-anticipated rate-setting showdown between big tech and Virginia’s largest utility kicked off this week with last minute maneuvers to influence the state regulator on a decision that may affect data center growth and rates for all customers in the state.

Dominion Energy, with over 2.7 million customers in Virginia and other states, presented the State Corporation Commission (SCC) a proposal for new customer rates that would increase residential bills by about $240 a year. The utility is seeking a base rate increase for the average residential customer of $8.51 a month in 2026 and another $2 a month in 2027. 

But the SCC weeklong review, which began Tuesday in its courtroom, will also examine proposals to set parameters on how data centers, a fast-growing industrial sector in Virginia, bear future utility costs. 

Dominion and the tech companies are sparring over a proposal by the utility to charge high-load customers separately in order to temper higher across-the-board rate increases and locking in those customers’ payments for their upgrades. Tech companies are balking at Dominion’s proposed rates for the proposed high-load class.

The commission process is being closely attended by some major corporations including tech giants Amazon, Google and Microsoft. All are expanding their data center capability in Northern Virginia at a pace that could triple energy demands across the state from about 10,000 megawatt hours in 2023 to more than 30,000 megawatt hours by 2040. The region just outside the nation’s Capitol is where the internet began and has grown to be a hub for processing a high percentage of the world’s information superhighway activity.

The tech companies, in particular, are seeking to forge artificial intelligence dominance through their expansion although financial services groups are also keen on creating data capabilities. In August, the SCC approved a single transmission line and towers for a private equity firm that plans a data center in Alexandria. 

This week, regulators have heard from companies and residential rate payers about how Dominion could or should serve customers amid fast-evolving commercial demands. Environmental and residential consumer advocates are set to testify against the rate proposal and warn against increasingly high commercial needs in the future. 

A decision from the commission is expected in December. 

“We take any rate increase very seriously, and we understand what the economic environment is for our customers, other members of our community,” Ed Baine, president of Dominion Energy Virginia, said during Wednesday’s hearing.

The rate increase request is rooted in two proposals. Dominion is seeking to raise base rates to increase its profit margin to 10.4 percent from 9.7 percent. Virginia’s regulations allow utilities to earn a guaranteed profit, but the commission has the authority to set rates and limit the profit margin.

Dominion also wants to change its fuel factor to add a new cost that may prove troublesome. Dominion’s current fuel factor formula allows for the cost for materials such as natural gas to generate electricity to be passed directly to customers. The utility is asking Virginia regulators to also allow capacity market purchases—outside purchases it makes to meet peak strains—to be added to that fuel factor. 

Dominion buys its capacity market purchases from PJM Interconnection, a regional grid that provides electricity to 13 states and has come under fire for soaring costs. 

Across PJM’s service area capacity costs have risen to $329.17 per megawatt-day in 2025, hitting the price ceiling set for the next two years. Governors have complained about PJM’s ability to add capacity, oversee costs and its processing of requests from possible suppliers. 

This week, a Virginia Commonwealth University student, an employee of the U.S. Department of Interior and retirees were among the residents who told the SCC that they opposed a potential rate hike because of the strain on their wallets.

“Twenty dollars might not seem (like) a lot to the Dominion CEO…but for me, it’s massive,” said Seattle Ferguson, who attends VCU in Richmond. “This June, during the recent heat wave, my bill was $50 higher than usual, since we were running the AC a lot.”

Most controversial for the data centers is a proposal by the utility to create a new customer class for “high-load customers.” That class, according to Dominion’s request, would be made up of energy intensive customers such as the tech companies. Those customers would pay for certain percentages of electricity generation, transmission and distribution upgrades needed to serve their specific business needs, according to Dominion’s request.

The SCC held a technical conference in December with tech company representatives to understand the demands of data centers. A report by the state’ legislative research arm found that data centers are paying a fair share of current costs, but non-data center customers are also paying the bill for new energy generation “that would not otherwise be built” if it weren’t for the data centers. 

Lawmakers this year introduced dozens of bills to increase regulation of data centers including ways to adjust cost allocations. None of the bills progressed into law except for a measure that directed the SCC to use the current Dominion rate request as a guide for future decisions. 

Even those opposing the rate increase this week said Dominion’s case was an opportunity. 

“We believe they should be decided in this case, not in a future proceeding,” said Will Reisinger, an attorney representing the nonprofit Piedmont Environmental Council. “The parties are all here. The issues will be fully developed through the course of this hearing. We believe these issues are ripe for determination.”

Dominion’s proposed high-load customer class is based on projections of an additional 40 gigawatts load—required by the new data centers—to be added to its service area. 

Dominion wants that class to be assigned to customers that demand 25 megawatts or more and those companies would have to sign contracts agreeing to pay a minimum of 60 percent of generation costs as well as 85 percent of the cost of new transmission and distribution lines. 

Dominion has suggested the contracts with the heavy users be set for 14 years, obligating big data users to pay what could be billions of dollars for generation and new infrastructure. Transmission projects alone can cost hundreds of millions of dollars in construction costs. 

Tech companies pushed back against Dominion’s high-load proposal in the leadup to this week’s hearing. Amazon, Google, Microsoft, the Data Center Coalition and some industrial users filed a joint proposal Friday to limit how much it should be expected to pay for its usage.

Under that proposal, data centers would be responsible for a lower percentage of costs than what Dominion laid out. 

The tech companies seek to pay 50 percent of generation costs and 75 percent of new electricity transmission and distribution lines needed to serve them. The tech companies did not change the 14-year contract proposal but sought to be able to cancel its contracts with a fee less than what Dominion is requesting. 

Tech lobby groups this week in testimony asked the SCC to consider what was fair for all involved. Nickhil Vijaykar, representing the Data Center Coalition, an industry group, noted that data centers bring construction and tax revenue to the state. Dominion’s proposal on contract terms is a way to lock in data centers’ “massive earnings opportunity” and make “no reciprocal commitments to get power to those customers on a reasonable timeline,” he said.

The tech companies’ joint proposal also seeks a “grandfathering” of data centers up until Jan. 1, 2026. That means they want many new centers, which now have agreements with Dominion, to avoid the new proposed tougher rates for high-use customers. 

Dominion has offered a potential modification of its proposal to not apply the new rate to high-load customers that have been on the grid for 10 years. 

Brian Greene, an attorney representing Amazon, said on Wednesday that the tech companies wanted to find some solutions early in the process. “We took it upon ourselves to bring parties together to make for a more efficient hearing, so that we wouldn’t have to spend a lot of time talking about all of the different possible outcomes,” he said. 

Environmental and ratepayer advocate groups including Appalachian Voices and the Piedmont Environmental Council have continuously been concerned with the risk of inflated data center demands, given that tech companies are pursuing multiple and vast locations for development.

“Data centers may be paying their assigned share,” said Nate Benforado, an attorney with the Southern Environmental Law Center, which is representing Appalachian Voices. “It may have been fair at some point, but in this proceeding, numerous parties have put forward significant changes for how we establish certain charges, how we allocate costs, the terms and conditions that should apply to certain customers.”

A representative of The Sierra Club, an environmental nonprofit, pushed for an additional provision under the high-load class to allow data centers to directly source clean electricity from third-party and non-utility entities. That provision is “not just because they ensure new load will be met with zero carbon generation, but because they allow customers with sustainability goals to shoulder some of the risk associated with less mature technologies in the Commonwealth,” attorney Evan Johns said.

The Virginia Attorney General’s Office of Consumer Counsel, which represents ratepayers, noted an SCC staff position that the utility’s profit level be set at 9.8 percent. Every 1 percent that the utility’s profit margins increase equals about $11 million in base rates and about $13 million in rate adjustments. 

That will need to be recovered from customers, its legal representative pointed out. 

“We all know that there’s growing upward pressure on electric rates in Virginia,” Assistant Attorney General Meade Browder said. “Fortunately, there are things that the commission can do in this proceeding to help alleviate” and “mitigate cost impacts and stranded cost risk associated with new high-load customers.”