One of the key objections from communities to proposed data centers around the U.S. has been the rise in electricity bills in order to meet the cost of upgrading grids so that power-hungry data centers can have reliable and sufficient power.
Now Virginia is taking steps to ensure that homeowners aren’t saddled with avoidable additional costs for power system upgrades that are geared toward meeting the needs of data centers.
State regulators are working on a new order that would ensure that heavy consumers of power, such as data centers, incur the bulk of the costs involved in upgrading grids so that the power needed at those facilities is delivered in the required quantity and at the desired reliability levels.
Dominion Energy, the utility firm serving Virginia, has been asked to design a policy or tariff system through which costs linked to system upgrades needed by large power consumers are billed directly to those end users rather than spread among households and other grid users.
Under normal circumstances, utilities routinely adjust their rates in order to recover the money expended in upgrading the grid each time demand rises and new substations and high-voltage transmission lines have to be established.
Dominion Energy had initially indicated that energy bills in the state would be adjusted upwards by $2.90 each month but this was subsequently lowered to approximately 94 cents for average households. Virginia hosts a large number of data centers and more are being planned, so these rate increases are widely expected to keep happening.
A backlash against these rate increases broke out and the state governor weighed in on the matter. The administration of Governor Kathy Spanberger said residential power consumers shouldn’t have to be billed for grid upgrade costs intended to serve data centers and that tech companies should instead foot those bills.
Spanberger then issued an order requiring regulators to formulate a policy to shift the burden of these costs to the beneficiaries of the upgrades, in this case data centers and other such consumers of huge amounts of electricity.
The change is intended to shift grid upgrade costs to the entities triggering the spike in electricity demand and shield ordinary power users from costs that have nothing to do with them. Could this approach that has started in Virginia spread to other parts of the country in the months to come?
It remains to be seen how major tech companies like Microsoft Corp. (NASDAQ: MSFT) react to this change in the way state authorities are responding to the rapid buildout of data centers and the attendant spike in power demand.
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