JLARC report: Virginia’s data center boom could force major energy build‑out and raise costs for other customers

The Joint Legislative Audit & Review Commission heard on December 1 that Virginia’s expanding data center industry delivers sizable construction‑period jobs and local tax revenue but poses growing energy, environmental and fiscal challenges.

JLARC project staff told commissioners that data centers drive most of the state’s projected unconstrained electricity demand growth and that meeting that need would require a massive increase in generation and transmission capacity. "Meeting unconstrained demand would require adding 150% more in state generation capacity, 40% more transmission, and importing 150% more energy," staff said, noting even a half‑realized demand scenario would still require substantial new capacity.

The report credited data centers with supporting an estimated 74,000 industry‑related jobs in recent years and adding roughly $9.1 billion annually to the state economy, mostly during construction. "A data center site can employ up to 1,500 workers during peak activity," the presentation said, but it also cautioned that operational staffing is relatively small compared with construction jobs.

On customer bills, JLARC summarized consultant modeling that attributed much of future generation and transmission cost increases to data center demand and projected systemwide impacts. Using constant dollars, JLARC staff said a typical Dominion residential customer might see an additional $23 by 2030 and $37 by 2040 on the generation and transmission portion of a monthly bill under a higher‑growth scenario.

Commission members pressed staff on modeling assumptions and regional dynamics, including the role of electric cooperatives. JLARC staff said about 60% of new demand in their forecast could fall in co‑op service territories and emphasized that co‑ops have different regulatory and transmission arrangements than investor‑owned utilities.

JLARC identified several policy options to limit cost risk to other ratepayers, including creating a separate data‑center customer class, adopting new cost allocation methods, and adjusting rate schedules more frequently. The report recommended the State Corporation Commission as the appropriate venue for detailed changes to utility rate design.

Staff also evaluated environmental and local impacts: backup diesel generators are permitted and rarely run beyond monthly testing, contributing a small share of regional emissions, and DEQ has launched a three‑year study of generator emissions in Northern Virginia. On water, JLARC found data center withdrawals currently account for less than 0.5% of state withdrawals; most sites obtain water from utilities and larger campuses aggregate uses that may be material for local planning.

On local land‑use impacts, JLARC cited noise and proximity concerns, noting roughly one‑third of operational data center properties are within about 200 feet of residentially zoned parcels in Virginia, and highlighted recent zoning changes in Fairfax and Loudoun aimed at reducing by‑right siting.

As a policy lever, staff noted the state’s sales tax exemption for data centers could be extended, allowed to expire, or modified (for example, by conditioning it on energy‑management or environmental standards) to balance economic benefits and energy or local impacts.

The briefing did not assess national security or cybersecurity implications; staff said the review did not include federal security consultations. Commissioners requested follow‑up on the number of large campus proposals and additional details about model assumptions. The commission did not vote on policy changes at the session; staff recommended further study and coordination with the SCC and utilities as next steps.