Northern Virginia alone hosts 13% of the world’s data center capacity, and power demand is surging alongside it. Since 2019, peak demand for Dominion Energy, the state’s main utility, has risen by more than 20%. In 2025 alone, Virginia’s electricity prices increased by 26%, according to the US Energy Information Administration.

Abigail Spanberger, elected governor last year, staked part of her campaign on taming electricity prices. As ground zero of the nation’s data center boom and with midterm elections looming, other states are watching Virginia closely.

Spanberger’s first 100 days tell a story of incremental, cautious progress: meaningful steps forward on grid efficiency and data center flexibility without any major changes to the existing energy regulatory structure. But the stakes are about to get higher. Hanging in the balance are a billion-dollar data center tax break and a proposed blockbuster utility merger. No one said this was going to be easy.

Improving Grid Utilization to Lower Costs

The scale and pace of Virginia’s energy demand mean the state cannot rely solely on the traditional approach of building more grid infrastructure. A new transmission line alone can take up to ten years to build. Moreover, generation costs will likely rise due to the expiration of clean energy tax credits under the Trump administration, and seven-year lead times for gas power plant components.

Virginia's answer is to squeeze more capacity out of existing infrastructure through a new grid utilization law. For the first time, Virginia's utility regulator will track how efficiently the grid is being used, set targets for improvement, and tie some utility cost recovery to those goals. The aim is to push utilities toward newer and more efficient technologies. The toolkit includes battery storage, customer-owned generation, virtual power plants, and advanced transmission equipment. The upside could be enormous.

But two questions loom: how aggressively will regulators enforce these policies, and to what extent can they slow rate growth?

Introducing Data Center Flexibility

Virginia joined a growing number of states creating data center flexibility programs. These programs can be a win-win: customers see lower costs, and localized reductions in demand can help data centers connect faster and more cheaply.

Virginia's voluntary program allows data centers to purchase "capacity reduction credits" and fund efficiency upgrades, storage deployments, and demand response programs elsewhere on the grid. Dominion is required to launch the program, but participation by data centers is voluntary, making adoption uncertain. The state regulator will need to define accreditation rules that could prove slow and complicated.

Virginia’s approach differs from Texas’ new law, which largely requires data centers to reduce their own power use rather than fund flexibility elsewhere on the grid. If Dominion’s program works, it could become one of the fastest ways for data centers to ease Virginia’s capacity constraints.

Data Centers Dividing Unified Government

Perhaps the highest-stakes development in Virginia is the future of a $1.9 billion data center tax break. Virginia's budget has been held up for months as the Democratic legislature and Spanberger negotiate over its future. The governor and House support maintaining the tax break while the Senate wants to tax data centers to fund healthcare; movement in both chambers suggests some change is likely.

Whether Virginia chooses to continue incentivizing data centers will set a precedent for other states trying to strike their own balance between attracting economic development and preventing runaway load growth.

Dominion’s Role Just Got More Complicated

On the campaign trail, Spanberger refused donations from Dominion, the largest corporate political donor in Virginia. Despite concerns about data centers and affordability, Dominion has retained considerable political influence. Its dominance will be put to the test in the wake of its announced $67 billion merger with NextEra.

Early signs suggest Spanberger wants a more hands-on approach to regulating Dominion, but legislative leaders in her own party are pushing back. The legislature rejected Spanberger's amendment to place a cap on Dominion's profits, which would have saved Virginia ratepayers hundreds of millions of dollars. The legislature also passed a $2.3 billion undergrounding program, overriding the governor’s proposed cost-benefit review requirements.

A separate Spanberger amendment that would have directly allocated costs to data centers rather than broader ratepayers was weakened to a generalized directive for the regulator to prevent cost-shifting onto ratepayers. The final bill creates an asymmetry: Dominion is guaranteed a larger rate base, while savings for ratepayers depend on enforcement. That imbalance captures the core challenge facing Spanberger: the benefits for Dominion are certain, but the relief for consumers is not.

The proposed Dominion-NextEra merger hands Spanberger and her allies meaningful leverage to extract concrete public benefits. The utilities have already offered $2.25 billion in bill credits, but that figure is the floor, not the ceiling. Spanberger could use the opportunity to push for structural reforms. Whether the legislature cooperates remains an open question.

Spanberger’s Balancing Act

Spanberger has a lot to balance between a restive legislature, electron-hungry data centers, frustrated customers, and a pending multi-billion dollar utility merger. If successful, she could achieve the best-of-all-worlds: capturing the economic growth from data centers while promoting customer affordability and structurally reforming the state’s relationship with Dominion. Depending on the outcome, other states may find a novel strategy to emulate or a cautionary tale.

-  Jim Kapsis and Max Davidson