As Data Center Boom Continues, Virginia Legislators Broach New Regulations

A  bipartisan coalition of Virginia lawmakers on Tuesday presented a series of bills aimed at addressing the rapid expansion of data centers, which have become a cornerstone of the state’s economy but have raised concerns about energy use, environmental impact and equitable cost distribution.

Gov. Glenn Youngkin highlighted the industry’s importance during his State of the Commonwealth address Monday, noting that “data centers alone support 74,000 jobs, bring in $9.1 billion in Virginia GDP, and generate billions in local revenue.” He called for Virginia to remain “the data center capital of the world” while ensuring state support for the industry.

However, lawmakers from both parties have emphasized the need for oversight to ensure the industry’s growth is managed responsibly.

During a news conference at the state Capitol in Richmond, Sen. Russett Perry, D-Loudoun, who is spearheading the legislative push, said the state’s approach to the IT hubs has, to a great extent, been unregulated.

“The data center industry has largely grown untracked,” Perry said. “Today, we are here to present a framework for responsible growth, one that provides Virginia’s people resources, and our economy protection.”

Sen. Russet Perry, D-Loudoun, at a news conference about data center legislation in Richmond on Jan. 14, 2025. (Photo by Markus Schmidt/Virginia Mercury)

The legislative package follows a Joint Legislative Audit and Review Commission (JLARC) report highlighting the strain data centers place on Virginia’s infrastructure and resources, including increased energy demands, environmental risks and questions about whether the industry’s benefits are equitably distributed.

The commission made several recommendations, including requiring data centers to report energy and water use, setting emissions standards for backup generators and ensuring non-data center customers do not subsidize data center energy costs.

A pillar of the legislative package that lawmakers unveiled Tuesday is House Bill 2101 and its companion measure Senate Bill 960, which directs the State Corporation Commission (SCC) to investigate whether non-data center customers are subsidizing data center energy costs. If subsidies are found, the SCC would establish new rules to address the imbalance by Jan. 1, 2026.

Perry, who sponsored the Senate proposal, highlighted the strain data centers place on the energy system, warning that residential energy bills could rise by as much as $37 per month by 2040 due to costly infrastructure expansions.

Del. Michael Webert, R-Fauquier, sponsor of the House bill, also noted growing concerns in his district over the energy demands of data centers. 

Del. Michael Webert, R-Fauquier. (Photo by Markus Schmidt/Virginia Mercury)

“Comprehensive action from the General Assembly in the form of recognizing data centers as a unique customer class and assigning their share of cost seems like a fair thing to do,” he said.

HB 2035, sponsored by Del. Shelly Simonds, D-Newport News, and former Del. Kannan Srinivasan, D-Loudoun, would require data centers to report quarterly on water and energy use to the Department of Environmental Quality (DEQ) starting in May 2026. The DEQ would create a public website by July 2026 to share this information statewide.

Facility owners would notify the DEQ 60 days before major operational changes, with funding provided through fees on operators. A stakeholder workgroup would recommend additional data to include, holding public meetings with 60-day comment periods.

“Increasingly over the last year, I’ve had constituents ask how much energy these data centers are really using,” Simonds said. “That’s really the crux of what we’re trying to do here.”

Del. Josh Thomas, D-Prince William, sponsored HB 1601 that would require site assessments before approving new data centers in Virginia. Localities would mandate sound studies to examine noise impacts on nearby homes and schools and could mandate reviews of effects on water, farmland, parks, historic sites, or forests.

Thomas also introduced HB 2027 that would direct high-energy facilities with electricity demands over 25 megawatts to secure a certificate of operation from the State Corporation Commission (SCC) if they are not operational by July 1, 2026.

Under this proposal, the SCC would only approve facilities that meet criteria such as minimal impact on utility rates and reliability, alignment with the Commonwealth Clean Energy Policy, and public interest standards. The SCC must also evaluate grid capacity and whether the facility would unfairly burden other utility customers.

“If we do not pass HB 2027, we could have rolling blackouts and a dire energy situation,” Thomas warned, citing concerns raised in the JLARC report.

The bill also requires the SCC to set criteria for certificates and ensure transparency through public notice and hearings. Proponents say the measure will help balance growing energy demands while protecting ratepayers and maintaining grid reliability.

Del. Rip Sullivan, D-Fairfax, introduced HB 2578 to tie Virginia’s sales and use tax exemption for data centers to stricter clean energy and efficiency standards.

By 2030, data centers would need to source part of their power from renewable energy and invest in energy efficiency. Sullivan emphasized the importance of making data centers more energy efficient, calling them top priorities for reducing energy use and waste.

Backup generators must also meet stricter emissions standards by 2027 under the legislation. Sullivan noted that data center generators, often as large as shipping containers, pose environmental concerns for nearby residents, who experience pollution and odors.

“Their kids are breathing this stuff,” he said.

The bill also directs state agencies to study alternatives to diesel backup power and explore ways to reuse waste heat from data centers, with findings due in late 2025.

Perry delivered a sharp closing message at Tuesday’s news conference, declaring the status quo unsustainable.

“Virginia, however, is in the unique position to set a national example by adapting responsible policies that balance economic opportunity with resource stewardship and fairness,” she said.

by Markus Schmidt, Virginia Mercury

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