These Bills Aim to Regulate Virginia Data Center Siting, Generator Use and SCC Oversight

As Virginia grapples with an energy crisis fueled by the proliferation of data centers and growing local concern about permitting for the facilities, lawmakers are mulling how to manage the industry.

Over the next two months of the General Assembly session, they will debate a slew of legislative proposals to streamline regulations, balance environmental priorities, and address community concerns about the industry.

A recent poll by the Chesapeake Climate Action Network found that three-quarters of voters blame data centers for rising utility costs and 9 in 10 believe that lawmakers need to take action.

“There’s no option to do nothing,” said Del. Michelle Maldonado, D-Manassas, who represents the region of the state where most data centers are concentrated and who has put forward a measure that would have state regulators determine if ratepayers are being required to “unreasonably subsidize” data center transmission costs.

One of the challenges in regulating an industry like data centers is that Virginia holds local control in high regard. But with more counties giving approval to data centers to reap the rewards of increasing business and tax revenue, there is more pressure on the utilities to meet the power demands, the cost of which ultimately comes out of ratepayers’ pockets.

Lawmakers will debate how the state can get the most out of the data center tax exemptions, expand on ratepayer protections following the new rate classes approved by the State Corporation Commission, and get enough power on the grid to keep the lights on for everyone.

Here are the top data center bills of the 2026 legislative session so far.

State Corporation Commission oversight

A controversial method of regulation, Del. Josh Thomas, D-Prince William, is exploring through House Bill 155, which looks to put additional reviews on high-load users over 25 megawatts, which describes most data centers and manufacturers.

The SCC would examine if proposed data centers and other high-load companies made sufficient contracts with renewable energy production and storage, or have proper demand response measures. The bill also requires the SCC to make sure there is enough energy and transmission capacity on the grid to support the new project. A similar bill did not make it through the legislative process in 2025.

Sen. Scott Surovell, D-Fairfax, said in a press conference ahead of the legislative session that there are many ways to address the energy demands that data centers present. He pointed to a number of recommendations by the Commission on Electric Utility Regulation that are steps towards increased transparency and guardrails.

Del. Rip Sullivan, D-Fairfax, has filed HB906 to direct the SCC to form a work group tasked with finding ways to address energy load flexibility for the high load users. This is meant to help with grid strain and reliability and find other methods to ease grid demand.

Recovery cost

The SCC recently approved a new rate class for high-load users under Dominion. They will now be locked into 14-year agreements, and minimum demand charges for these users would be 85% for transmission, 85% for distribution, and 60% for generation. Some environmental advocates believe it is a good first step in ensuring that data center companies are paying a fair share of the transmission and generation costs for power.

Now, lawmakers want to find more ways to relieve ratepayers from covering the cost of infrastructure that is primarily used by the data center industry.

Del. John McAuliff, D-Fauquier, has pitched HB 503, which would prevent utilities from putting the cost of transmission lines and energy generation that mostly serve data centers onto residential ratepayers. He hopes this will make the high-load users chip in more for the infrastructure that is not providing power to homes and businesses.

“Right now the data centers are getting a pretty nice tax credit, and we are paying for a lot of that infrastructure,” McAuliff said.

It’s in the same vein as Maldonado’s bill. She said that while the new rate class for high-load users will help keep rates fair, there is still concern about the cost recovery being added to bills through the individual riders.

“Without this legislation, families and small businesses can still end up subsidizing the infrastructure, the line substations and transmission projects needed for data centers, even if data centers are in a new rate class,” Sen. Russet Perry, D-Loudoun, said in a press conference.

Water use, putting waste heat to use

Public questions about how much local water is being used by data centers have bubbled to the surface.

The servers inside of the warehouse-style buildings generate a lot of heat and need water to cool them down. Closed-loop hyperscale data centers are reported to use less water than the open loop systems. HB 589 by Del. Shelly Simonds, D-Newport News, would require water providers to report to the State Water Control Board monthly on the volume of water that the centers use.

HB 496 by Del. Elizabeth Guzman, D-Prince William, would require data centers that are permitted by-right to report how much water the anticipated project would be using at the time of development.

There are also some ideas on how to use the heat that is generated by the data centers. Del. Rip Sullivan, D-Fairfax, is bringing HB 323 to direct the Department of Energy to find ways to use the heat to either push it to surrounding buildings or the data centers, as seen in other countries.

Tax exemption requirements

Senate democrats said in a pre-session press conference that the state misses out on an estimated $1 billion from the data center industry through tax exemptions.

Surrovell said the state needs to benefit more from the industry by utilizing the exemptions, either through potential energy efficiencies or other requirements. Sen. Creigh Deeds, D-Charlottesville, is expected to file a bill this session on that issue, similar to his bill from last year that did not pass out of committee.

Environmental impacts

Thomas, the delegate representing Prince William, said his constituents told him that there needs to be a minimum standard for data center locations, sound profile, and other environmental concerns. In response, he filed HB 153, which would allow localities to require high energy users to complete a site assessment when they apply for permits for proposed projects.

Thomas said this would be a way for county boards to get the full picture of how data centers or other projects may impact the surrounding community.

“We can look in some localities like my own in Prince William County, where there are clear mistakes in siting. The Village Place Technology Park is a clear example, right next to the Village Place housing development that was there first,” Thomas said. “One vote ends up putting an industrial site way too close,” Thomas said, adding that one could throw a baseball from one of the homes’ back decks and hit the nearby data center. “And so that’s clearly inappropriate.”

A similar bill was vetoed by Gov. Glenn Youngkin last year. At the time, the governor said it would create too much red tape for the industry.

There have been growing worries over the emissions from data centers’ diesel backup generators. Usually, they only run for a few minutes a month to test them unless there is an emergency situation. As the regional transmission managed by PJM is strained during hot and cold days, the grid operator is exploring whether data centers should hop off the grid to relieve some of the pressure. But that means the generators would run for hours at a time – releasing fumes into surrounding neighborhoods.

Thomas’ HB 154 would require the facility to report publicly when the emergency generators will be used.

“I find that very dangerous and concerning for those of us who have high concentrations of data centers near our children and near our schools. So all the bill does is create more transparency,” Thomas said.

Senate Bill 130, HB 607, and HB 507 also zoom in on the diesel backup generators, offering limitations on how much they can be used and pushing the industry towards energy storage options as their backup method of power.

Many lawmakers believe it will take more than one session to work out the regulations around the multi-billion-dollar industry.

“It’s probably going to take a year, or two, or three to fully flesh out because there are billions and billions and billions of dollars of assets and land investment out there, and we have to make sure we’re prudent about how we do it. But there’s no question, (the data center industry) is part of the problem, and we have to take it head on,” Surovell said.

by Shannon Heckt, Virginia Mercury

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