
In the 2025 session, the General Assembly of Virginia is considering several bills aimed at regulating data center development, including measures on cost allocation, environmental impacts, and land use. Given Virginia’s status as the “data center capital of the world,” these proposals—if enacted—could significantly affect data center operators, utility providers, and renewable energy developers. The stakes are high. According to Amazon, “Every day, approximately 70% of global internet traffic moves through data centers in Virginia.”
Below, we provide an overview of the legislative landscape and highlight key implications for our clients. Things are happening quickly on this issue in the General Assembly, as noted below.
Background: Why Now?
- Rapid Growth: Virginia leads the nation in data center construction and operation, bringing in substantial tax revenue and economic activity.
- Utility Costs & Grid Concerns: A recent study by the Joint Legislative Audit and Review Commission (JLARC) warns that unchecked expansion may lead to higher utility bills—possibly up to $37 more per month for residential ratepayers—and grid reliability challenges.
- Community & Environmental Impacts: Many localities are calling for stricter oversight due to concerns over noise, water usage, and land use conflicts.
Key Legislative Proposals
- Cost Allocation & Ratepayer Protection
HB 2101 / SB 960: Directs the State Corporation Commission (SCC) to determine whether residential and small business customers are subsidizing data center electricity demand. If so, the SCC must develop rules to ensure data centers cover an appropriate share of infrastructure costs.
- Reporting & Transparency
HB 2035: Requires quarterly reporting of energy and water usage to the Department of Environmental Quality (DEQ), with data posted publicly.
- Local Control & Environmental Assessments
HB 1601: Empowers localities to conduct site assessments (noise, environmental, historical, etc.) before approving new data center projects. This measure cleared a committee vote on January 17, 2025, and is reportedly headed for a vote the week of January 20, 2025.
- SCC Certification for Large Energy Consumers
HB 2027: Demands high-energy facilities (over 25 MW) secure a certificate from the SCC by July 1, 2026. This bill was tabled by a House of Delegates subcommittee.
- Tax Incentives & Clean Energy Requirements
HB 2578: Ties data centers’ sales and use tax exemptions to renewable energy and efficiency milestones by 2030.
Why This Matters
Data Center Developers & Operators: These proposals may increase project costs (through new taxes, fees, or environmental compliance) but also offer a clearer regulatory framework for long-term planning.
Energy & Utility Providers: Cost allocation rules could affect rate structures and capital expenditure recovery for grid expansion. Entities serving data centers need to assess how rate design changes may influence infrastructure investments.
Renewable Energy Developers: Proposals tying tax incentives to renewable energy usage could foster new demand for clean power solutions. Developers may see expanded opportunities for Power Purchase Agreements (PPAs) and other long-term offtake arrangements.
Localities & Stakeholders: Heightened local oversight—particularly around noise, water use, and environmental reviews—means stakeholders must engage early with municipalities to address concerns and streamline approvals.
Conclusion
The fact there are so many different data center bills is evidence of the urgency of balancing a trio of considerations: (i) economic development—especially in rural counties that can greatly benefit from the taxes data center owners would pay, (ii) the unquenchable electricity demands of data centers, and (iii) the need for wise government oversight—whether state, local or both—as data center growth continues. The underlying issues of cost allocation, community impact, rural/urban divide and environmental responsibility will likely remain focal points for policymakers and industry stakeholders. Our team will continue to monitor developments and stands ready to advise clients on the potential implications for their operations and investments. As they say, watch this space!
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