In short
Virginia hosts the largest AI data center market in the world, and Dominion Energy Virginia is the utility that serves it. Dominion delivers electricity to about 450 AI data centers inside the PJM wholesale market, where capacity prices have surged to over $300 per MW-day. PJM BRA Results, PJM, PJM 2026/2027 BRA Report, PJM, Virginia Mercury, Dominion Energy Virginia, Virginia Mercury, PJM, PJM Market Monitor analysis The State Corporation Commission created a new GS-5 rate class for large loads starting in 2027, required a formal interconnection queue, and ordered changes to cost allocation. SCC Data Center Initiatives fact sheet, SCC final order Recent laws give Dominion room to delay service for reliability and direct a review of load forecasting. HB 1151, HB 892
Why is Virginia the center of AI data center power demand
Virginia has the largest data center market in the world. About 35 percent of all known hyperscale data centers operate in the state, and roughly 70 percent of internet IP traffic is either created or passes through Loudoun County’s Data Center Alley. VEDP, VEDP
Dominion Energy Virginia serves approximately 2.7 million electric customers and about 450 data centers inside its service territory. Virginia Mercury In 2024 those AI data centers used about 3,583 MW of electricity, according to testimony from Dominion’s Director of Data Center Practice. Virginia Business The contracted pipeline has since exploded. Dominion’s contracted AI data center capacity went from 21 GW in July 2024 to roughly 40 GW by December 2024, an 88 percent increase in five months. Data Center Dynamics By October 2025 the pipeline had reached 47 GW, and by February 2026 Dominion’s queue of large-load delivery point requests had grown to 70 GW. Reuters, SCC filing PUR-2026-00011
These numbers are far above today’s regional peaks. Dominion hit an all-time peak load of 24,678 MW on January 23, 2025 during a cold spell. Dominion Energy IRP So the 70 GW of requests sitting in the queue is nearly triple the highest demand the system has ever seen.
Load is highly concentrated. About 80 percent of Virginia’s AI data center industry sits in three Northern Virginia counties, including Loudoun, Prince William, and Fairfax. Amperon Loudoun County alone reported 5.33 GW of AI data center electricity consumption in 2025, up 166 percent from 2.0 GW in 2021. Loudoun County report But development is now spreading south and west into Culpeper, Spotsylvania, Stafford, Henrico, Chesterfield, and other counties. Data Center Dynamics
How the PJM wholesale market drives costs for Virginia AI data centers
Dominion’s Virginia service territory sits inside the Dominion (DOM) zone of PJM Interconnection, the regional transmission organization that runs the wholesale electricity market across 13 states and Washington, D.C. PJM, PJM zone map, PJM load forecast
PJM runs two main markets that affect every AI data center in Virginia. The energy market sets the locational marginal price for every hour, and that price shows up in the power supply portion of the utility bill. The capacity market, run through a Base Residual Auction (BRA), pays generators to be available to produce power at the system’s most stressed hours, about three years in advance. A utility like Dominion buys capacity in the auction and passes the cost through to customers.
The capacity price has surged because of the load growth that AI data centers are driving. The RTO-wide clearing price for the 2024/25 delivery year was $28.92 per MW-day. PJM BRA Results For the 2025/26 delivery year it jumped to $269.92 per MW-day RTO, and the DOM zone price hit $444.26 per MW-day. PJM BRA Report For the 2026/27 delivery year the RTO-wide price reached the FERC-approved cap of $329.17 per MW-day, and DOM was also at the cap. PJM 2026/2027 BRA Report For the 2027/28 delivery year the auction again cleared at the cap of $333.44 per MW-day RTO, but for the first time the entire RTO fell short of the reliability requirement by 6,516.6 MW of unforced capacity. PJM 2027/2028 BRA Report, PJM Inside Lines
The total cost of the capacity market from these three auctions is about $47.2 billion. The Independent Market Monitor found that AI data centers were responsible for approximately 64 percent of the total cost in the 2025/26 auction alone. Monitoring Analytics Report, Monitoring Analytics Report
Think of the capacity market like a reservation fee. PJM pays power plants to be on standby so the lights stay on at the busiest moment. When demand for that standby grows, the price goes up. AI data centers are adding huge new demand, so the price has shot up, and almost every customer in Virginia will see that cost in their rates.
What is the utility’s duty to serve and how has it changed for large loads
Virginia law has long required public utilities to serve anyone along their lines who asks, at reasonable and just rates, under uniform conditions. Va. Code § 56-234 That duty is the backbone of the utility regulatory compact.
A 2025 amendment, effective January 1, 2027, adds an important exception. An electric utility organized under Chapter 9.1 may satisfy its duty to serve a new large customer through an unregulated affiliate sale if the customer’s expected demand exceeds 90 MW. Va. Code § 56-234(D) Plainly stated, a very large AI data center could be served by a Dominion affiliate that is not bound by the same regulated rates and terms. That gives the utility more flexibility but also removes the customer from some traditional ratepayer protections.
A separate 2026 law, HB 1151, gives utilities explicit authority to delay the provision of service if it is needed to maintain grid reliability. HB 1151 So the duty to serve is no longer absolute when the grid simply cannot handle the load. Together, these two changes give Dominion more tools to manage the 70 GW of demand that is pressing on the system.
What is the GS-5 rate class and what does it mean for large AI data centers
Starting January 1, 2027, any new customer with a demand of 25 MW or more on a contiguous site and a load factor of at least 75% must take service under the GS-5 rate class, created by the State Corporation Commission in its November 2025 final order in Dominion’s biennial rate review. SCC Case PUR-2025-00058
GS-5 is not a standard rate schedule. It is a long term commitment designed to make sure AI data centers pay their own way and to protect other customers from the costs of stranded grid capacity if a project fails or scales back. The key requirements are laid out here.
| Requirement | GS-5 class (effective January 1, 2027) |
|---|---|
| Eligibility | 25 MW or more of demand with a load factor of at least 75 percent |
| Contract term | 14 years |
| Minimum T&D charge | 85 percent of contracted transmission and distribution demand |
| Minimum generation charge | 60 percent of contracted generation demand |
| Collateral | Up to 60 percent of total minimum charges over the contract term |
| Load reduction notice | 3 years |
| Exit fee | Remaining minimum charges if operations cease during the contract |
| Load ramp period | Up to 4 years, with a minimum of 20 percent of contracted demand added each year |
SCC fact sheet, SCC final order, SCC final order
A developer who wants to build a 100 MW AI data center under GS-5 must sign a 14-year agreement, pay at least 85 percent of the T&D capacity charge every month even if the center draws less power, put down collateral that could reach tens of millions of dollars, and give three years’ notice before it can reduce its contracted demand. These are serious commitments that shift a large share of the project risk from the utility to the developer.
The same SCC order also approved a base rate revenue increase of $565.7 million in 2026 and $209.9 million in 2027, far less than Dominion requested. SCC final order For a typical residential customer, that base rate increase adds about $11.24 per month in 2026 and another $2.36 per month in 2027 before counting fuel and other riders. SCC final order
How does Dominion manage the 70 GW interconnection queue
In February 2026 Dominion filed formal interconnection queue rules with the SCC under Case PUR-2026-00011, as the SCC had directed. SCC filing The queue covers delivery-point (DP) requests of about 100 MW or more, with a cap of 300 MW on a single request.
Requests are processed first come, first served, in batches of about ten per batch, representing roughly 2 to 3 GW of demand. As of the filing, about 25 GW of the 70 GW in queue had been assigned projected connection dates through the end of 2031, and 45 GW remained under study with no connection date. SCC filing, Gardner testimony
The process moves through four steps. The first is project initiation. The developer submits a request on Dominion’s Delivery Point Exchange platform, Dominion screens it for basic viability, and the project enters the queue. The second step is project feasibility. Dominion runs system studies, the developer provides a zoning conformance letter from the local government and a site plan at 30 percent engineering, and the parties select a constructible solution, signing a Letter Agreement. The third step is project development, which covers detailed engineering, permitting, and regulatory approvals. The fourth step is project execution, which includes final design, construction, and energization. Dominion large-load queue filing
The SCC is not done with the process. In mid-May 2026 the Commission reportedly issued an interim order directing changes to Dominion’s proposal and creating a flexibility working group. News report Microsoft, Google, and the Data Center Coalition all intervened in the case, which shows that large customers want a voice in how the queue works. SCC docket, Microsoft notice, SCC docket, Google notice, Virginia Mercury, DCC testimony in queue case
What does a developer actually sign to get power from Dominion
Before any large AI data center receives an Electric Service Agreement, it must work through three contractual steps.
The first step is an Engineering Letter of Agreement (ELOA). The developer pays $250,000 in cash for engineering and design work. This step does not commit Dominion to build anything but gets detailed planning started.
The second step is a Construction Letter of Agreement (CLOA). The developer makes cash deposit payments and agrees to reimburse Dominion 100 percent of its costs if the project is canceled before energization.
The third step is the Electric Service Agreement (ESA), signed within one year of the target energization date. The ESA contains all final contractual provisions, including GS-5 terms if the load qualifies. Dominion GS-5 report
A developer that passes through all three steps and meets the GS-5 requirements will have locked in its grid connection, but it will have also posted millions of dollars in collateral and accepted long-term minimum payment obligations.
How are the costs of this growth affecting Virginia customers
The SCC is actively working to keep AI data center growth from unfairly raising other customers’ bills. In the November 2025 order, the SCC directed Dominion to move away from its traditional average-and-excess cost allocation method for generation and to propose new methods that more directly assign costs to the customers who cause them. SCC news release
The JLARC study published in December 2024 found that if unconstrained AI data center demand were met, a typical residential customer’s bill could rise $14 to $37 per month by 2040. JLARC report Shifting cost allocation and using rate designs like GS-5 are meant to prevent that scenario.
Reliability events have already shown the risk. In July 2024 a voltage fluctuation in Northern Virginia caused 60 AI data centers to disconnect at once, which created a 1,500 MW power surplus that required emergency adjustments. Belfer Center And the PJM capacity market, where Dominion buys the standby power it needs, is now clearing at the FERC price cap. Those capacity costs flow directly into the supply portion of every customer’s bill.
The 2026 General Assembly also required the SCC to examine how Dominion and other utilities calculate load growth to make sure costs do not unfairly fall on ratepayers. HB 892 That review is underway.
What new power plants and transmission lines are coming
Dominion plans about $65 billion in capital spending from 2026 through 2030, a roughly 30 percent increase over its earlier $50.1 billion plan, driven largely by data center demand. Reuters, Utility Dive Its 2024 Integrated Resource Plan projects the need for 27 GW of new generation by 2039, including about 21 GW of renewable energy and 5.9 GW of natural gas. Belfer Center citing Dominion IRP
Several major projects are already moving forward.
- Coastal Virginia Offshore Wind (CVOW), a 2.6 GW, $9.8 to $11.5 billion offshore wind farm, began delivering electricity in spring 2026 and is expected to be fully complete by early 2027. Virginia Mercury, Virginia Business
- The Chesterfield Energy Reliability Center, a 944 MW gas peaker plant, was approved by the SCC in November 2025 at an estimated cost of $1.47 billion, with construction starting in 2026 and completion in 2029. Virginia Mercury
- A new 3,000 MW combined-cycle natural gas plant is planned in Cumberland County. Virginia Business
- Dominion and Amazon signed a memorandum of understanding to explore developing a small modular reactor (SMR) of at least 300 MW at the North Anna Power Station in Louisa County. Dominion Energy, Utility Dive
- A 425 MW battery storage facility proposed by Tenaska in Loudoun County is also in the mix. Virginia Business
Transmission constraints have been the most immediate bottleneck. A temporary constraint in Loudoun County suppressed new connections, but Dominion expects the situation to improve in 2026 as several large transmission projects are energized. PJM presentation One of the biggest is the Golden-to-Mars 500 kV loop, an 8 to 9 mile line with towers up to 185 feet that serves more than 40 new substations. PEC timeline, PEC Another is the Culpeper Technology Zone transmission project, which provides 1.2 GW of capacity to serve three of the six new AI data centers in the zone at a capital cost exceeding $250 million. PEC
What other regulations and laws are shaping the future
Several 2026 legislative and regulatory actions will directly affect AI data center power development.
HB 1151 allows a utility to delay providing service if it is needed to maintain grid reliability. HB 1151 This gives Dominion a clear legal path to slow walk projects when the grid is not ready, rather than being forced by the duty to serve to connect them.
HB 892 directs the SCC to initiate a proceeding to examine how Phase I and Phase II utilities calculate load growth, to ensure accuracy and reduce the risk that costs are shifted to ratepayers. HB 892 The SCC’s technical conferences on AI data center cost allocation and load flexibility, held in 2024 and 2025, are part of the same effort. SCC fact sheet
Statewide buildout is spreading. Projects are under construction or in planning in Prince William, Culpeper, Stafford, Spotsylvania, Henrico, Chesterfield, Hanover, Powhatan, Caroline, Louisa, and other counties. Data Center Dynamics The 525-acre Peterson campus in Stafford, for example, could total 5.5 million square feet and roughly 1.8 GW at full buildout. Data Center Dynamics The PowerHouse 800 MW campus in Spotsylvania and the Chirisa and QTS expansions near Richmond show that growth is no longer confined to Loudoun.
The NextEra-Dominion merger, announced May 18, 2026, would combine Dominion into a NextEra subsidiary in a $66.8 billion all-stock deal, which would create the largest U.S. electric utility. Virginia Business The transaction faces SCC, FERC, and other regulatory approvals, and its effect on AI data center service terms will not be clear until those reviews play out.
The data center sales tax exemption under Va. Code § 58.1-609.3(18) remains a major state level issue. The exemption applies to computer equipment and enabling software for facilities that invest $150 million and create 50 jobs at 150 percent of the prevailing local average wage. It has been extended to 2035, with further extensions to 2040 and 2050 at higher thresholds. Va. Code § 58.1-609.3(18) The exemption costs the state over $1 billion annually in foregone revenue, and the General Assembly has debated scaling it back. Virginia Mercury While this is a tax matter, it directly supports the buildout that drives power demand, and any change would affect project economics sitewide.
Key takeaways
- Dominion’s duty to serve is no longer absolute for very large AI data centers. The 2025 amendment and HB 1151 give the utility more control over when and how to connect them.
- Every AI data center of 25 MW or more that takes service after January 1, 2027 must sign a 14-year GS-5 contract with mandatory minimum charges and heavy collateral. Budget for those costs early.
- The interconnection queue holds 70 GW of requests, and only about 25 GW have assigned connection dates through 2031. Time to energization is now measured in years, and the SCC is still shaping the queue rules.
- PJM capacity prices have hit the FERC cap in consecutive auctions, and the shortfall in the 2027/28 auction signals that the market is not keeping up with load growth. Those costs will appear in utility rates.
- Dominion is spending about $65 billion on infrastructure from 2026 through 2030, up from its earlier $50.1 billion plan. New offshore wind, gas, nuclear SMRs, and transmission are coming, but they will not match the pace of demand without regulatory constraint.
- The SCC is actively reviewing cost allocation and load forecasting. Expect further changes to rate design and queue process in 2026 and 2027.
- Monitor the NextEra merger review and any budget moves on the data center sales tax exemption. Both can shift the risk profile of a Virginia project.
Frequently asked questions
Q:How many AI data centers does Dominion serve in Virginia?
A:Dominion serves about 450 AI data centers, which together used roughly 3,583 MW in 2024. The contracted pipeline, however, totals 47 GW and the interconnection queue is at 70 GW.
Q:What is the PJM capacity auction price for the Dominion zone?
A:The RTO-wide capacity price for the 2026/27 delivery year is $329.17 per MW-day at the FERC cap. The DOM zone cleared at the same cap because the shortfall was RTO-wide. In the previous year, however, the DOM zone price reached $444.26 per MW-day because it was a constrained subzone.
Q:What is the GS-5 rate class and when does it take effect?
A:GS-5 is a new rate class for any customer with 25 MW or more of demand, effective January 1, 2027. It requires a 14-year contract, minimum demand charges of 85 percent for T&D and 60 percent for generation, collateral of up to 60 percent of total minimum charges, and strict exit terms.
Q:How long does it take to get a new AI data center connected to Dominion’s grid?
A:Connection time depends on the queue and the size of the request. As of early 2026, 25 GW had assigned dates through 2031, so some projects could wait five or more years. The queue is batch-processed, and Dominion adds about 10 new requests per month, so new entrants may face longer waits unless they already have a confirmed spot.
Q:What does a developer pay up front to Dominion for a large AI data center connection?
A:The process begins with a $250,000 payment under an Engineering Letter of Agreement. A Construction Letter of Agreement follows, requiring cash deposits and a promise to reimburse Dominion’s full costs if the project cancels. Once the GS-5 terms apply, the developer must also post collateral of up to 60 percent of the 14-year minimum charges, which for a 100 MW project could reach hundreds of millions of dollars.
Q:Can Dominion refuse to serve a new AI data center?
A:Yes, in two limited ways. The 2025 amendment lets Dominion satisfy the duty through an unregulated affiliate for loads above 90 MW, effectively a different service path. And HB 1151 authorizes a utility to delay service when it is needed to protect grid reliability. Otherwise, the general duty to serve remains.
Q:How is Dominion building power plants to keep up with AI data center demand?
A:Dominion is investing heavily in new generation, including 2.6 GW of offshore wind (delivering power now), a 944 MW gas peaker (Chesterfield, approved), a 3,000 MW combined-cycle gas plant (Cumberland, planned), and up to 5 GW of nuclear with a 300 MW SMR pilot. These projects will add capacity, but demand growth is so fast that shortages remain likely.
Q:What are the bill impacts of AI data center growth for residential customers?
A:The base-rate case already added about $13.60 per month over two years for a typical residential customer, and the JLARC study projected $14 to $37 per month by 2040 if growth is unconstrained. The GS-5 class and SCC cost allocation reviews are designed to prevent that larger impact.
Q:Does Virginia offer a sales tax exemption for data center equipment?
A:Yes. Under Va. Code § 58.1-609.3(18), qualifying data centers can receive a retail sales and use tax exemption on computer equipment and enabling software if they meet investment and job thresholds. The exemption is a major cost advantage but is under political debate and costs the state over $1 billion annually in foregone revenue.
Q:What happens to the interconnection queue rules under SCC review?
A:The SCC issued an interim order in May 2026 directing changes to Dominion’s queue proposal and forming a working group on flexibility. Final standards will likely be refined further in 2026. Large customers like Microsoft and Google are actively intervening, so the outcome will reflect significant input from AI data center developers.
Q:How does the announced NextEra-Dominion merger affect AI data center power?
A:The $66.8 billion merger would create the largest U.S. electric utility. Regulatory approvals are needed, and the combined entity’s approach to data center service, rate design, and capital spending will become clearer only after those reviews. Project developers should track the case for any effect on interconnection and rate terms.
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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.