The Virginia State Corporation Commission has ordered Dominion Energy to directly assign certain transmission upgrade costs to the data center customers driving them, breaking from the traditional practice of socializing those expenses across all ratepayers. The commission also signaled it may extend that principle to upstream transmission investments in a future docket, a move that would fundamentally alter how the nation’s largest data center market pays for grid expansion.
Virginia’s Data Center Boom Forces a Cost Allocation Reckoning
Northern Virginia’s “Data Center Alley” now hosts roughly 35% of global hyperscale capacity, with Dominion Energy’s service territory absorbing load growth that has no parallel elsewhere in the United States. The utility’s 2024 integrated resource plan projects summer peak demand rising from roughly 20 GW today to more than 30 GW by 2030 – a 50% increase in six years – driven almost entirely by data center contracts already signed or in advanced negotiation. That trajectory has forced Dominion to propose billions in transmission reinforcements: new 500 kV lines, substation upgrades, and dynamic line rating deployments across a corridor stretching from Loudoun County south toward Carolina and west toward the PJM border.
Historically, transmission costs in PJM are socialized across the footprint under the regional cost allocation framework established by FERC Order 1000 and the PJM Tariff. Virginia retail customers, including residential and small commercial accounts, have therefore subsidized the bulk power system upgrades needed to serve loads concentrated in a few counties. The SCC’s order in Case No. PUR-2024-00065 rejects that default for a defined slice of “local” transmission facilities – essentially the last-mile connections and substation work that serve individual data center campuses – and requires Dominion to bill those costs directly to the requesting customers under bespoke service agreements.
The commission stopped short of applying direct assignment to the backbone 500 kV expansions that benefit the broader system, but its language is deliberate: it “may use an upcoming docket to weigh whether this policy could or should also apply to more upstream transmission costs.” That sentence is the regulatory equivalent of a shot across the bow. If the SCC follows through, the cost shift could reach into the hundreds of millions of dollars per year for the hyperscale cluster, and it would establish a precedent that other states with emerging data center corridors – Texas, Ohio, Arizona, Georgia – will cite in their own proceedings.
Direct Assignment Collides with FERC Jurisdiction and Hyperscale Procurement Strategy
This development sits at the intersection of three moving trains: state retail regulation, federal wholesale tariff design, and the procurement playbooks of the world’s largest cloud providers. The SCC’s authority extends only to retail rates and the intrastate transmission facilities that Dominion owns and operates. The moment a cost shift touches facilities that PJM classifies as “regional” – typically 500 kV and above, or any upgrade that solves a reliability violation on the bulk electric system – FERC’s jurisdiction engages. PJM’s current tariff allocates those costs across the entire RTO footprint using a hybrid load-ratio and benefit-based formula. A state commission cannot unilaterally override that allocation for FERC-jurisdictional facilities without triggering a Section 206 challenge or a complaint at the Commission.
That points to a likely collision course. If the SCC attempts to direct-assign upstream 500 kV costs in the promised docket, Dominion will face a choice: file a tariff change at FERC seeking a carve-out for Virginia data center loads, or absorb the disallowed costs and seek recovery through its Virginia retail base rates – effectively socializing them anyway. Hyperscalers, for their part, have spent the last decade negotiating special contracts (often called “large load service agreements” or “economic development rates”) that lock in predictable transmission adders. Direct assignment of upstream costs would break those models, forcing AWS, Google, Microsoft, and Meta to internalize marginal transmission costs that today are smeared across 65 million PJM customers. On the order of $1-2 billion in planned 500 kV work over the next decade could be at stake, based on Dominion’s public transmission planning presentations.
By comparison, Texas has taken a different path: ERCOT’s “connect and manage” framework places interconnection costs on the generator or load, but the CREZ transmission buildout for West Texas wind was socialized. Ohio’s PUCO recently approved AEP’s $1.2 billion transmission plan with costs allocated to the zonal ratepayer base, though the commission required data center customers to fund dedicated substations. Virginia’s move is the first time a major data center state has explicitly threatened to extend direct assignment beyond the last mile. If the trend holds, we may see a patchwork of state-level cost allocation regimes that complicates PJM’s regional planning process and incentivizes hyperscalers to site new campuses in jurisdictions with softer cost assignment rules.
Who This Affects
- Utility transmission planner: Must now model two parallel cost recovery tracks – direct-assigned local facilities and socialized backbone – and prepare FERC filings that defend the jurisdictional boundary if the SCC pushes upstream.
- Hyperscale infrastructure lead: Budget for transmission adders that could rise from roughly $5-10/MWh today to $15-25/MWh if upstream direct assignment materializes; renegotiate power purchase agreements to reflect exposure to marginal transmission cost.
- State energy policy analyst: Track the SCC docket as a template for legislative or regulatory action in other states; quantify the cross-subsidy from residential ratepayers to data center loads under current vs. proposed allocation.
- Transmission investor / independent developer: Assess whether merchant transmission or “generator lead line” models become more attractive when hyperscalers bear direct cost risk; evaluate PJM competitive window bids under new cost certainty.
- PJM stakeholder affairs manager: Prepare for Section 205/206 filings challenging any state-ordered cost shifts that conflict with the OATT; model zonal rate impacts if Virginia load pays less into the regional pool.
What to Watch Next
- The SCC’s next docket scope and schedule – specifically whether it opens a generic rulemaking on upstream cost allocation or addresses it case-by-case in Dominion’s next biennial review (expected late 2025).
- Dominion’s FERC filing strategy: watch for a Section 205 tariff amendment seeking a Virginia-specific allocation exception, or a Section 206 complaint if the SCC orders upstream direct assignment without FERC concurrence.
- PJM’s 2025 Regional Transmission Expansion Plan (RTEP) – the first cycle where data center load forecasts exceed 30 GW; note any “supplemental” projects tagged as direct-assigned versus baseline reliability upgrades.
- Hyperscale siting announcements in 2025-2026: a measurable shift of new campus commitments to Duke Energy Carolinas, AEP Ohio, or Entergy Texas territories would signal that Virginia’s cost allocation risk is altering location economics.
Bottom line: Virginia has fired the opening salvo in a multi-year battle over who pays for the grid that powers the AI economy. The SCC’s willingness to extend direct assignment upstream will determine whether data center economics absorb marginal transmission cost or whether that burden remains socialized – and every other state with a data center pipeline is taking notes.
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Note: facts and figures attributed above to Utility Dive reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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