by Steve Haner

Virginia’s major data centers could pay more for electricity and other customers less under a surprise legislative substitute that appeared in email inboxes Sunday and was rapidly approved Monday by a major Virginia Senate committee.

The proposal is politically attractive, already being touted a major consumer rate cut, but the detailed accounting analysis of whether it is fair will be punted to the Commission’s judges later this year. If the Commission decides not to agree with the politicians’ suggested allocation rules, it will take the heat, and the politicians will say they tried.  

At issue is the marginal electricity price increase caused by the skyrocketing cost of future generation capacity within the PJM Interconnection regional marketplace, and the cost of large substations and power lines needed by the data centers. Under basic accounting rules for cost allocation, all the various customer classes pay a share of those. 

As introduced, Senate Bill 253 from Senator Louise Lucas, D-Portsmouth, had nothing to do with either. Sunday, she began to circulate to fellow members of the Senate Commerce and Labor Committee a drastic substitute version that was apparently drafted by Dominion Energy Virginia lawyers. 

The last minute “gotcha” move had obviously been well planned, because she also distributed a letter from the State Corporation Commission staff on the way it would impact various customer classes. The data centers would see their future bills jump almost 16%, while residential customers would see about a 3% reduction, perhaps $60-65 per year if they use 1,000 kilowatt hours monthly.

Other commercial and industrial classes would also see bills drop from 3 to 4 percent, the SCC staff predicted. The state and its agencies would pay about $8 million less annually for electricity from Dominion, and localities about $19 million less. Lucas was armed with kind of detailed bill impact data that should be produced for all major energy legislation but never is. 

The full weight of all the marginal capacity and infrastructure cost increases would fall on the new GS-5 class of customers that just came into existence January 1, following a long general rate case at the SCC. A handful of large industrial users who also fall into GS-5, such as the shipyard in Newport News, are given an offramp in the substitute. To be in GS-5 a user must draw 25 megawatts or more at least 75 percent of the time.

The SCC did not make any major changes to class allocation rules as it concluded that case but indicated a review of the allocation rules was coming next. The Assembly, under pressure from an angry public looking at likely record electric bills this winter, seems unwilling to wait. The bill and a likely House companion have not passed but the skids do look greased at this point.

Lucas claimed that her bill, with the substitute, was the only energy bill pending this year that would lower people’s electric rates. That ignores the pending bills, all probably doomed, that remove the mandates of the Virginia Clean Economy Act. The claim is also dubious because of the purpose of her bill before the substitute, which was to extend a decade-long Dominion program to charge all ratepayers for distribution line improvements that benefit only a few. 

The SCC didn’t speak up on the ratepayer cost impact of the so called “strategic underground program” or SUP until asked, but it was asked yesterday. If the new part of the Lucas bill would cut future residential rates about $5, another $5 would go away if the SUP program was allowed to sunset in 2028, as current law dictates. The amended bill keeps that program alive and the expense on everybody’s bills for another ten years, cancelling much of the benefit of the cost allocation shift. 

Several other pending bills previously discussed here on Bacon’s Rebellion will also be adding costs on consumers, with a cumulative impact that far exceeds any savings from imposing the capacity charges in full upon the data centers. And the underlying assertion that those large customers are solely responsible for what has happened to capacity costs within PJM is also debatable. Virginia has long made capacity purchases through PJM.

But complex debate, accounting and analysis are the job of the SCC. When the chair of Senate Commerce and Labor asked for public testimony against the substitute for SB 253, he limited it to three whole minutes. A room full of data center lobbyists for some of America’s largest tech companies let one spokesperson offer a few bland comments but otherwise sat silently.