Dominion proposes higher utility rates, new rate class for data centers

Dominion Energy is proposing a rate increase for residential customers that will add on an additional $10.51 a month starting in 2027. The State Corporation Commission, which held its first hearing about the possible rate increase on Tuesday, will consider the company’s reasoning for the rate hike and their proposed fuel rate increase that will add an average $10.92 monthly rate for customers.

The utility company that serves over two million Virginia homes is also attempting to create a new rate class just for large power users, such as data centers, a nod to a 2024 recommendation by a Virginia legislative commission. Currently, data centers are under the same class as large manufacturers but the utility wants to add transparency to show that the high load users are paying a fair rate for the amount of energy they demand, and to put financial safeguards in place for the cost of new energy infrastructure for those users.

Rate increase

The base rate increase proposal is largely due to the higher cost of critical materials needed to generate and deliver power, according to Dominion. From wires to power poles to transformers – the cost to maintain the current grid is getting more expensive on top of power demand continuing to rise. Dominion’s plan would phase in the increases over two years. 

In January 2026, the base rate would increase by $8.51 monthly for the average residential user, and in January 2027 an additional $2 would be added monthly. The company said this is the first time in decades they have increased their base rate. But due to various riders, which are the added costs of infrastructure projects and storm recovery, there have been other increases in bills over the years.

Several public witnesses stated Tuesday during the SCC hearing that they already struggle to pay their utility bills on top of other inflation-driven costs rising. Many shared personal stories of skipping meals or having to work multiple jobs to make ends meet.

Fuel rate

With the rising cost of fuel and energy capacity, Dominion is asking regulators to increase the fuel rate to $10.92 a month. In July 2025, the SCC approved an interim rate of $8.92 and, if the proposal is approved, an additional $2 will be added to remove the cost of PJM interconnection capacity rates from the base rate. Dominion does not gain a profit from the fuel rate; it is a passthrough cost of business. The cost of natural gas has been increasing nationally, which is why their rates need to go up, the utility said.

Data centers

Dominion serves about 450 data centers in their Virginia coverage area. Virginia hosts over a third of the world’s data centers, with the majority in Northern Virginia. As the power-hungry centers boost the demand for more energy production infrastructure, environmental groups and some residents are concerned they are not paying their fair share and could leave localities on the hook for building out the infrastructure, if the data center never actually comes to fruition.

Under Dominion’s plan, a new rate class would be created for utility customers that use more than 25 megawatts and use a load factor of more than 75% monthly. This describes most data centers and many of their larger industrial and commercial customers. Attorneys representing grocery stores and the military bases in Virginia, who are also high load customers, pushed back against the proposal Tuesday, stating that it is not fair to force the legacy customers into a new rate class.

A 2024 study by the Joint Legislative Audit and Review Commission found that data centers are accurately being charged for current costs. However, the report stated that data centers are likely to drive up costs for all customers due to the need to build out energy infrastructure that would not otherwise be built.

“Establishing a separate data center customer class, changing cost allocations, and adjusting utility rates more frequently could help insulate non-data center customers from statewide cost increases,” the report stated.

Dominion said it is basing the new rate class proposal off of the JLARC recommendations.

A more controversial portion of the new rate case is Dominion’s request that high-use customers  sign a 14-year contract that will ensure they will pay for their proposed energy costs, even if they use less or if the data centers aren’t built. The goal is to ensure that if companies propose the data center and the energy infrastructure — such as gas plants, nuclear power plants, solar or wind — is built, then the company will pay for it no matter what.

The minimum demand charges for these users would be 85% for transmission, 85% for distribution, and 60% for generation. They would be charged more if they exceed those minimums.

“If the high load customers live up to what they request in terms of service, then none of the protective elements, such as minimum charges or capacity reassignment provisions, come into play,” said one of Dominion’s attorneys in the case, Joseph Reid III.

Del. Terry Kilgore, R-Scott, submitted a letter into the record of the case that he is in support of providing a pro-economic environment for data centers in the state but agrees with Dominion’s plan creating fair cost allocation.

A group of some of the data center companies and other retailers in the case have joined together to offer an amended version of Dominion’s plan. It’ll be up to the SCC to determine if they will accept their proposal in pieces or in total.

“Make no mistake, load growth from large customers presents a massive earnings opportunity for Dominion shareholders. The company’s objective is to vigorously protect that opportunity by shifting as much risk as possible from its shareholders onto its high load customers,” said Nikhil Vijaykar, an attorney for the Data Center Coalition in the hearing. “That is why Dominion wants to lock high load customers into 14 year contracts but makes no reciprocal commitments to get power to those customers on a reasonable timeline.”

The key differences in the data centers’ counter plan are that the new rate class would l only apply to new customers who use more than 50MW that would come online starting in Jan. 2026. Their minimum demand obligations would be 75% for transmission, 75% for distribution, 50% for generation for non-shopping customers and 0% for shopping customers. Some of the high load customers want to aggregate accounts for applying for those minimum charges.

The data centers that are already built or have been financially settled before construction would not be implicated in these new rate cases and risk requirements under the proposed amendment. The data centers’ amendment also asks for more wiggle room in reducing their MW load from Dominion without penalty. Their plan proposal also greatly reduces the collateral that Dominion is asking for, from $1.5 million per MW down to $450,000 per MW.

Under Dominion’s plan, exit fees would kick in if a high load user closes its doors before the end of a contract, meaning the companies would have to pay the minimum demand charges for however many years are left in the contract. The data centers’ proposed amendment would lower the minimum demand charges timespan to less than five years.

Environmental groups are broadly in favor of Dominion’s plan to create a new rate class for data centers that would increase transparency and include new risk requirements. But multiple groups represented in the case feel it does not go far enough.

“The truth is that no one in this proceeding or anywhere in the world can say with certainty whether the projected level of energy used by data centers will be sustained for seven years, for 15 years, for 30 years,” said Nathaniel Benforado, an attorney representing Appalachian Voices in the case. “When we’re talking about recovering capital costs for generation, transmission and distribution assets that are being planned for today, this evidence suggests that the current system is not equipped to handle this growth.”

The SCC hearing for the rate case and fuel factor are expected to last through the end of next week. A decision on the case is not expected until December.

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