Va's Data Center Talk Must Get Real, To Meet Big Tech's Climate Goals

Wait a minute. Are Virginia's lights about to go out, her clean air and climate safety laws about to be dismantled, and our household electric bills about to skyrocket??

You couldn't be blamed for thinking so.

The inchoate cacophony in Richmond around Virginia's data center boom implicitly contemplates that each of those stupendous outcomes are our destiny, as we undertake an inevitable statewide accommodation of this newly-arrived, voraciously energy-hungry customer class. Indeed, one might get the impression that we're fated to contort Virginia's entire energy apparatus around data centers, and that to do so we must also cast our climate and clean energy laws by the wayside. And all that as we also all pony up in increased electric bills for the endless succession of air- and carbon-polluting fossil fuel plants needed, to feed any data center that has a notion to plop itself down here in our midst.

But has our data-hungry AI age really put the Commonwealth over a barrel?

Have we somehow already been obligated, by some unseen force, to not only colonize out our entire energy system, but also to jettison our clean air laws? And even to pay for an array of new power plants, all to ensure a single industry can process here in Virginia an infinite global appetite for data? That's an audacious notion. So, let's take a closer look at the core assumptions embedded in Richmond's still-nascent and somewhat hyperventilating discourse around data centers.

Implicit in this high-decibel cross-chatter is a striking, sweeping assumption, at least in some quarters, that we simply have no choice: drop everything, and plug in those data centers wherever they pop up. And build all that around-the-clock capacity they'll need, to deliver the staggering quantities of juice they call for, over any substations, transmission, and distribution upgrades that'll be needed to keep the data centers humming away.

Why? Well, because they asked!

This notion of fait accompli appears to be that it's Virginia's fate to passively usher in and pay up, to nearly double in size the energy system we already paid for, to be fed with a nearly one-plant-per-year buildout of new fossil plants.

That very consequential assumption that Virginia is wriggling on a really big hook is not just a passing notion. The Virginia-is-open-for-any-and-all-data-center-business assumption is particularly implicit in this week's much-heralded data center report from JLARC. That impressive report, a sobering document to be sure, casually throws around, with abandon, the striking assumption that our utilities are "legally required" to honor any new data center request to be hooked up and fed power. The JLARC report also casually surmises that Virginia might simply pre-emptively abandon, wholesale, the Commonwealth's climate and clean energy law, apparently to solve the pesky problem of pollution-intensive, Johnny-come-lately data centers running afoul of Virginia's clean air statute that is, um, legally required.

Hurtling toward such a stark, data center-dominated future is heady stuff, and Richmond policymakers are still wrapping their minds around where this is all going.

So, is this crisis real?

Is Virginia really committed to walking down the path to endless data center growth, and to building the massive new fossil generation buildout it requires, and to the stratospheric air pollution and bill increases that would follow?

Absolutely not.

Folks really need to chill out, take a step back, take a breather, and look around to take stock. If we do, we'll see that longstanding Virginia institutions and laws are firmly in place, to accommodate and oversee whatever orderly buildout of data centers that Virginia determines for herself is appropriate, desirable, and in comportment with already-existing law.

In short, we got this.

The Lynchpin of an Orderly Data Center Buildout: The SCC

First and foremost among the institutions, laws, and planning processes Virginia already has in place to take on sensible and orderly data center development, is the SCC.

The SCC's very purpose, under both the Constitution and its foundational regulatory principles embodied in statute (Chapter 10 of Title 56), is to protect existing Virginians - that is, little ole you and me - as well as our broader economy, from unjust or unreasonable costs. And that certainly includes the SCC's duty and authority to ensure that Virginia residents don't underwrite, in increased electric bills, the risks of a new data center customer class and its costs - whether that's the new distribution substations, transmission, or power plants they need, to say nothing of their externalized costs of air pollution that exceeds state pollution law).

Just as important, the SCC is charged - complementing the long-established regional and national long-term reliability planners at PJM and NERC - with ensuring our energy system is reliable. Blindly plugging in one new data center after another until the lights might go out, therefore, is not something the SCC can or will let happen.

A Misconstrued Source of Confusion: The Duty to Serve

In these early days of data center discourse, there is one particularly troublesome source of inadvertent misinformation. Some chatter appears to confuse or conflate the SCC's abiding duty and authority to ensure utilities treat their customers justly and fairly, with the "duty to serve" requirement by which utilities must abide. Under that longstanding principle, must treat fairly, and therefore provide service to, anyone in their service territory who requests it, rather than withhold provision of service to anyone the utility might deem unprofitable.

From that standing policy of nondiscrimination, the "obligation to serve" has been summoned up as the sum total of how Virginia must respond to the onslaught of data centers: if they ask a utility for power, well, there is a duty to serve, right? So hook 'em all up! Right??

Wrong.

For starters, a utility's duty to serve is not an all-consuming monolith that swamps all other considerations: that principle of fairness exists equally alongside other bedrock regulatory principles embodied in Virginia's statute. First and foremost is that SCC duty to protect Virginians against "unjust and unreasonable" costs. In this case, that would be unreasonably foisting upon everyday Virginians the costs and risks of an unconstrained data center buildout. That would be manifestly unjust, for residential customers in particular, who have long covered their own customer class costs, not to mention invested in the buildout and maintenance of Virginia's grid. While quite new as a distinct customer class, a hybrid of industrial and commercial, there is nothing magical about data centers that overrides the SCC's longstanding, bedrock enforcement of just and reasonable rates.

Additionally, the origin and intent of the "duty to serve" must inform data center discourse as well.

A "Duty to Serve" Endless Data Centers Is an Untenable & Unsupportable Contradiction

The "duty to serve" is founded upon centuries-old common law, and has long been enshrined in Virginia statute as a pillar of citizen protection, aimed at protecting the most vulnerable Virginians out there.

In the regulatory context, that generally means the ones that literally live past "the end of the line." Think the grandmother in Southwest, living at the homeplace all the way up the head of the hollow; the farming family in Southside, living further out of town than anyone else; or the waterman whose family lives out on the very far end of a Tidewater peninsula, accessible only by ferry. The "duty to serve" was and is a social compact for them.

These vulnerable, "last mile" Virginians are, by nature of their location (as well as low energy use), more expensive to serve, because they'll never cover the cost of running and maintaining the line out to their home. Absent the duty to serve, utilities would be sorely tempted to deny service to these unprofitable Virginians. But rather than let anyone languish in the dark, in spite of living in the electric age, the "duty to serve" simply demands that, out of social and economic fairness, regulated utilities, as a core part of the regulatory compact, serve everyone in their service territory. The marginal cost of doing so is then allocated across the entire customer class (in this case, residential).

In this way, the common good and societal value of electric energy is not withheld and is instead shared equally, both the benefits and the costs, and the grandmother up in that Southwest hollow is not left behind.

Those are the circumstances and vulnerable customers the regulatory compact's "duty to serve" exists to protect, ensuring that even unprofitable little residences out past the end of the line are served. In the data center context, the duty to serve may well be appropriate for certain specific customers, according to the SCC's expert oversight authority. But absurdly stretching the principle to justify endlessly plugging in an all-consuming statewide buildout of a new data center customer class, and swamping existing customers with that cost, is not just a staggering case of wagging the dog. It represents a facially untenable misconstruing - even a perverse reversal - of the duty to serve. Moreover, mindlessly and erroneously applying the duty to serve to high-cost causing data centers obscures the conversation we should be having in Richmond: what does a responsible, sustainable data center customer class and related buildout actually look like and entail?

The Conversation Policymakers, Stakeholders - and Data-Centers Themselves - Should Be Having

Constructive problem solving has unfortunately so far been displaced by the breezy assumption that the "duty to serve" obligates all of Virginia to contort its energy system and jettison its environmental law to accommodate every new data center customer that pops up. That foregone conclusion of endless hookups might even lead some to think our three SCC commissioners are merely potted plants. That, rather than thoughtfully enforcing law in a balancing of societal interests, they merely sit there in a row, passively looking on while a chaotic, headlong data center and fossil plant buildout falls into their laps out of the sky, for their ministerial stamp of summary approval.

Absolutely not.

SCC commissioners are eminently-qualified judges with deep subject matter expertise - and an expert Staff supporting them. And that expertise, judgement, and authority will include assessing what a just and reasonable data center buildout looks like. It's just that topic, in fact, that the SCC is delving into at its "technical conference" next week, to determine, for example, [insert items from SCC order].

Those are all very ripe items for a more-informed, less-panicked energy sector discourse in Virginia. Because Virginia is firmly in the driver's seat, to determine exactly how data centers figure into our economy, energy system, and environmental requirements, and not the other way around.

That more thoughtful dialogue deliberation will include applying a fresh regulatory paradigm for the new data center customer class, one that under the cost causation principle pays its own way for entry into and use of Virginia's energy system, and in a way that accounts for Virginia's standing air emissions law.

Yes, data centers have to locate somewhere, and that place may well be Virginia, subject to our laws and best interests. But data is a global commodity, and if paying their own full freight to access our grid means some data centers locate elsewhere, knowing that Virginia residents won't be subsidizing their location here, then that is a well-regulated and therefore efficient marketplace at work. And the price global citizens all pay for the flow and consumption of data will adjust accordingly, maybe up, maybe down, but Virginia's interests will be protected.

Both Virginia's and Data Centers' Climate Commitments Can Be Mutually-reinforced

Overlooked in Virginia's early "all heat, no light" data center policy discussion is the still-untapped proactive role of data centers and "Big Tech" in all of this. As it happens, data centers themselves have one of the biggest potential roles to play, as Virginia decides how this will all pan out. If data centers want to locate in Virginia, they have to not only absorb their grid and generation costs. They must also be partners in abiding by Virginia climate law. For many, this will work quite well: good faith data center owners, with actual, non-greenwashed climate goals, will have the best of both worlds in Virginia: they get to locate where they want (Virginia), while also hitting their own decarbonization requirements through clean energy procurement and other innovations, in keeping with Virginia's own statutory targets.

All policymakers, utilities, and stakeholders have a role to play here in rolling up our sleeves and crafting the 21^st century grid that can accommodate both load growth and statutory carbon emission reductions. We have the tools to do so.

Because, while more responsible siting parameters to protect local interests still need to be crafted and enforced, the net benefits in Virginia from responsible data centers location in Virginia could be immense: for local governments, there is nothing better than found money.

But before we get there, the SCC's and other policymakers' work has only begun to ensure that in Virginia data centers are (1) sited appropriately, taking into account local character, local concerns, and natural resources including water.(2) pay their own full freight of connecting to our grid, including all associated transmission and clean energy generation costs, and (3) partner in ensuring Virginia has a truly 21^st century grid that accommodates steadily decreasing air pollution.

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