Virginia Starts Collecting Its Data Center Power Tax This Month

Virginia's State Corporation Commission begins collecting the commonwealth's first data center electricity consumption tax this month. The rate is $0.011 per kilowatt-hour on all electricity consumed at any facility primarily engaged in the storage, management and processing of digital data that has at least one megawatt of electrical capacity. The first collection is due in September and covers July through September.

The tax was not created by a standalone bill. It was written into the state budget as item 3-5.24 of the HB 30 conference report, and it runs from July 1, 2026 through June 30, 2028. Where a utility supplies the power, the utility collects the tax and remits it to the Commission monthly. Where a data center generates its own, the operator reports that consumption separately on a quarterly basis. Annual collections are capped at $600 million, and the Commission refunds anything above that line on a pro rata basis beginning in fiscal 2028.

The arithmetic is straightforward and worth doing. A 100-megawatt data hall running at 85 percent load draws roughly 745 million kilowatt-hours a year, which at $0.011 comes to about $8.2 million in annual tax. The $600 million cap implies roughly 54.5 terawatt-hours of taxed data center consumption before refunds start flowing back. Neither figure is small, and neither one lands on construction.

That distinction is the story. Through the 2026 session, the larger fight in Richmond was over the retail sales and use tax exemption for data center equipment, which one chamber proposed phasing out beginning in 2027. The exemption survived. It remains in place through June 30, 2035, with extensions available through 2040 and 2050 tied to aggregate investment thresholds of $35 billion and $100 billion respectively, plus direct job counts.

For anyone who installs the work, the exemption matters more than the tax, because of what it covers. The qualifying equipment list is largely an electrical list: electrical substations, power distribution equipment, generators, radiators, exhaust fans, fuel storage tanks, cogeneration equipment, batteries, chillers, computer room air conditioners, monitoring systems for power management, and cabling and switches. General building improvements such as roofs and ordinary lighting do not qualify. The exemption sits almost exactly on top of the scope a commercial electrical contractor bids.

The scale of that exemption is documented. The January 2026 report to the General Assembly on data center tax exemptions put the fiscal 2025 benefit at $1.94 billion across 56 reporting operators, on $48.6 billion in total capital investment, $33.2 billion of which was exempt equipment and software. Fiscal 2024 came in at $1.29 billion across 48 operators on $32.0 billion in investment. The report notes those figures were self-reported by operators and not independently validated.

So the new tax is an operating cost applied after commissioning. It does not touch the switchgear purchase, the labor, or the permit. That is why nothing in Virginia's pipeline appears to have flinched. Dominion Energy's second-quarter materials, released July 31, put data center capacity under contract at approximately 53.8 gigawatts as of July 2026, up 5.3 gigawatts, or 11 percent, since December 2025. In July 2023 that number was 16.5 gigawatts.

The composition of the 53.8 gigawatts is the part to read closely. Roughly 32.4 gigawatts sit at the early substation engineering letter of authorization stage, 9.4 gigawatts at a construction letter of authorization, and 12.0 gigawatts under firm electric service agreements. Early substation engineering is the leading indicator for medium-voltage work: substation buildouts, feeder routing, switchgear lineups, and the coordination studies that precede them. The 9.4 gigawatts at construction authorization is work being staffed now. Dominion also reported commercial load growth of 8.5 percent on a weather-normalized basis for the twelve months ended in the second quarter, with commercial customers now accounting for 48 percent of regulated sales.

The licensing and hiring consequence runs through the exemption's conditions rather than the tax. To qualify, a standard project must put in $150 million of capital and create 50 new jobs paying at least 150 percent of the local average wage; in localities designated as distressed, the thresholds drop to $70 million and 10 jobs at the same wage standard. Those are operating positions, not construction headcount, but they are the reason a wage floor is written into the incentive at all. The quarterly self-supply reporting requirement is the other item worth tracking, because it puts behind-the-meter generation under a metering and reporting regime — relevant on every project where electricians are landing paralleling gear and on-site generation.

Two dates should be on the calendar. The General Assembly is studying additional revenue mechanisms aimed at the industry, with recommendations due December 15, 2026. And the consumption tax itself sunsets June 30, 2028 unless it is extended, which makes the 2028 session the next real decision point on how Virginia prices data center load.

For now the commonwealth has taxed the electricity and left the equipment alone. The work is still on the board.