For years, Virginia treated data centers the way a casino treats high rollers: bring them in, comp the meal, and let the rest of the floor cover the markup. That worked while the buildout was a quiet line item and “data center alley” was a Loudoun County zip code nobody outside Loudoun thought about. It does not work in 2026.

This month, three things happened in the same news cycle. Virginia’s General Assembly nearly broke itself over the sales-and-use tax exemption that funds the boom. PJM Interconnection’s market monitor reported that wholesale power prices in the regional grid rose 75.5 percent year over year and named data-center load as the primary driver. NextEra Energy announced a $67 billion acquisition of Dominion Energy — the utility at the center of the boom — explicitly framed around AI and large-load growth.

That is not three separate stories. It is one story with three timestamps. The cloud is a land-use application; it is also a fiscal-impact statement, a rate case, a tax bill, and a utility merger. The useful civic question is no longer whether Virginia hosts data centers. It is who pays, who decides, what gets disclosed, and what conditions get locked before approval.

The Budget Took a Data-Center Hostage

When Virginia created the data-center sales-and-use tax exemption in 2008, lawmakers expected to forgo about $1.5 million per year. NBC4 reports the figure has now climbed to roughly $2 billion per year. The difference between those numbers is the difference between a quiet industrial subsidy and the largest single tax-expenditure program in the Commonwealth.

The fight this spring is inside the Democratic majority. Senate Democrats want to end the exemption. House Democrats want to preserve it. Governor Spanberger is hedging — signaling that data centers should pay more while Virginia keeps faith with prior business commitments. Union electricians showed up at the Senate hearing in favor of keeping the program, because construction hours track buildout.

If no budget deal lands by June 30, Virginia faces its first partial state government shutdown. Over a sales tax exemption for server farms.

This is what it looks like when an economic-development tool grows past the institution that wrote it. You cannot quietly retire a $2-billion-a-year line — every general fund program that depends on it becomes a stakeholder in the industry’s continued buildout. The Data Center Coalition’s argument is that Virginia made a long-term promise. That is true. So did the General Assembly when it passed a balanced budget requirement. Both promises cannot survive at current scale.

The Ratepayer Is Already Paying

While Richmond fights over who collects, the bill is already moving through the meter.

The Register reported that Monitoring Analytics — PJM Interconnection’s official market monitor — found total wholesale power costs in PJM’s territory went from $77.78 per megawatt-hour in Q1 2025 to $136.53 in Q1 2026. A 75.5 percent jump in twelve months. The watchdog’s own language: data-center load growth is “the primary reason” for the tight supply-demand balance, and “but for data center growth, both actual and forecast, the capacity market would not have seen the same tight supply demand conditions.” The cost impacts, it warned, “have been very large and are not reversible.”

PJM’s proposed fix is a one-time backstop auction to procure new generation for the surge. The market monitor’s read: the structure “would generally shift significant risk to other PJM customers.” Maryland’s Office of People’s Counsel is not waiting — it has filed a FERC complaint arguing PJM’s $22 billion grid-upgrade plan would drive up Maryland customer bills by roughly $1.6 billion over a decade, about $345 per residential customer, to fund transmission Maryland did not cause and will not meaningfully benefit from. JLARC’s 2024 forecast for Virginia was directionally similar: residential ratepayers in Dominion territory could see $14–$37 per month in real-dollar transmission and generation cost increases by 2040 driven by data-center load.

This is where the “tax revenue” framing breaks. The host locality collects business personal property tax on the servers. Everyone in the PJM footprint pays for the transmission. The math doesn’t reconcile at the household level for anyone outside the lucky zip code.

Dominion Is About to Become Something Else

On May 18, Bloomberg reported that NextEra Energy would acquire Dominion Energy in an all-stock deal valued around $67 billion. The combined company would serve about 10 million customer accounts across Florida, Virginia, the Carolinas, with roughly 110 gigawatts of generation and a stated pipeline of more than 130 gigawatts of “large-load opportunities.”

The press release sweetener is $2.25 billion in bill credits over two years. The substantive piece is who controls Virginia’s grid expansion when the next decade of capacity additions is decided. Dominion was already the dominant interconnection counterparty for many of Virginia’s largest data-center projects. NextEra-Dominion would be that, with a larger balance sheet, a renewables pipeline built for hyperscale offtake, and an investor base whose thesis is AI demand.

The merger has to clear the Virginia State Corporation Commission, the equivalent bodies in the Carolinas, FERC, NRC, and antitrust. That is a year-plus regulatory runway. It is also the single largest window the Commonwealth will have to attach conditions: large-load tariffs, ratepayer protection language, transmission cost-allocation rules, and reporting requirements on which load growth drives which capital request. Either Virginia uses that window to write the rules, or the merger writes them for Virginia.

What This Looks Like on the Ground

The Virginia spine is the hard story. The national anecdotes are support, and they are consistent enough now that the pattern is not in dispute.

In Fayette County, Georgia, a QTS data center used nearly 30 million gallons of water through unaccounted-for connections — about 44 Olympic-sized pools — before residents noticed low pressure and the utility figured out the meters had never been hooked up correctly. The water director said her staff was small and at capacity. Metafilter’s headline on the story was borrowed from W.H. Auden: “Thousands have lived without love, not one without water.” That line belongs in the file.

In Saline Township, Michigan, the planning commission and township board both voted to reject a 21-million-square-foot data center. The developer sued under an “exclusionary zoning” theory and threatened to bypass local approval by partnering with the University of Michigan. The township settled; the eventual anchor tenants are OpenAI and Oracle, under the Stargate banner. In Festus, Missouri, voters unseated half their city council after it approved a $6 billion development against constituent opposition — a 70-year-old first-time candidate beat an eight-year incumbent by over 40 points. In Lake Tahoe, NV Energy told 49,000 residents it would stop supplying them after May 2027 in order to free capacity for nearby data-center load. In Ravenna, Ohio, a content creator told the council, in a video that went viral, that an employer using “the water of 50,000 people” to hire ten is not an employer — “they are an extraction.” In Kenya, Microsoft’s planned $1-billion AI data center with G42 stalled when the country’s president pointed out that the full buildout would require “switching off half the country.”

Trade unions, reading the construction hours, have largely sided with the developers — short-term work for building-trades members against long-term costs to the same workers’ neighborhoods. That is the labor split Virginia is also producing: union electricians at the Senate hearing for the exemption, while ratepayers in the same locals get the bill.

The pattern is not subtle. The buildout is faster than the disclosure regime, faster than the rate cases, faster than the zoning code, and faster than the political feedback loop that would normally rebalance any of those.

Rules Before Deals

The places that still have time should use it. A locality does not have to be anti-data-center to be serious about the conditions under which one gets built. It has to write those conditions down before the developer arrives with a site plan, a construction-jobs slide, and a calendar designed to make public review feel like delay.

The work is concrete:

  • Define data centers explicitly in zoning. Not “industrial use, generally.” Not “warehouse.” A specific definition that distinguishes industrial-scale compute from light commercial or logistics. Without that, the next proposal slips in under a category that was never designed to evaluate it.
  • Make it conditional, not by-right. Industrial-scale compute should require conditional-use review, hearings, findings of fact, and binding conditions on the land.
  • Require pre-hearing disclosure of power, water, and noise. Peak and average daily water draw in gallons. Substation interconnection assumptions and Dominion cost estimate. Pre-construction sound modeling at the property line, day and night. JLARC’s 2024 report flagged constant low-frequency mechanical noise as a category that ordinary nuisance ordinances do not catch — zoning is where it gets addressed.
  • Publish a net fiscal impact model before any tax concession. Promised revenue modeled against state and local abatements, equipment-tax concessions, infrastructure costs, and ratepayer exposure. JLARC found a 250,000-square-foot data center supports about fifty full-time jobs, roughly half of them contractors — that is the number to compare against the construction-jobs slide in the developer’s deck.
  • Tell the truth about jobs. Separate temporary construction labor from long-term operations headcount. Construction is real and trades members deserve work; permanent jobs are smaller and skew specialized. Conflating them is how localities trade durable land for short-cycle payroll.
  • Require a decommissioning and security plan. If the tenant leaves, the forecast collapses, or the campus is mothballed, who pays for stranded grid investment, site remediation, and security around high-value equipment? That answer belongs on file before the rezoning vote.
  • No tax deal without a public ledger. Every abatement, exemption pass-through, and infrastructure commitment posted in a single readable document tied to the parcel. If the deal is good, it can survive daylight.

None of this is anti-data-center policy. Plenty of jurisdictions write rules and still land the projects. What it is, is a refusal to outsource civic judgment to whoever shows up first with a site plan and a clock.

The Bill Is Coming Due

The story Virginia tells itself about data centers — quiet revenue, clean industry, growth without footprint — worked when the buildout was small. The exemption is now too large to be invisible. The grid is too constrained to absorb the next decade’s load without somebody else paying. The utility is the target of a $67-billion acquisition built on the assumption that the load keeps coming.

The fight in Richmond this June is the first time the question gets answered out loud. Whichever way it goes — a partial shutdown, a phased exemption, a hard cap, or a deal that papers over the gap for one more cycle — none of those make the underlying pressure disappear. They only decide who absorbs it.

Virginia’s job, before the next deal arrives, is to make sure “who absorbs it” is not answered by default.

The cloud is a land-use application. Treat it like one.