Who Pays for Power Lines? Data Centers, the Grid, and Virginia’s Regulated Rates

Shortwave examines how data centers connect to the electricity grid and who pays for the transmission upgrades needed to power their growing footprint. The episode centers on Virginia, Dominion Energy, and state regulators as they weigh the costs borne by ratepayers versus upfront charges for data-center connections. The discussion features Union of Concerned Scientists analyst Mike Jacobs and a field visit to a Virginia substation project, highlighting tensions between clean energy goals, grid reliability, and fair funding. It also notes policy ideas and a potential federal rule shift proposed by the Trump administration to require data centers to pay their connection costs.

Overview

Shortwave delves into the economics of powering data centers and the electrical grid that feeds them. The episode follows a field-based investigation in Northern Virginia and Virginia regulatory discussions to illustrate how new power lines and substations are funded. The central tension is whether utility customers should bear the costs of grid upgrades that data centers demand or if those costs should be charged upfront to the data-center operators themselves. This framing sits within broader debates about the role of data centers in a clean-energy future, the reliability of the grid, and the fairness of cost allocation in regulated monopolies.

"There is no such thing as a free power line." - Economist.

Context: The Data Center Boom and the Grid

The show traces a wave of planned transmission projects spanning multiple states in the mid-Atlantic region, driven by large data-center developments and their demand for reliable power. Mike Jacobs, who works on transmission at the Union of Concerned Scientists, explains that data centers often attract connections to the grid with minimal stated charges upfront, creating a long-run cost shift onto the general ratepayer base. The narrative emphasizes the physical reality of the grid: towers, wires, substations, and the complex system that moves clean energy from wind and solar farms to end users, including data centers, schools, hospitals, and households. The field report from Dan Charles focuses on Dominion Energy in Virginia, where documents and planning maps reveal dozens of projects aimed at delivering power to data-center customers, sometimes through a single substation or a network of new lines.

\"Basically, solar and wind energy need transmission, and data centers are part of the demand that requires it, but the way these upgrades are funded is the core policy question,\" Jacobs notes, setting the stage for discussion about who pays and how costs are distributed across ratepayers and customers.

Funding the Transmission: How Costs are Assigned

The episode explains the regulatory framework that governs how electric utilities recover costs. Utilities operate as regulated monopolies, with state regulators approving rate levels that include a return on investment for capital projects like lines and substations. When a utility spends more on upgrades to serve data centers, regulators consider whether those costs should be recovered from all customers or allocated differently. The Virginia example shows documented plans where upgrades are framed as necessary for reliability and for serving broader community needs, but the data-center portion of the demand is the driver behind the projects. The discussion highlights the ambiguity of costs: estimates of modest increases for households in some areas contrast with forecasts of larger jumps in others, depending on how fixed costs are spread across a growing customer base.

Jacobs argues that current rules effectively subsidize data-center interests, since large users can benefit from the grid without paying the upfront infrastructure costs. He explains that if data-center developers paid for the lines they require, the grid could become more stable and the policy would align with how solar and wind projects connect, which often involves dedicated network upgrades funded by the project itself.

"This is not fair. You know, this isn't right. All the consumers of Virginia are subsidizing the business plans of these data center companies." - Mike Jacobs, Union of Concerned Scientists.

Policy Landscape: What Could Change

The transcript notes that there is a political and regulatory push toward reform. Experts discuss options such as requiring data centers to pay upfront for the necessary power-line connections, in line with solar and wind facilities. There is also mention of a federal shift, with the Trump administration calling for a new rule that would require new data centers to cover their connection costs. While state regulators typically hold jurisdiction over rate-setting, federal guidance could accelerate or alter the pace of change. The dialogue makes clear that this is part of a broader policy conversation about how to balance the needs of technology-driven growth with the obligation to keep electricity affordable for all customers.

"The rules should change, that data centers should have to pay upfront for the power lines they need just like solar farms." - Mike Jacobs, Union of Concerned Scientists.

What This Means for the Future

From a consumer perspective, the episode frames the issue as a fairness and adequacy question: will future rates reflect the true costs of expanding the grid for data centers, or will predictable, predictable costs be shifted to ratepayers over time? The field reporting emphasizes the real-world impact of policy decisions on household budgets, hospital operations, and public services, while also reminding listeners that these investments are tied to broader goals around reliability and the transition to renewable energy. The episode closes with an invitation to follow ongoing regulatory decisions and potential federal action, recognizing that the fight over who pays for grid upgrades is likely to continue as data centers expand and energy demand grows.

"Trump administration called for a new federal rule that would require new data centers to pay the costs involved in connecting them to the grid." - Dan Charles (narration).