politics
Virginia Governor Defends Data Center Industry After New Electricity Tax
The governor said the tax balances revenue needs with economic and national security priorities. The measure is expected to raise up to $600 million annually while preserving existing tax exemptions worth $1.9 billion.
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Virginia Gov. Abigail Spanberger defended the state's data center industry this week after approving a budget that created the first tax on the sector's electricity use. Spanberger said the new tax ensures data centers pay their fair share while protecting an industry tied to state revenue and national technological leadership.
The budget, finalized at the end of June, is projected to generate up to $600 million per year from the electricity tax.
Revenue above an annual cap will be refunded to operators each fiscal year. The tax applies to the state's most energy-intensive industry, which used roughly 5,050 megawatts of electricity in 2024. Dominion Energy reported requests for 70,000 megawatts of new large-load service by the end of 2025.
The new tax is smaller than the existing sales and use tax exemption, which saves operators about $1.9 billion annually.
Spanberger said data centers provide roughly half of local tax revenue in some communities, funding schools, libraries, and fire departments. She warned that removing the sales tax exemption outright could reduce construction, electrical, and union jobs. A work group created by the budget will study whether the exemption should be phased out or replaced with other contribution mechanisms.
