Virginia Enacts First US Data Center Electricity Tax at $0.011/kWh, Capped at $600 Million a Year
- Policy & Markets Regulatory State & Local Regulation
Marin Holt
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- 6 minutes read
- Tax rate: $0.011 per kWh
- Annual revenue cap: $600 million
- Effective date: July 1, 2026
- Sunset: June 30, 2028
- Cost, 500 MW facility: about $48 million a year
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Virginia Governor Abigail Spanberger signed the Commonwealth’s 2026 biennial budget on June 30, 2026, creating the first U.S. state tax charged directly on the electricity a data center consumes. The Data Center Electricity Consumption Tax sets a rate of $0.011 per kilowatt-hour and takes effect July 1, 2026. Legislative estimates put collections at roughly $600 million a year, and the statute caps net revenue at that figure and sunsets the tax on June 30, 2028.
The levy lands on Northern Virginia’s “Data Center Alley,” the largest data center market in the United States. It applies to both utility-supplied power and self-generated electricity, with no carve-out for on-site wind or solar. At $0.011 per kWh, a 500 MW facility running around the clock would owe about $48 million a year, and a 1 GW campus close to $100 million, an increase of roughly 10 percent on a data center’s effective electricity rate.
The tax reaches the machines that draw the most power. Facilities whose primary function is providing internet-access or communication service are exempt, which narrows the base toward the AI and cloud-compute campuses driving Virginia’s load growth. Revenue flows to the state general fund; once annual collections pass $600 million, the excess is refunded pro rata to utilities and passed back to their other customers.
Enforcement Reality
The State Corporation Commission, not the Department of Taxation, administers the tax. Utilities collect and remit on utility-supplied power monthly; data centers that self-supply remit quarterly. First payments come due in September 2026. Because the charge is metered per kilowatt-hour rather than assessed on property or income, an operator cannot escape it by siting equipment differently or by building behind-the-meter generation. Self-generated electricity is taxed the same as grid power.
Critical Perspective
Virginia’s new $0.011 per kilowatt-hour charge would add about $48 million a year to a 500 MW facility’s bill and is capped at $600 million before the surplus is refunded to other utility customers. The statute draws no line between grid power and behind-the-meter generation, so it taxes the on-site solar that operators such as Amazon Web Services have used elsewhere to sidestep utility rates, and it stays silent on whether new campuses simply migrate into neighboring Maryland. Ohio offers the cautionary precedent: the AEP Ohio data-center tariff, approved by the Public Utilities Commission of Ohio in 2024, forced large loads to pay for reserved capacity only after a contested year-long case, and developers kept building anyway. If the tax sunsets on June 30, 2028 just as the first payments come due, who is betting that Virginia lets a $600 million revenue stream actually expire?
Why It Matters
Virginia is the test case other states will watch. Former FERC Chairman Mark Christie framed the measure as an offset that leaves existing data center tax subsidies in place while clawing back revenue through power use. Rob Gramlich of Grid Strategies noted that excluding data centers from standard industrial rate classes is unusual. With data center demand straining grids from Texas to PJM, a per-kilowatt-hour state tax gives legislators a template to convert soaring electricity load directly into public revenue, and a two-year sunset that turns Virginia into a live experiment.
Sources
- Virginia 2026 Budget: Data Center Electricity Consumption Tax (HB30 Conference Report)
- Greenberg Traurig: Virginia Legislature Approves Tax on Data Center Electricity Consumption
- Data Center Knowledge: Virginia Approves First-Ever Data Center Power Tax
- Williams Mullen: Virginia Budget Creates New Electricity Consumption Tax for Data Centers
- National Law Review: Virginia Approves First-of-Its-Kind Tax on Electricity Consumption
