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Data Centres: Boom and Backlash
14AUG

Virginia signs first per-kWh power tax

3 min read
10:48UTC

Abigail Spanberger signed Virginia's $0.011-per-kilowatt-hour data-centre tax on 30 June, the first US levy on compute power itself, and the rival backup-generator fee died with it.

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Key takeaway

Virginia now taxes the power a data centre burns, including the power it makes on site.

Virginia Governor Abigail Spanberger signed a $0.011 per kilowatt-hour consumption tax on data-centre electricity into law on 30 June, a day before it took effect on 1 July. 1 It is the first US charge levied on the power a computing campus actually draws, and it reaches every source: utility supply, competitive retail from third-party suppliers in deregulated markets, and behind-the-meter self-generation, the private gas and battery power that never touches the public grid.

The signature settled a months-long fight over method. The state legislature had passed the tax on 22 June , but Senate negotiators were still pushing a rival $35-45 per kilowatt charge on backup generators, the "Lucas fee" , to break a budget deadlock. Signing the consumption model killed that alternative. Virginia's State Corporation Commission, the utility regulator, will collect monthly, with the first payment due in September.

Rob Gramlich of the energy consultancy Grid Strategies puts the effective rate rise near 10%. A 500-megawatt (MW) campus will owe about $48m a year, a full gigawatt campus close to $100m. 2 Operators pass most of that through to their cloud customers. The mechanism matters more than the rate: a per-kilowatt capacity fee taxes installed hardware, which reads in court as a regulatory taking, while a tax on electricity drawn is an ordinary excise. Virginia picked the litigation-proof instrument, and that is what other states will copy or reject.

Deep Analysis

In plain English

Virginia just started charging data centres for every unit of electricity they use, whether that power comes from the grid or from a generator or battery on site. The self-generated power used to escape state tax entirely. A company running a modest server room barely notices the charge. A campus the size of a small town's power plant can end up owing tens of millions of dollars a year. Virginia's utility regulator, the State Corporation Commission, will collect the money monthly starting in September.

Deep Analysis
Root Causes

Virginia's choice of mechanism turns on a legal distinction the fight over the rate obscured. A fee on installed generating capacity risks a Takings Clause challenge because it prices equipment an operator already owns, while a tax on electricity consumed prices an ongoing transaction and reads to courts as an ordinary excise. The Senate's own $35-45 per kilowatt generator fee tested the riskier instrument first and lost.

The tax also closes a gap federal curtailment could not reach. The Department of Energy's 2026 curtailment orders in PJM territory applied only to grid-connected power; Virginia's consumption tax is the first instrument to price behind-the-meter generation, the private gas and battery supply operators built specifically to sit outside federal reach.

What could happen next?
  • Precedent

    Virginia's consumption-tax model becomes the template other high-density states test before drafting comparable legislation.

  • Risk

    The tax's $600m annual cap and 30 June 2028 sunset mean Virginia may need to renegotiate the mechanism again as more campuses come online.

First Reported In

Update #9 · US data-centre backlash becomes law

Tech Times· 7 Jul 2026
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Causes and effects
This Event
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It gives every other state a working template for taxing what a data centre burns rather than what it installs, on the instrument least exposed to a takings lawsuit.
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