Pepco bills and data centers

April 2, 2026

ISAACS

Pepco Shutoff Pause And Data Centers

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Are Rising Electric Rates In The District Caused By Data Centers?

District residents are seeing significant increases in their monthly electric bills thanks to a 2024 hike by Pepco that an appeals court just vacated due to lack of due diligence on the part of the D.C. Public Service Commission, its regulator.

The District Court of Appeals found that the D.C. Public Service Commission, tasked with regulating the city’s utilities, failed to follow proper procedure when it approved Pepco’s two-year $123 million rate increase in late 2024.

Now, the D.C. Council wants to take a step back, review the data, and decide how best to move forward, as a full evidentiary hearing must now take place beginning in May, with input from both sides about costs. Pepco lobbied for rates to stay as they are in the interim, claiming that customers may fall too far behind on bills if the increases are found to be valid. If the commission findings indicate otherwise, Pepco says it will refund customers. But it could take months for residents to see those refunds.

DC Council Just Passed Legislation To Pause Pepco Account Shutoffs

This week, the DC Council passed Plan Vacatur Interim Protections Emergency Amendment Act of 2026 to halt electricity shutoffs for 90 days for residential customers owing less than $1,000. This action follows sharp rate hikes in recent months.

Many DC residents have complained that utility bills have become unaffordable or inexplicably high. Pepco spokespeople have argued that regional plant retirements and rising demand from data centers contribute to higher costs.

Energy costs in D.C. have increased 93.2% in the past five years, the greatest increase in the U.S. according to We Power DC. It’s not due to DC’s population growth, or even the bitter cold winter we just had.

Data-center demand is principally documented as a driver of regional generation, capacity and transmission costs. Other culprits are a combination of regional grid pressures due to population growth along the entire grid, skyrocketing wholesale power prices, utility rate hikes, and regulatory decisions.

Increases in our area are being inflated by the expansion of energy-intensive industries related to Ai. And they’re located in Virginia.

Virginia Is Building The Largest Data Hub In The World

Over the past decade, Virginia’s data center boom has been actively supported by both Democratic and Republican governors, including Terry McAuliffe (D, 2014–2018), Ralph Northam (D, 2018–2022), and, most recently, Glenn Youngkin (R, 2022–2025).

These administrations approved and extended generous sales and use tax exemptions for data center equipment, alongside local incentives and expedited permitting, especially in Northern Virginia’s Loudoun and Prince William counties. Loudoun County alone now hosts the greatest concentration of data centers in the world (Brookings, Cardinal News). While Virginia’s data center boom spanned multiple administrations, it’s fair to say that Governor Youngkin’s approvals, often in the face of mounting local and legislative opposition, pushed the region’s infrastructure to a breaking point. Projects greenlit under his watch, particularly the largest and most controversial, placed unprecedented demand on the regional grid and helped trigger the sharp rise in electricity bills now affecting residents across the metro area.

Governor Youngkin’s administration supported mega-projects like the PW Digital Gateway, despite well-documented local and legislative opposition showing that the project would push the region’s infrastructure and electricity markets past the breaking point. Residents, environmental groups, and lawmakers all called for a slowdown or moratorium, but Youngkin pressed ahead. (Cardinal News, VPM, Bloomberg).

If The Hub Is There, Why Are We Paying Here?

Why are DC residents seeing skyrocketing electric bills when DC has built no new data centers in years?

DC’s data centers are comparatively modest in number and size:

  • CoreSite DC1:
    1275 K Street NW, Washington, D.C.
    This is one of the flagship data centers in D.C., providing colocation, cloud, and connectivity services.
    More details from CoreSite
  • Equinix DC2, DC3, DC6:
    1140 19th Street NW and 2020 K Street NW, Washington, D.C.
    Equinix operates several facilities in the city, serving as interconnection hubs.
    Equinix Washington, D.C. Data Centers
  • Atlantech Online, ByteGrid, Tierpoint, zColo:
    These providers also operate data centers within the city, though often in multi-tenant office or telecom buildings rather than sprawling new construction.
    Atlantech Online DC Data Centers
  • Other Listings:
    Data Center Map lists 7 main data centers in D.C., often concentrated in the downtown and business districts.
    Data Center Map – DC

Most were established in the 2000s and early 2010s.

The true drivers of increased consumption and higher bills are the massive concentration of data centers just outside the city, in Northern Virginia. This region houses hundreds of large-scale facilities that require enormous amounts of electricity, drawing power from the same regional grid that supplies DC homes and businesses (CoreSite, Fox5DC). When high-demand users like data centers spring up in nearby counties, utilities must buy more electricity on the wholesale market, often at higher prices, and may need to expand infrastructure (like substations and transmission lines) to support the load. Utilities typically spread these costs across all customers, not just those located where the centers are built (EESI, Consumer Reports, WJLA).

That’s why DC residents are seeing higher electric bills.

The Public Is Starting To Fight Back Against New Data Centers

Public opposition to data center construction has ballooned along with energy costs, and fears of ground water pollution and noise. Residents in neighborhoods where new data center proposals are being considered are fighting to block them. For example:

The Case Of Prince William Digital Gateway (PW Digital Gateway)

A planned corridor for up to 27 million square feet of data centers in Prince William County would have been one of the largest single data center developments in the world. The project advanced during Youngkin’s administration with his economic development office supporting Virginia’s continued leadership in the data center industry.

Documented Opposition

Public hearings drew hundreds of residents and environmental groups opposing the project, citing concerns about “runaway industrialization,” water and noise pollution, and threats to the Manassas National Battlefield (Cardinal News).

Prince William County Board of Supervisors meetings were marked by intense debate, and the board was deeply divided, but ultimately voted to approve the project.

Calls for moratoriums and stricter regulation were ignored by both county and state leadership (VPM).

The extraordinary size of projects like the PW Digital Gateway have been linked to unprecedented regional grid stress and utility cost increases. Bloomberg reports wholesale electricity prices near Northern Virginia’s data centers have risen 267% in five years, far outpacing other regions (Bloomberg).

Utility infrastructure, such as new transmission lines and substations, has been built or proposed specifically to meet data center demand, costs which are passed on to all ratepayers (Vadogwood, Generation180).

Legislative and Public Pushback

In 2025 and 2026, Virginia lawmakers introduced bills to slow or temporarily halt new data center approvals and to re-examine the cost burden on residents (VPM).

Despite these efforts, the Youngkin administration maintained support for continued expansion, prioritizing economic growth over public and legislative concerns (Cardinal News, VPM, Bloomberg).

Lawsuits were filed the project’s approval process was challenged. A Virginia appeals court unanimously ruled on March 31, 2026, that the rezoning approval process was flawed.

Current Status: The massive Prince William Digital Gateway data center project in Virginia is officially dead. In July 2026 developers withdrew their final legal appeals, following court rulings that invalidated the county’s initial rezoning approvals.

The court found that public hearings for the 2,000+ acre, 35-plus data center project were not properly advertised, invalidating the zoning approvals, marking a significant victory for local residents. The Virginia Court of Appeals upheld a lower court’s decision, siding with the Oak Valley Homeowners Association and the American Battlefield Trust against the project.

Who Benefits From The Northern Virginia Hub (And Who Doesn’t)

The massive NVA data center hub delivers benefits to several groups, though not always equally, and often not to average residents who are now grappling with higher utility costs. Here are the key beneficiaries:

  • Big Tech Companies and Data Center Operators
    Major corporations like Amazon, Google, Microsoft, Meta, and data center REITs (like Equinix and Digital Realty) have established enormous campuses in NOVA. They benefit from the region’s dense fiber infrastructure, reliable power supply, tax incentives, and proximity to major federal agencies (Brookings). These companies receive generous sales and use tax exemptions on data center equipment, which is a policy that has been repeatedly extended by state lawmakers (Cardinal News).
  • Local Governments (Especially Hosting Counties)
    Counties like Loudoun and Prince William collect substantial local tax revenue from data center real estate and business personal property (equipment) taxes. Loudoun County has used this revenue to keep property taxes lower for residents and to fund schools and services (Brookings). However, the benefits are not evenly distributed; counties without data centers do not see this windfall, but their residents pay higher regional electricity rates. Surrounding areas like DC are also paying more without realizing a benefit.
  • Construction and Related Industries
    The ongoing construction of data centers creates thousands of short-term jobs for builders, electricians, engineers, and related trades. This has been an economic boon for regional contractors and suppliers (Cardinal News), but again, it is a limited benefit.

Who Doesn’t Benefit?

  • Most residential and small business utility customers across the region have not benefited and are instead seeing higher bills due to the increased grid costs required to support data center power demand (Bloomberg, Vadogwood).
  • Lower-income and non-hosting communities bear the brunt of rising energy costs, while the direct economic windfalls are concentrated in a few counties.

Consequences For DC Residents

Rising Electricity Bills:
The massive power demand of data centers—especially hyperscale facilities built since the mid-2010s—has driven up wholesale electricity prices by as much as 267% in some localities over just the past five years. Utilities like Dominion Energy recover these higher supply and infrastructure costs from all customers, meaning residents across the region (including D.C. and Maryland) pay more, not just those living near the facilities (Bloomberg, Brookings).

Infrastructure Costs:
To keep up with data center demand, utilities have rapidly built new substations, transmission lines, and even proposed new generating capacity. These capital costs are factored into base rates and fuel charges for all ratepayers (Vadogwood, Generation180).

Water and Environmental Strain:
New data centers, particularly those built after 2018, have increased water usage for cooling by nearly 86% between 2019 and 2023 in Northern Virginia, raising concerns about water availability and local environmental impacts (SecureWater Illinois).

Equity Concerns:
While local governments hosting data centers often benefit from increased tax revenue, the broader region, including lower-income ratepayers, shoulders the majority of higher utility bills and infrastructure costs, drawing criticism from consumer advocates and policy experts (Brookings).lamcorper at. Etiam pretium rutrum vestibulum.

Mitigation

You may wonder why District leaders stood still as NVA built a massive data center hub that would have no benefit, but become a significant burden, to their residents?

Mostly, it was a political trade-off.

1. Economic Development Priorities and Regional Cooperation

  • Bowser’s administration has long sought to position DC as a tech and innovation hub, aiming to attract investment and jobs. She has often framed the region’s growth, including in data infrastructure, as a shared economic opportunity rather than a zero-sum game;
  • There’s a strong tradition of regional cooperation among DC, Maryland, and Virginia on economic and infrastructure issues. Publicly opposing Youngkin’s policies could have risked fracturing these relationships and potentially jeopardizing cross-border initiatives important to DC’s economy (Brookings).

2. Limited Leverage Over Virginia’s Decisions

  • The District has no direct regulatory or taxing authority over data centers in Virginia, which house the overwhelming majority of the region’s centers. This limits Bowser’s ability to demand offsets or financial contributions directly from Virginia’s data center operators or government.
  • Pepco’s regional grid operations and wholesale electricity markets are governed by multi-state agencies (like PJM), reducing DC’s unilateral influence over rate structures or cost allocations (D.C. PSC rulings, 2026).

3. Focus on Internal Protections and Consumer Relief

  • The D.C. Council prioritized bandaid provisions like the emergency shutoff moratorium and a push for evidentiary hearings to scrutinize Pepco’s rates. The 90-day emergency utility shutoff moratorium was introduced in March 2026 by Ward 4 Councilmember Janeese Lewis George. Mayor Bowser opposed the moratorium, calling it “bad policy.” She argued that pausing disconnections for balances under $1,000 would “kicking the can down the road,” increasing customer debt, and creating a bad precedent. The DC Council pushed the emergency measure through in a split 8–5 vote.

4. Political and Lobbying Realities

  • Utilities and data center interests are powerful players with significant lobbying resources. Bowser’s administration may have calculated that a confrontational approach with Virginia or Pepco could lead to protracted legal and political battles, with uncertain outcomes and potential backlash (Cardinal News).

Meanwhile, Back In Virginia…

With Governor Abigail Spanberger now in office, Virginia appears poised to take a more measured and regulatory approach to the data center boom that has burdened so many with soaring electricity costs. Her administration supports legislative efforts to ensure data centers shoulder more of the costs they impose on the grid, seeks to slow unchecked growth, and prioritizes regional cooperation to mitigate the widespread impacts felt across the DCMA. This marks a shift from the previous administration’s stance and offers hope that more equitable and sustainable solutions may be within reach for residents caught in this costly regional dynamic.

Here’s a detailed summary of the key 2026 Virginia legislative efforts aimed at shifting electricity and infrastructure costs more fairly onto data centers, along with Governor Abigail Spanberger’s stance:

Major 2026 Virginia Legislation on Data Center Cost Allocation

1. SB 253 (Senator Louise Lucas, D-Portsmouth)

  • This bill would raise electricity rates for data centers by about 15.8%, while cutting residential bills by roughly $5.52 per month.
  • It aims to shift costs for grid upgrades and energy demand from residential customers to large data centers, especially those consuming 25 megawatts or more.
  • The bill passed the General Assembly and was headed to Governor Spanberger’s desk for signature as of March 2026 (Virginia Mercury, Axios).

2. HB 591

  • Establishes the Commonwealth’s policy to encourage responsible data center operation while supporting grid reliability and equitable cost allocation.
  • Empowers the State Corporation Commission (SCC) to review and revise rate structures to prevent residential customers from subsidizing data center costs (Virginia Legislative Information System).

3. SB 960 (Failed)

  • Directs the SCC to determine if current cost allocations cause unreasonable subsidies by non-data center customers.
  • If so, the Commission must adjust rates to ensure data centers pay their fair share of infrastructure and energy costs (Virginia Legislative Information System).

4. Other Related Bills and Measures

  • Several bills require greater transparency and reporting on data center energy and water consumption to better assess impacts (PECVA).
  • Efforts to curtail or modify tax exemptions for data centers are ongoing, as millions in tax breaks have been linked to the rapid growth and resulting externalities (Politico).

Governor Spanberger has voiced support for data centers paying their fair share of energy costs, including exploring a consumption tax tied to their electricity usage.

How Fair Share Payments Drive Down Consumer Costs

Fair share payments from data centers help drive down rising energy bills for DC consumers by shifting the cost burden more appropriately to the largest users who actually cause the increased demand and infrastructure expenses. Here’s how that works in practice:

Aligning Costs with Usage

Data centers consume huge amounts of electricity, requiring utilities to invest in costly grid upgrades and purchase additional power at higher wholesale prices.

When these costs are spread evenly across all customers, including those using far less electricity, everyone’s bills go up. Fair share payments ensure data centers pay proportionally for the infrastructure and energy they demand, reducing the need to spread those costs across all ratepayers (Brookings).

Reducing Cross-Subsidization

Currently, residential customers subsidize the grid costs driven by data centers because utilities recover fixed costs through base rates that don’t fully reflect large users’ impact.

By imposing demand charges, consumption taxes, or surcharges on data centers, utilities can recover more costs directly from those large users, lowering the fixed cost burden on smaller customers (Virginia Mercury).

Encouraging Efficiency and Peak Load Management

Higher, usage-based costs incentivize data centers to invest in energy efficiency, demand response, and on-site renewable generation to reduce their grid impact.

This can lead to less strain during peak times, which in turn helps stabilize wholesale prices and reduces the overall cost drivers for utilities and consumers (Generation180).

If data centers continue to pay artificially low rates, utilities must keep raising rates on residential customers to cover new infrastructure and market costs.

Fair share payments can help slow or stop this cycle, preventing future electricity bill spikes for DC residents and others in the regional grid. By treating data centers as high-load customers rather than standard consumers, regulators ensure that the cost of developing new power sources is paid by the users, not the public.

But… will providers like Pepco fairly pass the savings along to customers?

This is where we come full-circle.

Pepco And The PSC: Fair & Ethical Treatment Of Customers

Pepco doesn’t directly set all the rates themselves, the rates are regulated and approved by the Public Service Commission (PSC), that very entity which failed to perform its due-diligence and simply greenlit Pepco’s big rate hike in 2024.

Pepco can propose rate structures, and the PSC has the final say to ensure rates are fair and maintain grid reliability, but when that agency fails to do its job, it’s up to our DC legislators to hold them accountable. And that’s what they’re doing now.

Pepco will argue that revenue needs to cover their costs of maintaining and upgrading the grid plus the power they buy. If big users like data centers pay more, that can reduce the fixed costs Pepco recovers from residential rates. Pepco also has to manage grid stability and investments. If data centers shift to paying higher demand charges or surcharges, Pepco might still need to invest heavily in infrastructure. Whether those savings fully translate to lower residential bills depends on how the PSC sets the overall rate design and cost recovery. Regulators decide how much savings get passed on.

Here’s a tip for the PSC: 

  • Pepco Holdings (a subsidiary of Exelon) made a substantial profit last year. Based on reported figures from March 2026, Pepco Holdings’ three utilities, Pepco, Delmarva Power and Atlantic City Electric, collectively earned $799 million on $7.1 billion in revenue in 2025, marking an increase in profitability from the prior year, alongside implemented rate increases for customers.

The company has seen a big increase in revenue due in no small part to approved rate hikes, such as that multi-year plan increasing rates for DC residents. Reports also indicate that Pepco has been accused of “over-earning” (making profits above the approved regulatory cap) and has been ordered to undergo audits for the 2023-2026 period.

Also, because these Virginia reforms apply directly to Dominion customers, they would not automatically lower Pepco rates in DC. Any future benefit to DC customers would be indirect, through their possible effects on regional electricity demand, infrastructure investment and future PJM capacity costs.

So whether or not customers see a steadying of rates going forward as legislators hold data centers accountable for rising energy costs, depends largely on how well PSC does its job.

We’ll be watching.

Sources

Pepco Rate Case and Shutoff Moratorium
Electricity Costs and Data-Center Demand
Virginia Data Centers and Environmental Effects
Prince William Digital Gateway
Virginia Legislation
Pepco Holdings Financial Results

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