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.

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. What’s driving hikes this large? It’s not DC’s population growth, or even the bitter cold winter we just had. Increases in our area are being driven primarily by the expansion of energy-intensive industries related to Ai. They’re located in Virginia.

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.

But where’s the documentation?

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 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. Pepco is notorious for long delays in refunding overpayments.

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

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

The data center factor is mainly regional. While the District has a handful of data centers, the true drivers are the massive concentration just outside the city, with the biggest influencer being Northern Virginia. NVA is now the largest data center hub in the world. 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).

Tat’s why DC residents are seeing higher electric bills, even if there’s no construction boom of new data centers inside city limits.

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 D.C. data centers were established in the 2000s and early 2010s.
For example, CoreSite DC1 opened in 2005 and has been expanded over the years. Equinix facilities in D.C. were developed throughout the 2000s and 2010s as demand for urban interconnection grew.

But 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 the most recent Glenn Youngkin (R, 2022–2025).

These administrations have 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 approved 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).

The Prince William Digital Gateway (PW Digital Gateway)

A planned corridor for up to 27 million square feet of data centers in Prince William County. It would be 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).

Current Status: The PW Digital Gateway is currently halted. A Virginia appeals court unanimously ruled on March 31, 2026, that the approval process was flawed.

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.

Projected Status: The development, intended to be the world’s largest data center hub near Manassas National Battlefield Park, cannot move forward with its current rezoning.

Next Steps: Developers (QTS and Compass) may appeal to the Virginia Supreme Court, while the Prince William County Attorney reviews the decision.

Ongoing Legal Action: The case is still considered active litigation, with the county having 30 days to consider further appeals.

Who Benefits From The NVA Hub And Who Doesn’t

The massive data center hub in Northern Virginia (NOVA) 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:

1. 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).

2. 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.

For example, 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.

3. 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 Does Not 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).

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 D.C. 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

• Bowser’s administration has prioritized bandaid provisions like the emergency shutoff moratorium and pushing for evidentiary hearings to scrutinize Pepco’s rates.

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

• 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

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 earned $799 million in profit on $7.1 billion in revenue, 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.

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

We’ll be watching.