Amazon Pushes Virginia to Let AI Data Centers Fund Their Own Grid Upgrades

Amazon urged Virginia regulators to allow hyperscalers to fund transmission via CIAC, igniting debate over who pays for AI-driven grid growth in PJM.

Amazon urged Virginia regulators during hearings this month to allow hyperscale data center operators to voluntarily fund transmission infrastructure serving their campuses, opening a debate over who should pay for grid expansions needed to support AI.

The proposal surfaced before the Virginia State Corporation Commission (SCC) in Dominion Energy Virginia’s annual Rider T1 proceeding, which determines how the utility recovers transmission costs from customers. Amazon argued that large-load customers should be permitted to finance transmission facilities built specifically for their projects through contributions in aid of construction (CIAC).

Data Center Knowledge reviewed official transcripts from the hearings and related filings, as well as Dominion’s rebuttal.

Amazon witness Cameron Brooks, president of consulting firm E9 Insight, testified that voluntary transmission CIAC would let hyperscale customers “put their own capital at risk” while reducing costs for other ratepayers by shifting stranded-asset risk to the customers driving new demand.

“The question of whether to allow data centers to put their own capital at risk, to pay their own way, there’s really no reason why the Commission ... can’t take some immediate action on that,” Brooks testified.

Dominion countered that transmission CIAC should not be addressed in the Rider T1 case, arguing that the proposal raises broader questions touching the PJM Interconnection (PJM) regional planning process, Federal Energy Regulatory Commission (FERC) jurisdiction, and retail rate design that merit a separate proceeding.

Customer-funded facilities are common for generator interconnections and some distribution projects. Applying CIAC principles to transmission is more complicated, however, because high-voltage facilities often serve multiple customers and regional reliability needs under PJM’s FERC-approved planning process.

SCC Probes Amazon's CIAC Plan and Tests GS-5 Implications #

Johannes Pfeifenberger, a principal at The Brattle Group, told the Commission that transmission CIAC “can be a partial solution” when the beneficiaries of an upgrade are clearly identified and willing to fund it. He cautioned, however, that the most cost-effective transmission projects often address multiple regional needs – accommodating new load, integrating generation, and improving reliability – complicating the line between customer-specific costs and those appropriately shared across the grid.

Commissioner Kelsey Bagot pressed Brooks on how voluntary CIAC would interact with Virginia’s newly approved GS-5 tariff and whether customers could effectively pay twice for the same transmission facilities.

“The honest answer is I’m probably not sure,” Brooks replied when asked how the proposal would work alongside existing transmission charges. He said Dominion and the Commission were better positioned to determine implementation details but described voluntary CIAC as “a logical next step” beyond the protections already incorporated into GS-5.

A Regional Planning Challenge #

Neil Osnato, founder of Persistence Analytics Group, said the hearing reflects a broader challenge across organized electricity markets as regulators try to assign the costs of serving rapidly growing AI loads.

“The biggest practical challenge is that a transmission project rarely exists in isolation,” Osnato said. A new line serving a 1 GW or 3 GW campus can alter power flows, contingency requirements, substation configurations, local reliability needs, and future expansion opportunities across the network.

That makes it difficult to separate upgrades driven by one customer from investments that provide broader regional benefits or would have been needed regardless. Osnato also warned that allowing private funding should not create “a de facto fast lane” that displaces more mature or more system-efficient projects in PJM’s planning process.

Rather than framing the issue as customer funding versus cost socialization, he said regulators should ask whether a proposal requires customers to “internalize the full incremental infrastructure consequences of its load while preserving PJM’s ability to plan the regional system efficiently.”

Utilities and regional transmission organizations also face the problem of distinguishing speculative load requests from projects likely to materialize. “Requested, studied, contracted, collateralized, site-controlled, permitted, financeable, construction-ready, power-deliverable, and operational load should not receive the same planning weight,” he said. His bottom line: “CIAC can solve direct cost responsibility. It does not, by itself, solve regional cost causation, load verification, or stranded-asset risk.”

New Minimum Demand Charges Rebalance Transmission Costs #

The hearings highlighted how Virginia’s recently approved transmission minimum demand charges are starting to shift more transmission costs to large-load customers. Citing Dominion’s revised Rider T1 schedules, Brooks testified that the updated allocation shifts roughly 90% of the increased transmission responsibility to the GS-4 large-load class while reducing costs for residential customers. Asked whether the revised allocation demonstrated that the new charges were functioning as intended, Brooks replied, “It certainly seems so from these numbers.”

Separately, Dominion’s June rebuttal filing reduced the projected monthly residential bill impact of Rider T1 from about $2.90 to $0.94 after incorporating updated load forecasts and the new transmission minimum demand charges.

The Commission has not indicated when it will issue a final order in this proceeding.