Henrico County Faces Rising Energy Costs Due to Data Center Growth

Lights are being switched off earlier in classrooms and offices in Virginia’s Henrico County as a rapid rise in electricity costs begins to filter through public services, reports Inc.

The county, which has spent years encouraging data centre development, is now facing a steep increase in its power bills. From 1 July, electricity rates for Henrico’s government and schools will rise by nearly 25 percent, adding about $5 million in annual costs.

In a June 26 email to staff, County Manager John Vithoulkas urged employees to take simple steps to cut usage, including turning off lights, shutting down computers, unplugging chargers, adjusting blinds and avoiding space heaters. He noted that some heaters alone can cost between $150 and $300 a year to run.

The message landed in a county that has become one of Virginia’s key data centre hubs, home to 37 facilities, according to local planning data, with clusters around White Oak Technology Park.

Ben Sheppard, the county’s communications director, said the email reflected wider priorities. He told Inc. it was about “good fiscal stewardship and good environmental stewardship”, describing both as core values for the county.

Electricity contract drives sharp increase

The price rise comes through a new electricity contract negotiated by the Virginia Energy Purchasing Governmental Association, which buys power on behalf of local governments, schools and public bodies in Dominion Energy’s service area.

The association has said members will see a 24.9 percent increase from July, followed by at least another 12 percent rise in 2027.

Dominion Energy said the higher municipal rates reflect “inflationary pressures and rising costs of fuel, purchased power, grid equipment, and the necessary investments to maintain a reliable grid to serve growing demand.”

That demand is now at the centre of the debate.

Pressure on the grid grows

According to Monitoring Analytics, the independent market monitor for PJM Interconnection, wholesale electricity costs across the region rose 62.7 percent in the first five months of 2026 compared with the same period a year earlier.

Capacity costs, which are payments designed to ensure enough future electricity supply, rose 412.9 percent.

The monitor estimated that data centre demand accounted for nearly three-quarters of the increase in capacity-market revenues in the 2025-26 auction.

It also said data centres pushed wholesale power prices up by $11.26 per megawatt-hour in early 2026, a 24.4 percent rise.

Joseph Bowring of Monitoring Analytics told Inc. that proposals being considered by PJM could increase those pressures further and shift costs onto other customers.

PJM said it is working to rebalance supply and demand. Spokesperson Dan Lockwood said the operator is focused on market reforms, faster connections for new power sources, new rules for large electricity users such as data centres, and improved demand forecasting.

This week, PJM members advanced a plan aimed at meeting surging demand from data centres, after capacity prices in the region jumped more than 1,000 percent since around 2024.

The board is expected to make a final decision on the policy.

Industry pushes back on blame

The data centre industry argues it is being unfairly blamed for wider energy market pressures.

Nicole Riley, director of Virginia government affairs for the Data Center Coalition, told Inc. the sector is “committed to paying the full cost of the energy it uses.”

She added: “Nonpartisan studies by JLARC, the Lawrence Berkeley National Laboratory, and others have consistently found that data centers do not raise energy prices and that data centers pay for all the power they use, just like any other customer,” Riley said.

Dominion Energy also pointed to new state rules introducing a large-user rate class, which it says strengthens upfront commitments and minimum demand charges for major electricity users including data centres.

The company said Virginia has “among the strongest protections in the country to prevent data centre costs from being passed onto residential or municipal customers.”

Local gains, rising strain

Henrico County has benefited financially from the sector.

According to communications director Ben Sheppard, the county created an Affordable Housing Trust Fund in July 2024 using $60 million in data centre tax revenue.

So far, 69 homes supported by the fund have been sold to first-time buyers, while funding has been allocated to another 401 units.

At the same time, the county has tightened rules around new developments, introducing stricter requirements on utility capacity, noise studies, buffer zones and distance from residential areas.

The shift highlights a growing tension playing out across regions hosting large-scale digital infrastructure.

Data centres can bring significant tax income, but they also increase pressure on electricity systems that serve schools, hospitals and public buildings.