Amazon Urges Virginia Regulators to Allow Hyperscalers to Fund Transmission Upgrades for AI Data Centers

Amazon urged Virginia regulators during hearings this month to allow hyperscale data center operators to voluntarily fund transmission infrastructure serving their campuses, igniting a debate over who should pay for the grid expansions needed to support the rapid growth of artificial intelligence workloads. The proposal was made 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), a mechanism already used for generator interconnections and some distribution projects.

The hearings highlighted a growing tension between hyperscalers and utilities over how to allocate the multibillion-dollar costs of reinforcing the grid. Amazon witness Cameron Brooks, president of consulting firm E9 Insight, testified that voluntary transmission CIAC would allow hyperscale customers to “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 regional planning process, Federal Energy Regulatory Commission jurisdiction, and retail rate design that merit a separate proceeding.

Applying CIAC principles to transmission is more complicated than for distribution projects, because high-voltage facilities often serve multiple customers and regional reliability needs under PJM’s FERC-approved planning process. 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—making it difficult to separate customer-specific costs from 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, designed to protect other ratepayers from cost shifting. Brooks acknowledged uncertainty, replying, “The honest answer is I’m probably not sure,” 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 in GS-5.

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, noting that 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. He warned that allowing private funding should not create “a de facto fast lane” that displaces more mature or system-efficient projects in PJM’s planning process. Instead, regulators should ensure that customer-funded proposals require hyperscalers to “internalize the full incremental infrastructure consequences of its load while preserving PJM’s ability to plan the regional system efficiently.”

The hearings also highlighted how Virginia’s recently approved transmission minimum demand charges are beginning to shift more transmission costs to large-load customers. Brooks testified that Dominion’s revised Rider T1 schedules allocate roughly 90% of the increased transmission responsibility to the GS-4 large-load class while reducing costs for residential customers. 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.