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Data centers can put new demands on electric grids and water systems while generating substantial local tax receipts. Neither outcome is automatic for nearby households: the result depends on utility rate design, who finances new infrastructure, the facility’s cooling technology, local water capacity, tax rates, and incentives.
The most useful way to judge a proposal is to separate modeled forecasts from measured use, current charges from future system costs, and gross tax collections from the net public benefit after exemptions and service costs.
Do data centers raise electricity bills?
A data center is a large, continuous electricity load. Its servers, cooling equipment, power-conversion systems, lighting, and backup infrastructure may operate around the clock. Connecting such a facility can require additional generation, high-voltage transmission, substations, and local distribution equipment.
That physical need does not determine who pays. The key question is whether the utility’s approved tariffs assign the incremental cost to the data-center customer or spread part of it across other customers. The U.S. Department of Energy’s Office of Policy identified the central rate-design objective in a technical brief published January 17, 2025: “Fair allocation of electricity system costs to large-load customers without unfair shifting of costs to other customers.”
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Current charges and future system costs are different
A utility can charge a data center appropriately for its present service while future growth still creates broader costs. New generation and transmission built for expected demand can affect wholesale energy prices and the amount all customers must pay to maintain adequate capacity. A proposal also creates stranded-cost risk if the promised load arrives late, operates below forecast, or closes before long-lived assets are paid off.
Virginia’s Joint Legislative Audit and Review Commission (JLARC) found in 2025 that current Virginia rates appropriately allocate existing costs to data-center customers. The same review concluded that projected expansion could require new generation and transmission and raise costs for other customers.
What the Virginia forecast actually says
For a typical Dominion Energy residential customer, Virginia JLARC modeled an additional $14 to $37 per month in generation and transmission costs by 2040, expressed in constant dollars. This is a scenario-based forecast, not an observed increase on a current bill, and it applies to one utility territory rather than the United States as a whole.
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| Electricity figure | What it measures | Important qualification |
|---|---|---|
| $14–$37 per month | Modeled generation and transmission cost for a typical Dominion residential customer by 2040 | Virginia JLARC, 2025; constant dollars; forecast, not a measured bill change |
| 11.8% of U.S. electricity by 2030 | Potential data-center share of national electricity use | Lawrence Berkeley National Laboratory, 2026 scenario |
| 9.5%–15.3% | Range of modeled national data-center electricity shares in 2030 | Lawrence Berkeley National Laboratory, 2026; scenarios, not a guaranteed outcome |
The Lawrence Berkeley National Laboratory projection describes national possibilities. It cannot tell a resident what a particular town’s bill will do, because local outcomes depend on the utility’s resource plan, contracts, load forecast, and cost-allocation rules.
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Why household effects differ by utility
Two communities can host similarly sized facilities and see different bill effects. A utility may require a large customer to pay the cost of a dedicated substation, collect a contribution toward transmission, or sign a special contract with minimum-payment obligations. Another utility may recover more of the investment through general rates. Regulators may also impose demand charges, interruptible-service terms, exit fees, or security deposits.
Fairfax County explains that residents do not directly pay for the electricity consumed by data centers, although customers may pay some costs for infrastructure improvements. Approved rates and customer classifications determine the allocation. To understand a local proposal, ask for the tariff, interconnection agreement, cost-of-service study, and the assumptions behind any new generation or transmission.
How much water does a data center use?
Water demand is mainly a cooling question. Servers convert electricity into heat, and the facility must remove that heat continuously. Some designs use evaporative or other water-based cooling; others rely primarily on air cooling or closed-loop systems. Computing density, outdoor temperature, redundancy requirements, and the size and operating schedule of the building all change water demand.
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Virginia JLARC reported in 2025 that most data centers it reviewed used about as much water as, or less than, an average large office building. The same review found wide variation: some facilities used substantially more, while some used less than a typical household. Those comparisons show why a single “data-center water use” number is misleading.
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The water metrics that matter
A project’s annual withdrawal is only one measure. Evaporative systems may consume a meaningful portion of withdrawn water, while a recirculating system may return more of it. Peak-day demand can determine whether a municipal system needs new pumps, storage, or treatment capacity even when annual volume appears moderate.
- Withdrawal: the amount taken from a municipal system, river, reservoir, or well.
- Consumptive use: the portion not returned to the source, often because it evaporates.
- Peak demand: the highest short-term requirement, which can control pipe and treatment capacity.
- Source and quality: potable water, reclaimed water, surface water, or groundwater have different costs and constraints.
- Wastewater: blowdown and other discharges may require treatment capacity and permits.
Water availability is local and seasonal
A region described as water-rich may still have a municipal system with little spare capacity. Virginia JLARC noted that some localities have less water available, including areas subject to groundwater-management constraints, and that oversight of how available water is shared among competing uses is limited. Drought, heat waves, agricultural demand, and existing industrial users can make a facility’s peak requirements more consequential than its annual average.
Fairfax County reported that precise county data-center water-use information had been private when its public FAQ was accessed. Additional state reporting requirements were scheduled to take effect in 2027. Until comparable disclosures are available, residents should treat generalized water estimates as indicative rather than as a substitute for site-specific records.
Questions to ask about a proposed facility
- What cooling technology will be installed, and can it be changed later?
- What are projected annual withdrawals, consumptive use, and maximum-day demand at full build-out?
- Which source will supply the water, and what capacity has the utility reserved?
- How will drought restrictions affect operations and other users?
- What wastewater volumes and treatment upgrades are required?
- Will actual monthly withdrawals and consumptive use be reported publicly?
How much tax revenue do data centers bring to a community?
Local governments can tax the land and buildings as real property and servers, power equipment, and other assets as business personal property. A large campus can therefore produce substantial receipts, particularly where equipment assessments are high and the local market has many facilities.
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Revenue is not uniform. It depends on assessed value, depreciation rules, local tax rates, exemptions or abatements, the pace of construction, and whether a locality has negotiated a special arrangement. Virginia JLARC found that in five Virginia localities with relatively mature data-center markets, data-center revenue represented less than 1% to 31% of total local revenue.
| Local fiscal factor | Why it changes the result |
|---|---|
| Real-property assessment | Land and buildings add a recurring tax base, but values depend on assessment practice and construction timing. |
| Business personal property | Servers and electrical equipment can be valuable, while depreciation and local classification rules reduce taxable value over time. |
| Tax rate | A lower rate may attract projects but collect less per dollar of assessed equipment. |
| Exemptions or abatements | Incentives can delay or reduce receipts and may vary by project and year. |
| Local market maturity | A community with several operating campuses may receive a much larger share of revenue than one hosting a single early-stage project. |
Gross receipts are not the same as net benefit
A tax announcement should be evaluated against the public costs needed to obtain it. Compare annual receipts with road, water, sewer, emergency-service, planning, and utility-support costs. Also examine the duration and quality of jobs, construction employment versus permanent positions, and whether the investment would have occurred without the incentive.
Washington JLARC reported that four reviewed properties added at least $111 million in assessed value and paid about $1.2 million more in property taxes between 2022 and 2025. The agency said it could not isolate how much of that change was attributable to the incentive itself. The figures therefore demonstrate additional assessed value and taxes, not a proven return caused by the tax break.
What local proposals should disclose
Use the same questions for every project so that a large promised benefit cannot be compared with a smaller project measured on a different basis.
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| Category | Request from the developer, utility, and local government |
|---|---|
| Electricity | Peak and annual load; generation, transmission, and distribution upgrades; who pays; special rates or contracts; reliability obligations; and protections against stranded costs. |
| Water | Cooling design; annual and peak withdrawals; consumptive use; source; drought assumptions; available utility capacity; wastewater needs; and reporting requirements. |
| Public finances | Assessed real and personal property; tax rate; exemptions or abatements; expected annual receipts; infrastructure and service costs; job counts, wages, and duration; and the share attributable to any incentive. |
| Evidence quality | Label each number as measured, estimated, or forecast; identify the geography and date; and distinguish gross collections from net fiscal impact. |
How to interpret national and local claims
National electricity projections describe a possible aggregate future, not a prediction for each county. Local audits can reveal actual utility sales, tax collections, or water withdrawals, but their findings may not transfer to a different climate, utility, tax system, or facility design.
Washington JLARC estimated that four eligible centers used about 427,000 megawatt-hours in 2024, equal to 1.4% of relevant utility power sales, and judged their likely cost impact on other customers minimal for that group and period. That conclusion is bounded by the four-center sample and the 2024 measurement; it does not establish that every concentration of data centers has minimal system effects.
Likewise, Virginia’s $14–$37 monthly figure should not be quoted as a nationwide household surcharge, and the 31% local-revenue figure should not be treated as a typical community outcome. Check current legislation, utility rate decisions, project disclosures, and local tax rules because each can change before a facility is completed.
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Data centers can provide a durable tax base and economic activity, but they also create large, location-specific demands for electricity and water. The fair outcome depends on transparent contracts and rate design that charge large customers for the costs they cause, protect other customers if forecasts fail, and account for reliability. Water decisions should use peak and consumptive-use data rather than annual averages alone. Fiscal decisions should present incentives, public costs, jobs, and measurable tax receipts together.
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