Who Pays for Data Center Power? The Growing Legal Challenge

The rapid expansion of AI and cloud infrastructure is creating a new legal question for the data center industry: who should pay for the power infrastructure required to support it? As utilities invest in substations, transmission lines and other grid upgrades to connect increasingly large facilities, regulators are looking more closely at how those costs are allocated. 

Recent developments in Virginia and at the federal level show how quickly this issue is moving. For data center operators, developers and utilities, these decisions could affect project economics, energy agreements and long-term financial commitments. They are also increasing the need for regulatory and legal talent that understands the intersection of energy, infrastructure and commercial agreements. 

Why data center power is becoming a legal issue

Connecting a major data center to the grid can require significant infrastructure investment. New transmission capacity, substations and other upgrades may be needed before a facility can access the hundreds of megawatts required by large AI and hyperscale developments. 

The question is what happens to the cost of that infrastructure. Regulators are increasingly focused on preventing households and existing businesses from paying for investments primarily required by a new large-load customer. 

Virginia is already moving in this direction. The Virginia State Corporation Commission has introduced measures designed to make large-load customers, including hyperscale data centers, pay more directly for the costs associated with serving them. These include a separate GS-5 rate class, minimum contract requirements and provisions intended to reduce the risk of infrastructure costs being transferred to other customers. 

For developers, these are not minor utility changes. They can influence the financial structure of a project before construction begins, increasing the value of in-house legal professionals who can assess regulatory and commercial exposure early. 

Virginia is changing how data centers pay for the grid

Virginia provides one of the clearest examples of how the regulatory environment is changing. As one of the largest data center markets in the U.S., the state has had to address the cost and reliability implications of rapid large-load growth. 

Under the Virginia SCC's new framework, qualifying large-load customers can face a 14-year minimum service commitment and minimum monthly payments covering at least 85% of transmission and distribution costs associated with their contracted demand. The commission has also supported directly assigning certain costs for transmission lines and substations to the large customers that created the need for them. 

The aim is straightforward: if a new data center requires major grid investment, existing customers should not automatically be responsible for paying for it. 

This also changes the legal work behind development. Utility agreements, rate structures, collateral obligations and long-term energy commitments can now have a greater influence on project viability. Larson Maddox has previously highlighted how energy agreements are reshaping legal hiring across data center development, with Energy Counsel, Commercial Counsel and Project Development Counsel becoming increasingly important earlier in the project lifecycle. 

Federal regulators are asking the same question

The issue extends beyond Virginia. In June 2026, the Federal Energy Regulatory Commission launched proceedings covering six regional electricity markets after raising concerns about the rules governing how major electricity users connect to the transmission system. 

A major focus is cost recovery. FERC has raised the risk that transmission infrastructure could be constructed for a large customer that ultimately uses less power than expected, delays its development or does not come online at all. In that situation, other electricity customers could potentially be left contributing toward infrastructure they did not require. 

FERC has therefore proposed greater transparency around the network upgrades associated with large loads and cost recovery agreements that would make large customers responsible for an appropriate share of those costs. 

For companies operating across several states, this creates another challenge. Regulatory approaches can vary between markets, requiring legal teams to manage different tariffs, utility requirements and cost allocation models across the same development portfolio. This reflects the wider regulatory talent challenge shaping digital infrastructure, where energy procurement, permitting and regulatory change are becoming increasingly connected. 

Energy agreements are carrying greater commercial risk

The issue goes beyond regulatory compliance. Power agreements themselves are becoming increasingly important commercial documents. 

A data center developer may need to commit to electricity demand years before the facility reaches full capacity. Utilities, meanwhile, need confidence that expensive infrastructure will be used and paid for once it is constructed. 

This can lead to longer contract periods, minimum payment obligations, collateral requirements and stronger protections if a project is delayed or canceled. Legal teams therefore need to assess not only the price of electricity, but the potential long-term liabilities attached to securing it. 

For operators developing multiple sites, those liabilities can become significant. An agreement designed to secure power today may influence capital allocation and development decisions for years, bringing together expertise across Energy, Construction & Infrastructure, regulatory law and in-house commercial legal functions. 

What this means for legal talent

At Larson Maddox, we are seeing how power access is changing the legal requirements surrounding data center development. Businesses increasingly need attorneys who can work across energy regulation, commercial agreements and infrastructure rather than treating these areas as separate legal issues. 

Energy Regulatory Counsel can help organisations interpret utility tariffs, FERC requirements and state regulatory decisions. Project Development and Commercial Counsel can negotiate power supply, interconnection and infrastructure agreements, while senior in-house lawyers need to understand how those commitments affect the wider development and investment strategy. 

This reflects a broader trend across data center legal recruitment. Power access has become closely connected to project feasibility, which means legal teams are being brought into development decisions earlier. 

The candidate pool is also competitive. Lawyers with experience across utilities, power markets, infrastructure and major capital projects are in demand outside data centers as well. Energy companies, utilities, renewable developers and infrastructure investors are competing for many of the same professionals, making access to specialist regulatory talent and in-house counsel increasingly important. 

The legal skills data center companies may need

The exact requirement will depend on where a company operates and how its projects secure power, but several areas of legal expertise are becoming increasingly relevant. 

Energy and regulatory attorneys can support utility negotiations, tariffs and regulatory proceedings. Commercial and project counsel can structure long-term power and infrastructure agreements, while lawyers with experience in construction, real estate and project development can connect those energy commitments to the wider development program. 

At senior levels, General Counsel, Deputy General Counsel and Associate General Counsel may increasingly need to bring these disciplines together. Larson Maddox's in-house legal recruitment specialists support organisations building and expanding legal functions across seniority levels. 

Compensation and competition for these professionals also need to form part of hiring strategy. Larson Maddox's USA Regulatory & Legal Compensation Guide provides benchmarking across regulatory, energy, construction, infrastructure and other legal markets. 

Building legal teams around the data center power challenge

The question of who pays for data center power infrastructure is unlikely to disappear as AI demand grows. Regulators want to protect existing electricity customers, utilities need confidence that new infrastructure will recover its costs, and data center companies need access to power without taking on unmanaged financial exposure. 

That puts legal teams directly at the center of the issue. The right legal talent can help companies interpret regulatory changes, negotiate energy and infrastructure agreements and identify financial risk before commitments are made. 

Larson Maddox works across regulatory, in-house legal and private practice, with industry expertise spanning energy, construction, infrastructure and technology. If grid access, energy agreements or changing regulation are creating new requirements for your legal team, request a call back from Larson Maddox to discuss the specialist talent your organisation needs.