Democrats scored decisive victories in state elections on November 4, winning the governorship in Virginia and holding the office in New Jersey. The electoral gains in these states, both major data center hubs, set the stage for a potential conflict over the power-hungry facilities as the incoming governors pledge to rein in rising energy costs for consumers.

In the off-year elections, U.S. Reps. Mikie Sherrill (D-N.J.) and Abigail Spanberger (D-Va.) won their gubernatorial races against respective Republican challengers Jack Ciattarelli and Winsome Earle-Sears. Both governors-elect have vowed to address rising electricity rates, spur renewable energy development, and hold data centers responsible for grid upgrade costs needed to support their power consumption.

The electoral gains come amid charged politics over rising power prices. Debates are raging over the appropriate level of government intervention to keep utility bills in check and whether states’ membership in PJM, the regional wholesale market that includes New Jersey and Virginia, is beneficial. Increased state-level regulation of data centers could run counter to the Trump administration's moves to champion the sector for national security and economic growth.

While underscoring that data centers are an important source of local tax revenue for many communities, Spanberger said consumers should not be on the hook for any costs arising from the facilities.

“I will work to develop a statewide strategy so communities that want data centers can bring them there, without straining statewide resources such as water supply,” Spanberger said in a statement. “But I also firmly believe that data centers should be paying their fair share for the energy they use, including the costs of new electricity generation and transmission built for them.”

For her part, Sherrill reportedly vowed to block any utility rate increases and to spur in-state power generation to bring down energy costs, with support for solar, BESS, and nuclear plant upgrades.

“On day one as governor, I will declare a state of emergency on utility costs and freeze rate hikes so families will not see bill increases as we massively expand cheaper energy generation to bring costs down,” said the governor-elect in a statement.

Virginia is home to the world's largest data center hub, and New Jersey has a significant concentration of the facilities. Together, the two states represent about 21% of the total generating capacity within PJM, the nation's largest regional grid operator, placing them at the center of the political debate.

Load growth from data centers has been a key driver of higher PPA valuations. The fair market value for a 10-year as generated solar PPA in PJM’s Dominion zone, which includes much of Virginia, climbed 15% year-over-year to nearly $100/MWh on Nov. 7, according to Pexapark data. The prospect of new regulations on data centers could slow load growth, creating a bearish impact on PPA prices and renewable energy development.