Western Virginia weighs 'take-or-pay' rate for new Google data center alongside FY27 rate hikes

Western Virginia weighs 'take-or-pay' rate for new Google data center alongside FY27 rate hikesThe utility is exploring a new Tier 4 rate structure to manage the 2 MGD demand of a planned tech facility, as it proposes a 2.4% combined residential rate increase to keep pace with rising operational costs.

Staff presented FY27 budget proposals featuring a $1.80 monthly combined rate increase for average residential users.

Following a Raftelis rate study, the board discussed introducing a new 'Tier 4' rate or special contract for a single highly consumptive user—a planned Google data center.

Board members cautioned against a pure 'take-or-pay' model, suggesting an availability fee combined with a commercial usage rate to incentivize water conservation.

The utility's overall FY27 operating and maintenance expenses are projected to rise by 3.63% to $60.54 million.

The Western Virginia Water Authority (WVWA) board discussed overhauling its rate structure to accommodate a massive new industrial customer—a planned Google data center—during its March 19, 2026, meeting, alongside proposed system-wide rate increases for fiscal year 2027. Following recommendations from a Raftelis rate study, WVWA staff are evaluating the creation of a "Tier 4" rate category targeting very large users. Currently, the utility expects only one customer to fall into this category: a Google data center that has requested a day-one solution of 2 million gallons per day (MGD). Executive Director Mike McEvoy outlined several options for the new tier, including a higher per-gallon volumetric charge, a special negotiated contract rate, or a "take-or-pay" structure where the tech giant would pay for 2 MGD of capacity regardless of actual usage. However, board members expressed concern that a strict take-or-pay model could inadvertently discourage water conservation. "I think we all want them to use as little water as possible or to find other ways to source water," one board member noted, arguing against a structure that might prompt the facility to "use every drop" it pays for. Instead, the board favored exploring an annual availability fee to cover the capital costs of reserving large-scale capacity, paired with a traditional commercial volumetric rate that rewards reduced consumption. The current contract with Google subjects the facility to the same rate schedule as other customers, but McEvoy noted the company is aware the authority intends to modify its rate structure to account for the center's massive usage. Staff are also reviewing the utility's drought contingency plan, which was developed before the prospect of data centers, to ensure it can adequately handle a single user drawing up to 30 times more water than the system's current top consumer. The data center rate discussion came as staff presented the broader FY27 budget, which features a 3.63% increase in total operation and maintenance expenses to $60.54 million. To cover rising costs—including a 3% merit pay increase and higher health insurance premiums—staff proposed a 2.4% combined rate increase for residential customers. Under the proposal, which would take effect in October 2026, base rates will remain unchanged. However, Tier 1 volumetric rates will increase from $3.35 to $3.50 per 1,000 gallons for water, and from $4.20 to $4.50 per 1,000 gallons for wastewater. For an average residential customer using 4,000 gallons, the combined monthly bill will rise by $1.80 to $75.95. Staff noted that the rate adjustments also aim to rebalance the utility's revenue burden. The Raftelis study indicated that recent rate hikes had placed a disproportionate share of system costs on commercial and industrial customers, prompting the authority to implement a flatter overall rate increase this year with a slight adjustment on the residential side. The board will review the utility's capital improvement plan in April before holding a public hearing and adopting the final FY27 budget and rates in June.