The Tennessee Valley Authority will charge data centers higher electricity rates than regular customers after its governing board unanimously approved a new rate class Aug. 20. Utility leaders say the decision will protect other customers as demand for power surges.
The TVA Board of Directors at its meeting in Memphis decided to take data centers off its manufacturing service rate customer class and charge them about 10% more for the power they use across the utility's seven-state service region. The rate hike comes amid a growing backlash against data centers from communities across the U.S.
TVA leaders said the new rate class is linked to the utility's commitment to a voluntary White House pledge aimed at protecting ratepayers amid a rising
federal interest in artificial intelligence that will require more data centers be built.
Data centers in early 2026 accounted for nearly 20% of all power demand from TVA’s industrial customers. That volume may double by 2030, former CEO Don Moul said in early February.
TVA spokesperson Melissa Greene told Knox News in a text that TVA does not track the number of data centers in its service region, which stretches from southern Virginia to central Mississippi. The local power companies the utility serves work directly with data centers in their territories.
Funded by ratepayers rather than taxpayers, TVA sells power to 153 local power companies including EFB in Chattanooga, the Knoxville Utilities Board and Memphis Light, Gas & Water, which is TVA's biggest customer by load.
TVA told local power companies in early 2026 it was considering changing rates for data centers. The idea dates back further, but vacancies created after President Donald Trump fired multiple board members prevented an earlier vote on the proposal.
While private utilities need to bring these types of changes before independent regulators from outside the organization, TVA as a federal utility is not bound by the same requirements and relies on its own board to approve changes. Now that the rate change is approved, TVA leaders said, it will be phased in over the next three fiscal years.
Transparency advocates like Southern Alliance for Clean Energy President Stephen Smith argue the proposal should have been "transparent and able to be independently verified." Without external regulators, he said, "we do not know what is really happening."
TVA's Aug. 20 decision came as Memphis sits at the center of TVA's growing debate over data centers. In February, the board approved a request to double the power available to Elon Musk's xAI facility in West Tennessee.
Mariah Franklin reports on technology and energy for Knox News. Email: mariah.franklin@knoxnews.com. Signal: mariahfranklin.01
This article originally appeared on Knoxville News Sentinel: TVA sets a new electricity rate for data centers as demand surges
