Nashville Electric Service approved a series of measures on Aug. 26 aimed at making data centers bear the costs of connecting to the electric grid as the utility sees a growing number of requests from the power-hungry facilities.
The NES Electric Power Board in its regular meeting unanimously approved three recommendations: joining a voluntary federal pledge to protect existing ratepayers from data center costs, developing a separate retail electricity rate for data centers and changing how the utility charges the facilities for infrastructure needed to serve them.
The actions follow a similar move this month by the Tennessee Valley Authority, which approved a new wholesale data center rate amid rapidly growing electricity demand from the industry.
Barry Daniel, NES revenue and rates manager, told board members the utility wants to accommodate new development while ensuring existing customers aren't left paying for the infrastructure.
"We want to protect our existing customers. We want to protect reliability, and we want to support growth that is responsible," Daniel said. "We're not turning folks away, but we want to make sure that we're careful and thoughtful in our approach."
NES considers any new customer requiring at least 5 megawatts of electricity, or an existing customer adding at least 5 megawatts, a large load that triggers a joint review with TVA. The utilities conduct studies to determinewhether new generation, transmission or distribution infrastructure would be needed to serve the customer.
Daniel said NES is seeing an increasing number of large-load data center requests.
How will customers be impacted?
NES officials said the new data center policies are not expected to increase bills for average residential customers, whose current monthly bill is about $143 for 1,000 kilowatt-hours of electricity
The most significant NES-specific change involves how data centers will pay for construction required to connect them to the grid.
Under NES' existing policy, expected revenue from a new customer can reduce how much that customer pays upfront for construction. But because data center power use can fluctuate or be curtailed during periods of high demand, NES plans to make them pay more of those costs upfront rather than risk passing them on to other customers.
"We want to make sure that the risks and costs associated with these new large load requests are borne by the customers that create those costs and risks," Daniel said.
The board also approved plans to create a separate NES retail rate for data centers, with specific rates and other details to come back for a future vote.
The change follows TVA's Aug. 20 decision to remove data centers from the manufacturing rate class and establish a separate wholesale rate that will eventually charge them roughly 10% more for electricity.
Existing data center customers will see no immediate increase when TVA's new rate takes effect Oct. 1. The higher rate will instead be phased in over the following two years, with increases of approximately 5% each year. NES officials said those higher wholesale costs will flow through to data centers on its system.
New data centers also will face a TVA capacity commitment charge of about $1.5 million per megawatt, paid over three to five years. TVA officials have said the charge is intended to recover the cost of adding generation capacity necessary to serve the enormous new loads rather than spreading those expenses among other ratepayers.
Growing power demand
Data centers accounted for nearly 20% of TVA's industrial electricity demand in early 2026, and the utility has said that demand could double by 2030.
TVA supplies electricity to 153 local power companies across a seven-state territory, including NES, Knoxville Utilities Board, Chattanooga's EPB and Memphis Light, Gas & Water.
TVA and NES also are considering greater use of interruptible service, which would allow TVA to order data centers to reduce their electricity consumption during periods of high demand or other grid constraints.
NES officials said allowing TVA to temporarily reduce power to data centers during periods of high demand could also limit how much new generation the utility needs to build to serve them. TVA is considering allowing up to 400 to 500 hours of such power reductions, though officials said no requirement has been finalized.
NES officials said the measures are only the first steps in a broader data center policy. The board will consider additional rules and a final retail rate structure at future meetings.
Nashville’s action comes as city leaders are also tightening restrictions on data center development. The Metro Council recently approved a temporary moratorium on new permitting and adopted new regulations restricting the size and location of future facilities, following public backlash over proposed projects at Fisk University and near the Nashville Zoo.
This article originally appeared on Nashville Tennessean: Nashville plans for new data center rates. What it means for your bill
