KNOXVILLE, Tenn. (WOKI / WVLT) — The Tennessee Valley Authority is taking steps to change how data centers pay for electricity as rapid growth in the industry places new demands on the region’s power grid.
TVA has notified the 153 local power companies it serves that it is developing a new rate structure specifically for data centers. The proposal is aimed at ensuring those facilities do not shift costs onto the roughly 10 million residents and businesses that rely on TVA power every day. The utility’s board is expected to consider the changes during meetings scheduled for August or November.
According to TVA, data centers currently account for between 18% and 20% of its industrial electricity load, a figure that could double by 2030 as demand for artificial intelligence and cloud computing grows.
TVA officials stress that the proposal is not intended to raise rates for average customers, but instead to reclassify data centers, which have been grouped with manufacturers since 2008. Because data centers operate around the clock and require large, consistent amounts of electricity, TVA says they represent a unique type of demand that may require a different pricing structure.
One option under consideration is a capacity commitment charge that would require data center developers to invest upfront before connecting to the system.
Local power providers, including Knoxville Utilities Board, say they support the effort, citing the need to ensure large-scale users pay their fair share and to protect residential customers from absorbing additional costs.
At the same time, some East Tennessee communities are proactively regulating where data centers can locate. Cities like Sweetwater and Rockwood have implemented zoning rules addressing noise, land use and setbacks, while Knox County is also exploring regulations.
Not all economic leaders are supportive. The Blount Partnership has voiced opposition, raising concerns about the significant electricity and water demands of data centers and noting they generate relatively few jobs compared to other industries.
TVA says it is also expanding generation capacity, with thousands of megawatts of new power expected to come online, as it works to meet growing demand across the Valley.
