TVA approves new data center power rate, bringing average 10% billing increase for centers

From Local 3 News: The Tennessee Valley Authority (TVA) is changing how it charges for electricity as demand from data centers continues to grow across the region.

On August 20, TVA’s Board of Directors approved a new higher wholesale rate structure specifically designed to address the increasing amount of power being used by large data centers.

The new rate is scheduled to begin October 1, 2026, and TVA estimates it will increase overall billing for data centers by roughly 10%. The impact will be spread out over three fiscal years.

The agency says the changes are intended to make sure data centers pay the full cost of the electricity and infrastructure needed to serve them.

“Today’s Board actions position TVA to meet the Valley’s growing demand while continuing to advance American energy leadership,” said Mike Skaggs, TVA interim President and CEO. “Thanks to the Board’s strategic focus and dedication of our employees, we’re building the right resources, adjusting rates responsibly and planning for a future that strengthens communities, supports economic growth and delivers the affordable, reliable energy that millions of people depend on.”

That could help prevent residential and manufacturing customers from shouldering costs associated with the rapid expansion of data centers and other large power users.

This action is covered by the "Ratepayer Protection Pledge," which was created to ensure data centers and other major power users cover the full cost of energy and infrastructure their facilities require.

TVA says electricity demand is rising as the region sees growth in data processing, artificial intelligence, advanced manufacturing and population.

“Maintaining low rates and high reliability for customers is our first priority,” said TVA Chair Mitch Graves. “As AI and advanced industries consume more electricity, TVA’s Board is making sure that hardworking American families and small businesses aren’t left carrying the cost. By modernizing our rate structure and strengthening American-made energy, we’re advancing our nation’s AI and energy dominance while safeguarding the people we serve.”

The agency’s 2026 Integrated Resource Plan estimates the Tennessee Valley could need between 11 and 32 gigawatts of additional generation capacity by 2040 to keep up with that growth.

TVA also approved more than $13 billion in planned investments through fiscal year 2029 to maintain reliability and expand its power system.

That includes construction of 4,120 megawatts of new TVA-owned generation capacity, with another 3,000 megawatts currently under evaluation.

“Affordability and reliability remain at the center of every budget decision we make,” said TVA Chief Financial Officer Tom Rice. “As electricity demand grows, the FY 2027 budget strengthens TVA’s ability to add new capacity, support America’s energy and innovation leadership, and ensure Valley families and businesses continue to have reliable, affordable power for decades to come.”

The changes come as communities across the Tennessee Valley continue to consider the economic opportunities and infrastructure challenges associated with large-scale data center development.

The board also approved several other items Thursday, including TVA’s FY 2027 incentive measures and goals, the selection of an external auditor, approval for loads greater than 100 megawatts, and the divestiture of Sugar Camp mineral rights.