TennesseeTennessee limits utility and local government payments for data centers
Tennessee’s law generally bars local governments and electric utilities from covering large data centers’ power infrastructure costs, while allowing limited shared costs and reimbursements.
What it does
Local governments and electric utilities generally cannot cover power infrastructure costs caused by large data centers. Exceptions allow certain shared system costs and standard reimbursements that do not raise existing customers’ rates.
Large data centers may buy power from independent producers in Tennessee. Direct connections need written utility approval when the center also uses utility service; shared power lines generally require the owner’s agreement.
Independent producers do not count as public utilities solely because they operate power generation or storage equipment and supply covered data centers under authorized agreements. Other activities may still trigger utility rules.
Argument forThe payment limits could protect utility customers from covering data center infrastructure costs, since allowed reimbursements cannot raise existing customers’ rates.
Argument againstPayment limits could leave data center owners paying more power infrastructure costs themselves when they do not qualify for reimbursement.
More detail
Local governments and electric utilities generally cannot pay or absorb covered power infrastructure costs for large data centers. Centers must expect peak demand of at least 50 megawatts in their first three years. State-owned or operated facilities are excluded, as are communications-provider facilities mainly serving networks or broadband. Covered costs concern utility-owned or locally owned infrastructure needed because a center is built or expanded. Utilities may assign some costs to shared system improvements only if all four tests are met: improvements exceed the center’s needs, can serve others without reducing existing service, repair or replace infrastructure originally paid for by someone else, and follow utility cost allocation policies. Maintenance also qualifies. Reimbursements must follow standard policies for comparable customers, cannot favor data centers, and cannot raise existing customers’ rates. Federal obligations still apply. Conflicting Tennessee Valley Authority requirements control. Local governments and utilities are not liable for refusing to honor an obligation that is void under this section. The law took effect May 7, 2026. It applies to conduct occurring and contracts or agreements entered into, amended, or renewed on or after that date.
Covered data centers may buy electricity directly from independent power producers located in Tennessee. Centers must meet the 50-megawatt threshold and facility definitions, including the state and communications-provider exclusions. Purchases may include electricity, reserved power capacity, and related services. A direct connection on the center’s side of its meter needs written utility approval if the center also receives utility service. No such approval is required if it receives no utility service. Access to utility or Tennessee Valley Authority power lines depends on the owner’s choice and terms, unless federal law provides otherwise. Federal law applies, and conflicting Tennessee Valley Authority requirements control. These rules apply to conduct occurring and contracts or agreements entered into, amended, or renewed on or after May 7, 2026.
An independent power producer does not count as a public utility solely because it operates power generation or storage equipment and supplies a covered data center under an authorized agreement. Covered producers sell under written agreements to data center owners or operators or wholesale buyers, which buy power for resale. Producers offering these services to other kinds of customers do not meet this definition. The exclusion concerns operating generation or storage equipment in Tennessee and supplying covered centers under authorized agreements. Other activities may still make the producer a public utility. The exclusion applies to conduct occurring and contracts or agreements entered into, amended, or renewed on or after May 7, 2026.
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Where it stands
- Introduced
- Passed House
- Passed Senate
- To Governor
- Became Law
Looking ahead
No hearings or votes scheduled.
History
- 2026
- May 18Pub. Ch. 961Latest
- May 18Effective date(s) 05/07/2026
- May 7Signed by Governor Bill Lee.Became Law
- May 6Transmitted to Governor for his action.To Governor
- May 5Signed by Senate SpeakerMajor
- Apr 30Signed by H. SpeakerMajor
- Apr 28Enrolled; ready for sig. of H. Speaker.Minor
- Apr 22Received from House, Passed on First ConsiderationMinor
- Vote recorded FLOOR VOTE: Third Consideration 4/22/2026 Passed. Result: pass.Upper
- Apr 22Senate substituted House Bill for companion Senate Bill.Major
- Apr 22Amendment withdrawn. (Amendment 1 - SA1006)
- Apr 22Amendment withdrawn. (Amendment 2 - SA1099)
- Apr 22Passed Senate, Ayes 28, Nays 0, PNV 2Passed Senate
- Apr 21H. adopted am. (Amendment 1 - HA0727)Major
- Vote recorded FLOOR VOTE: REGULAR CALENDAR MOTION TO ADOPT AMENDMENT # 2 BY BUTLER AS AMENDED PASSAGE ON THIRD CONSIDERATION 4/21/2026 Passed. Result: pass.Lower
- Vote recorded FLOOR VOTE: REGULAR CALENDAR AS AMENDED PASSAGE ON THIRD CONSIDERATION 4/21/2026 Passed. Result: pass.Lower
- Apr 21H. adopted am. (Amendment 2 - HA1209)Major
- Apr 21Passed H., as am., Ayes 76, Nays 14, PNV 1Passed House
- Apr 21Sponsor(s) Added.Minor
- Apr 21Engrossed; ready for transmission to Sen.Minor
- Apr 20
- Vote recorded HOUSE CALENDAR & RULES COMMITTEE: H. Placed on Regular Calendar for 4/20/2026 4/16/2026. Result: fail.Lower
- Apr 16H. Placed on Regular Calendar for 4/20/2026
- Apr 15Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/15/2026
- Vote recorded HOUSE FINANCE, WAYS, AND MEANS COMMITTEE: Rec. for pass; ref to Calendar & Rules Committee 4/15/2026 Passed. Result: pass.Lower
- Vote recorded HOUSE FINANCE, WAYS, AND MEANS SUBCOMMITTEE: Rec. for pass by s/c ref. to Finance, Ways, and Means Committee 4/15/2026 Passed. Result: pass.Lower
- Apr 15Rec. for pass by s/c ref. to Finance, Ways, and Means CommitteeMinor
- Apr 15Placed on cal. Finance, Ways, and Means Committee for 4/15/2026
- Apr 15Rec. for pass; ref to Calendar & Rules CommitteeMinor
- Apr 15Placed on cal. Calendar & Rules Committee for 4/16/2026
- Apr 8Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/14/2026
- Apr 1Placed behind the budget
- Mar 25Assigned to s/c Finance, Ways, and Means SubcommitteeMinor
- Mar 25Placed on s/c cal Finance, Ways, and Means Subcommittee for 4/1/2026
- Mar 18Rec. for pass. if am., ref. to Finance, Ways, and Means CommitteeMinor
- Vote recorded HOUSE COMMERCE COMMITTEE: Rec. for pass. if am., ref. to Finance, Ways, and Means Committee 3/18/2026 Passed. Result: pass.Lower
- Mar 11Action def. in Commerce Committee to 3/18/2026
- Mar 11Placed on cal. Commerce Committee for 3/18/2026
- Mar 4Rec for pass if am by s/c ref. to Commerce CommitteeMinor
- Vote recorded HOUSE BUSINESS AND UTILITIES SUBCOMMITTEE: Rec for pass if am by s/c ref. to Commerce Committee 3/4/2026 Passed. Result: pass.Lower
- Mar 4Placed on cal. Commerce Committee for 3/11/2026
- Feb 25Placed on s/c cal Business & Utilities Subcommittee for 3/4/2026
- Feb 18Action Def. in s/c Business and Utilities Subcommittee to 3/4/2026
- Feb 12Sponsor(s) Added.Minor
- Feb 11Action Def. in s/c Business and Utilities Subcommittee to 2/18/2026
- Feb 11Placed on s/c cal Business & Utilities Subcommittee for 2/18/2026
- Feb 4Placed on s/c cal Business & Utilities Subcommittee for 2/11/2026
- Feb 3Assigned to s/c Business & Utilities SubcommitteeMinor
- Feb 2P2C, ref. to Commerce CommitteeMinor
- Jan 22Intro., P1C.Minor
- Jan 21Filed for introductionIntroduced
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