TVA to raise data center rates, affecting North Alabama facilities

The Tennessee Valley Authority will raise electricity rates for new and existing data centers by about 10 percent under a new rate structure approved last week. TVA provides wholesale power through local power companies across seven states, including much of North Alabama.

TVA’s board of directors approved changes to its wholesale rate structure during its August 20 meeting in Memphis. The new data center rates will take effect October 1 and be phased in over the next three fiscal years.

The new structure creates four standard rate classes based on a data center’s contracted electricity demand. TVA Chief Financial Officer Tom Rice said the changes are expected to increase electricity costs for data centers by about 10 percent. The rates will apply to both existing and future facilities.

The changes come after TVA signed the Trump administration’s Ratepayer Protection Pledge, which calls for large electricity users to cover the costs of new generation and infrastructure needed to serve them.

TVA said the changes are intended to help the utility meet rapidly growing electricity demand while limiting costs passed on to residential and other customers. Data centers accounted for 18 percent of TVA’s industrial electricity load in 2025, and the utility has projected that data center demand in the region could double by 2030.

TVA’s 2026 Integrated Resource Plan projects that the Tennessee Valley could need between 11 and 32 gigawatts of additional generation capacity by 2040. The rate change is particularly relevant to North Alabama, where several major data center operations fall within TVA’s service territory.

Google operates a large data center campus in Jackson County near Bridgeport on the site of TVA’s former Widows Creek coal plant. The company announced in June that it plans to invest an additional $1.5 billion to expand the facility through 2027.

Google said during the expansion announcement that it would cover the electricity consumed by its operations and pay for infrastructure costs directly associated with the facility. The company said the approach was intended to prevent costs associated with the expansion from being shifted to other electricity customers.

The Jackson County facility is also part of a broader effort involving Google, TVA and Kairos Power to develop new sources of electricity for the region. Under an agreement announced last year, TVA plans to purchase power from Kairos Power’s Hermes 2 advanced nuclear project in Tennessee, with up to 50 megawatts intended to support Google data centers in Alabama and Tennessee.

Meta also operates a major data center campus in Huntsville, which receives power through Huntsville Utilities, a TVA local power company.

Meta’s Huntsville facility represented an initial investment of $750 million. The company later expanded its presence in Alabama with an $800 million data center under construction in Montgomery. The Montgomery facility, however, is outside TVA’s service territory and would not fall under the new rate structure.

TVA has identified population growth and data center expansion as major drivers of increasing electricity demand. The utility’s 2026 Integrated Resource Plan addresses the need for additional generation and infrastructure to meet that growth.

The authority said the new rate structure is intended to allow continued growth in energy-intensive industries while requiring data centers to bear more of the costs associated with meeting their electricity demand.