TVA's Board Puts Data Centers in Their Own Rate Class, About 10% Higher, and Approves Direct Service Above 100 MW for SpaceXAI

The Tennessee Valley Authority board did two things for data centers at its quarterly meeting in Memphis on Thursday, August 20. It moved them into a rate class of their own, priced about 10% above what they pay now on average, with a new charge on loads above 5 MW ^[1,3]. And it approved more than 100 MW of firm power for MZX Tech LLC, the SpaceX subsidiary doing business as SpaceXAI, which will take service directly from TVA rather than through the local utility ^[1,2].

The first is a rate design for data centers, existing and new, across a seven-state service territory ^[2,5]. The second is one customer. The rate got one slide ^[5].

What the board approved

TVA is a federal power agency. It sets wholesale rates through its own board, not a state commission, and sells to the Knoxville Utilities Board, Huntsville Utilities and 151 other local power companies, which resell to homes and businesses ^[6]. That makes the board vote the whole approval. There is no separate tariff case.

The slide titled “Data Center Rate Change Summary” lists the pieces ^[1]:

• A new standard data center rate, effective October 1, 2026.
• A Capacity Commitment Charge, or CCC, for new or expanding loads above 5 MW, which TVA says recovers incremental capacity costs so that new data center customers “do not shift costs to other customers.”
• Capacity commitment provisions written into each data center B, C and D rate schedule.
• A Power Interruption Provision with terms for data centers that ask to come online before the “availability date,” meaning before TVA has the supply to serve them.
• Transitional treatment for “in-flight” data centers that meet specific criteria.
• An expected all-in average billing impact of about 10%, phased in over three consecutive fiscal years.

Chief Financial Officer Tom Rice told the board that data centers move off manufacturing rates into their own class, and that new data centers will pay the capacity commitment charge up front over three to five years to fund grid upgrades, according to WSMV ^[3]. Rice said the upfront fees are there to protect other ratepayers if projected demand does not show up ^[3].

The same package, also effective October 1, lets TVA reduce a customer’s contract demand if it goes “materially unused,” adds a stability-focused contract option for existing manufacturers above 5 MW, and updates the board’s policy on new power requirements above 100 MW ^[1]. The board also approved the 2026 Integrated Resource Plan, which projects a need for 11 to 32 GW of additional generation by 2040, and a fiscal 2027 budget with more than $13 billion in planned spending through fiscal 2029 ^[2].

How the rate got here

TVA staff sent letters to the local power companies in February proposing a data-center-only rate class that would pull data centers out of the manufacturing class and the General/Small Manufacturing Credits program, according to Knox News ^[6]. The stated goal was to avoid “undue cost increases” for other customers ^[6]. TVA and its customers then entered a 180-day negotiation set to conclude two days before this meeting ^[6]. In May, TVA spokesperson Melissa Greene said the proposal “will continue to evolve between now and then” ^[6].

Data centers were nearly a fifth of TVA’s industrial-customer demand in early 2026, and former CEO Don Moul said in February that the volume could double by 2030 ^[6]. That is a statement about a forecast, not a measured load.

In July, TVA signed the Ratepayer Protection Pledge, which the administration announced in March ^[8]. TVA’s slide lists its five commitments for hyperscale and AI companies: build, bring or buy new power supply; pay for required grid upgrades; pay for dedicated power and infrastructure whether they use it or not; invest in local jobs; and make backup power available during scarcity events ^[1]. The board presentation says TVA will talk with customers that want to bring their own generation, “provided they align with the principles” of the pledge ^[1].

What it does to cost and to SpaceXAI’s connection

What the slide does not say is the price. There is no dollar figure for the CCC in the board presentation or the release ^[1,2]. There is no definition of “data center” separate from other large loads, no contract term, no minimum bill and no exit fee ^[1]. The B, C and D schedules the CCC attaches to were not posted. The 10% figure is an average across customers, so any single data center’s change could be larger or smaller ^[1].

The SpaceXAI item is more specific about the customer than about the price. TVA’s presentation describes MZX Tech as a new TVA directly served customer, seeking direct service for its MACROHARD and MINIHARD data centers in south Memphis ^[1]. Commercial terms listed are the new data center rate, the CCC and a transmission expansion scope; reliability terms include “strict operational requirements, including demand response,” near- and long-term transmission upgrades and bulk energy storage ^[1]. The board approved “greater than 100 MW” of new supply, contingent on the company meeting, “for its full load,” the requirements TVA sets, and delegated those terms to the CEO ^[1,2]. The Daily Memphian reported that the request was for power to the Colossus II campus, which stretches between Memphis and Southaven ^[4].

Compare February. On February 11 the board approved an additional 150 MW for xAI’s Memphis operations, on top of a 150 MW agreement from 2024, and that power ran through Memphis Light, Gas & Water ^[7]. TVA’s chief business officer, Jeremy Fisher, told the board then that the load was “consistent with the contract we have in place for Memphis Light, Gas & Water” ^[7]. Thursday’s approval takes the next increment outside that contract. TVA requires a board vote for any new load of 100 MW or more ^[7]. The board approved a number with a floor and no ceiling.

Where the sides stand

TVA frames the rate as protection. “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,” Chair Mitch Graves said ^[2]. Interim CEO Mike Skaggs said TVA will build capacity and transmission “right below what the demand is, and we won’t build anything above what the demand is,” according to WSMV ^[3].

The Southern Alliance for Clean Energy says the public cannot test that. Its response, posted the same day, says “all the public knows about it is one slide with seven bullet points” and that no board member asked a question before the unanimous vote ^[5]. The group asks how TVA defines a data center, what the contract minimum and exit fees are, and whether a cost-of-service study exists ^[5]. Its concern is stranded cost: if TVA builds long-lived infrastructure and a data center closes after five years, “the rest of us customers will be stuck paying for that infrastructure” ^[5]. It called on TVA to release the rate schedule, the cost study and the workpapers ^[5].

The Sierra Club’s Bonnie Swinford aimed at the resource plan rather than the rate, saying “Data centers need this gas buildout; the people need renewable energy” ^[3].

SpaceXAI and the local power companies had made no statement on the rate in the record this piece draws on.

What I’m watching

October 1 is when the rate takes effect ^[1]. By then the rate schedules, the per-megawatt charge and the transitional criteria have to exist somewhere a customer can read them. Whether TVA posts them is the first test of the pledge it signed.

Second, the MZX Tech contract. The board set a floor of 100 MW and handed the rest to the CEO ^[1]. The interruption terms and transmission scope in that agreement will be the first applied version of the new rate.