Summary of Bill: SB 2128 / HB 1847 (Session 114, Tennessee)
Purpose and overall intent
- The bill aims to restructure the financial responsibility for data center-related infrastructure. It requires the owner or operator of a data center (whether proposed or existing) to pay the full cost of infrastructure needed to support the data center, including upgrades or expansions to existing utility infrastructure necessary to serve the data center while preserving service to other utility customers.
- It also directs electric utilities to set ratemaking and pricing to ensure that costs for data-center-related infrastructure are paid solely by the data center owner/operator, and not by residential or other non-data-center customers.
- The bill creates specific definitions around data centers and related infrastructure and would take effect January 1, 2027 (with amended version taking effect July 1, 2026 in the amended text).
Key provisions and changes (substantive)
- New Chapter 13-12 added in Title 13:
- Definitions:
- Data center: building primarily containing electronic equipment and necessary environmental control and cooling equipment.
- Infrastructure: roads, water, wastewater, natural gas, electric, transmission lines, substations, transformers, telecom/fiber, stormwater facilities, and related facilities required for development and construction of a data center and benefiting the data center.
- Cost of infrastructure: all capitalizable costs under GAAP for purchasing, constructing, installing, and equipping infrastructure, plus fees or costs imposed by municipalities or utility providers related to construction/installation or as a condition of delivering utility services.
- Cooling equipment, electric utility, electric service, local government, etc. (as defined).
- Financial responsibility:
- Section 13-12-102(a): The owner/operator of a data center (new or expanding) shall pay the full cost of infrastructure needed to support the data center, including upgrades necessary to serve the data center and maintain service to existing customers.
- Section 13-12-102(b): Local governments, the state, or a utility may enter into agreements about infrastructure, but such agreements cannot shift the cost to someone other than the data center owner/operator.
- Utility ratemaking and rate protections:
- Section 13-12-103(a): Electric utilities must conduct ratemaking to ensure costs of infrastructure and electric service to the data center are paid solely by the data center owner/operator; utilities may not raise rates for residential or non-data-center commercial/industrial customers due to the data center’s demand.
- Section 13-12-103(b): Utilities cannot allocate the data center-related costs to other customers or groups.
- Section 13-12-103(c): Utilities may create a new customer class for data centers if necessary to implement these provisions.
- Section 13-12-103(d): Before any rate increase, a written finding must be made that the increase is not attributable to the data center, and that finding must be publicly available.
- Section 13-12-103(e): Individuals or entities harmed by potential violations may file complaints with the TPUC, a utility’s governing board, or the local government owning the utility (depending on the utility type).
- Effective date:
- Original bill: January 1, 2027.
Amended version ( Fiscal Memorandum reflects amendments): Effective July 1, 2026 for certain provisions, with applicability to conduct on or after that date.
- Compliance and enforcement:
- Complaints process described for affected customers or groups.
- Provisions include potential new customer classifications and standards for cost allocation.
Alternative and related provisions (as amended)
- The fiscal analysis (amended version) allows for:
- Utilities to reimburse data centers under their standard policies (not more favorable than other customers) and only if not causing rate increases for existing customers.
- Possible revenue or cost-sharing arrangements with independent power producers (IPPs) for data center energy needs, with constraints to ensure fairness and non-discrimination among customers.
- IPP energy options behind the meter or via utility interconnections.
- Exclusions for certain facilities owned by the state or providers of telecommunications/broadband/internet services in some versions.
Affected parties
- Data center owners and operators (primary financial responsibility for infrastructure and related costs).
- Electric utilities (subject to specific ratemaking that isolates data center infrastructure costs from other customers; potential new data-center-specific rate class).
- Residential and non-data-center commercial/industrial customers (protected from rate increases due to data-center-related upgrades; may file complaints if violations occur).
- Local governments, the state, and utility providers (may enter agreements but cannot subsidize data-center infrastructure costs).
Procedural/timeline aspects
- Primary effective date: January 1, 2027 (as introduced).
- Amended version indicates a potential effective date of July 1, 2026 for some provisions, with applicability to contracts or agreements entered into on or after that date.
- Establishes a complaint mechanism routed through TPUC, utility boards, or local governments depending on the utility type.
- Includes a requirement for written, public findings before rate increases attributable to data centers.
Fiscal and commerce implications
- Estimated significant cost avoidance for state and local governments and utilities in relation to infrastructure subsidies.
- Anticipated new costs for data center developers/operators (potentially substantial, exceeding $10 million statewide, per fiscal notes).
- Possible broader effects on data-center expansion and energy market dynamics, including IPP interactions and cost-sharing arrangements with utilities.
Notes
- The bill is under consideration with amendments introducing nuanced cost-allocation rules, potential reimbursements under utility policies, and IPP participation, while maintaining strict protections against pass-through costs to non-data-center customers.
