The proposed legislation, HB1847/SB2128, would allow large data center operators to generate or purchase their own electricity instead of relying on local utilities. Supporters say the move could protect residents from rising power bills, while critics warn it could open the door to unregulated fossil fuel expansion, News.Az reports, citing foreign media.
“We don’t want what’s happened in some other states where data centers have come in and rates have gone up $20 to $30 a month,” said state Rep. Ed Butler, who sponsored the bill.
Tennessee is experiencing a rapid increase in data center development, particularly around Nashville and surrounding regions. Many of these facilities rely on electricity supplied through the Tennessee Valley Authority, or Tennessee Valley Authority, which provides power across multiple states.
Data centers already account for roughly 10% of TVA’s total electricity load, and that demand is expected to double by 2030, according to utility projections.
In Memphis, xAI operates its Colossus data center, which powers the AI chatbot Grok. The facility has relied heavily on “behind-the-meter” power generation, including mobile natural gas turbines.
At its peak, the site used around 30 turbines, though that number has since been reduced to about 15. Combined, these units can generate enough electricity to power hundreds of thousands of homes.
The company has also secured additional power from TVA and is expanding its footprint, including plans for further facilities that could significantly increase total electricity demand.
Environmental groups warn that allowing data centers to independently generate power could accelerate the use of methane gas turbines, which emit pollutants such as nitrogen oxides, benzene, and formaldehyde.
“This bill would open the door to a massive influx of unregulated methane gas plants across the state,” said Trey Bussey of the Southern Environmental Law Center.
Studies have suggested that emissions from large-scale data center operations could significantly increase air pollution in parts of Tennessee and northern Mississippi.
TVA officials have acknowledged growing pressure from data center expansion. The utility estimates that AI and data infrastructure could become one of the fastest-growing electricity demands in the region.
To meet rising consumption, TVA has already increased electricity rates and expanded gas plant investments, while also extending the life of some coal facilities.
At the same time, lawmakers are debating how to balance economic development with consumer protection and environmental responsibility as Tennessee becomes a key hub in the AI infrastructure boom.
