ABC24 This Week: Data Center Regulation
The Memphis City Council has passed the first reading of a proposal to temporarily ban new data center permits. Concurrently, the Tennessee Valley Authority approved a new utility rate class for data centers, which will significantly increase upfront costs for developers. These actions aim to regulate the rapidly growing data center industry in the Memphis region.
The Memphis City Council and the Tennessee Valley Authority (TVA) are implementing new regulations concerning data centers, which are currently the largest taxpayers in Memphis.
The Memphis City Council recently passed the first reading of a proposal to enact a temporary ban on approving permits for new data centers and large computing facilities. This move signals a potential hurdle for developers looking to build in the region, though the final bill is still subject to further readings and votes.
Separately, the Tennessee Valley Authority has approved and implemented a new utility rate class specifically for data centers, effective October 1st. This change is expected to make it significantly more challenging and expensive to develop data centers, as it introduces a non-refundable fee of $1.52 million per megawatt for projects exceeding 5 megawatts. For a 300-megawatt data center, this could mean an upfront payment of $450 million, requiring developers to have substantial capital. Previously, data centers were treated under a manufacturing rate class, similar to companies like Electrolux. The new rate reflects that data centers primarily consume electricity and, while offering high-paying jobs, do not generate a large volume of employment compared to their property tax contributions.