Memphis leads the way in Tennessee on data center power needs, and a new report says in communities with data centers, residential electricity bills rose even as commercial bills fell.
Those findings come from a report by ThinkTennessee, a Nashville-based nonpartisan think tank. The report, called “Powering the Boom: Data Centers and What They Mean for Tennessee’s Energy Future,” says data centers are reshaping electricity demand in Tennessee.
“Tennessee is at a critical inflection point,” the report says. “Decisions made today about planning, pricing, and infrastructure will determine whether data center growth strengthens Tennessee’s economy — or places new costs and risks on households
and businesses.”
Electric bills are rising more prominently in areas with data centers, and residential customers’ bills are increasing while commercial customers’ bills decrease, the report says. Areas in Tennessee hosting data centers saw electricity bills rise 1.6 percent on average, between 2023 and 2024, compared to the statewide average of 1.3 percent.
in 2023, the Memphis City Council approved a 12-percent rate increase for Memphis Light, Gas & Water (MLGW). It was implemented over three years. The final 4-percent increase was applied to bills in January, raising household bills by about $5 per month.
The ThinkTennessee report said residential customers absorbed a 3.2 percent increase, with electric bills reaching an average of $149.10/month. While commercial customers saw electricity bill reductions of 0.2 percent, on average.
As for data center power needs, the report says Memphis leads the way, with more than 1000 MW needed to power its data centers.
“In recent years, data center electricity consumption has grown sevenfold in the Tennessee Valley region, leading to the first sustained increase in energy demand in two decades,” researchers said.
Tennessee accounts for 16.7 percent of “data center capacity currently under construction,” the report says. While this may be good for tech business here, it comes with risks.
Researchers said data centers also pose potential harms for the state’s customers. They referenced instances in Virginia and Texas where there were “sudden and simultaneous disconnections from data centers.”
Data centers who suddenly lower their electricity consumption could also cause outages.
“Grid reliability is already a concern in Tennessee,” the report said. ” During 2026’s Winter Storm Fern, 345,000 Tennessee customers lost power — more than in any other state.
It took nine days to restore power to all customers.”
The state’s available land and “business-friendly environment” coupled with its supply of renewable power sources, has also contributed to this increase in tech expansion. Researchers said the state leads the nation with a 36.6 percent increase in tech jobs.
Data provided by the group showed that prior to 2020 the state’s annual electricity consumption growth was 0.6 percent for 15 years. However the state saw a 2 percent uptick in this number between 2020 and 2024. The report said this is a direct result of data centers.
These centers along with other businesses are likely to increase growth in demand. Think Tennessee “believes that if demand exceeds projects” the Tennessee Valley Authority (TVA) may have to look at several alternatives.
“If demand turns out to be higher, it could force TVA to purchase power at prices above its generation costs, trigger rolling blackouts and rate raises, and delay connections for other commercial and industrial customers,” the reporter said.
They said that TVA has requests above demand.
Cities with data centers in the state have seen a rise in electrical costs between 2023 and 2024. ThinkTennessee said while residents saw an increase in their bills, commercial customers saw their bills reduced by an average of 0.2 percent.
xAI’s presence in Memphis has prompted a number of concerns including its impact on the power grid during peak demand.
The TVA board approved Memphis Light, Gas and Water’s (MLGW) request to power xAI in 2024. At the time, the Southern Environmental Law Center (SELC) said MLGQ requested that TVA provide 150 megawatts of power to xAI.
SELC said this demand was enough to power 100,000 homes.
According to the Greater Memphis Chamber, xAI would not take any power from the grid “during emergencies or when the grid is strained so that all available power is going to the community.
The Chamber said the company agreed to this in a contract with TVA and MLGW.
“[xAI is] exploring ways with MLGW and TVA that they can provide additional energy to the grid for the community,” The Chamber said.
