Twenty-Three States Have Approved Tariffs Making Data Centers Pay Their Own Power Costs. Tennessee Wrote an Exception Instead.

MEMPHIS, Tenn. - Across the country, state utility regulators have been answering the same question Memphis has not yet asked out loud: when a data center needs new generation and new transmission, who pays for it.

As of May 2026, twenty-three states had approved at least one large-load tariff, with another seven pending, according to the Edison Electric Institute. A large-load tariff is a binding set of rate and service rules for very large customers, determining what they pay and on what conditions they connect to the grid. Its central purpose is to require those customers to bear the incremental costs of serving them, rather than spreading those costs across every household on the system.

What other regulators decided

Wisconsin's Public Service Commission rejected a proposal that would have required ratepayers to share the cost of new power plants built for data centers. Data centers in We Energies' service area are instead expected to pay the whole cost. Commissioners also lowered the threshold at which the very large customer tariff applies, from facilities demanding 500 megawatts down to 100, and raised the minimum contract length between data centers and the utility from the ten years the utility proposed to fifteen.

One commissioner framed the reasoning directly, saying that in the meantime the commission needed to make sure existing customers were not paying for data center transmission.

The Wisconsin order also insulates ratepayers from paying more for transmission if data centers fail to meet their projected load. That provision addresses stranded cost risk, the possibility that a utility builds capacity for demand that never arrives and recovers the cost from everyone else.

Oregon's Public Utility Commission approved a large-load tariff framework for Portland General Electric in May 2026, establishing cost allocation measures intended to reduce cross-subsidization. A separate proceeding involving PacifiCorp remains unresolved.

Minnesota enacted a law in 2025 requiring its utility commission to create a "very large customer" rate class and allocate all attributable costs of service to that class.

Microsoft, responding to the Wisconsin decision, said it has always been committed to paying the costs its operations require and that the tariffs give it a clear path to continue investing in the state while protecting other ratepayers. Environmental and consumer groups supported the ruling. That is worth noting: in Wisconsin, the hyperscaler and the ratepayer advocates ended up on the same side of the order.

What Tennessee did

Tennessee's 2026 law requires owners of data centers demanding at least 50 megawatts to pay for infrastructure upgrades needed to generate the electricity they use. State Senator Brent Taylor, a Shelby County Republican, sponsored it in the Senate and has said it is meant to protect ratepayers from bill increases.

The law also permits utilities to help cover those costs in two circumstances: where the upgrades benefit other ratepayers, and where they follow the normal rules applied to all large electricity customers.

Those are the categories the tariffs in Wisconsin, Oregon and Minnesota are designed to constrain. Tennessee wrote them as permissions.

Tennessee's law additionally allows a data center to generate its own electricity, using equipment such as gas turbines, without state or local oversight.

Where Memphis stands

Memphis Light, Gas and Water is the municipal utility serving the xAI Colossus campus. It is owned by the City of Memphis and governed by a board the mayor appoints and the City Council confirms.

MLGW does publish a rule, and it is worth reading in full. Section 12.4 of MLGW's Service Policy Manual, titled Electric Financial Arrangements for Demands Over 5000 kW, states in a single sentence that MLGW will negotiate all terms, conditions, design, and financial arrangements with all new and existing customers with kilowatt demands over 5,000 kW. That is the whole of it.

The contrast with smaller customers is sharp. Section 12.3 covers general power and industrial customers at 5,000 kW or less, and it gives them a formula. MLGW builds the lowest-cost line extension at no charge provided the cost does not exceed three times the estimated annual gross margin it expects from that customer, and the customer pays any excess on a non-refundable basis. A business below the threshold can calculate what it owes. Above the threshold there is no published formula, only negotiation.

MLGW's own policy contemplates customers of this scale. Its electric service contract term tables extend to a category labeled 350,001 kilowatts and above, which carries a minimum ten-year term. Section 12.3 also requires customers to disclose all electrical load subject to self-generation, and provides that MLGW may claw back a margin allowance if undisclosed self-generation reduces the revenue MLGW expected.

So the published answer exists, and the published answer is that the terms are negotiated privately. In twenty-three states a resident can look up the standard that governs a data center's cost responsibility. In Memphis a resident can look up the standard that governs a corner store, and for the largest new electrical load in the city's recent history the published standard is that MLGW negotiates.

There is a fair counterargument. MLGW is a municipal utility, not investor-owned, and it is not regulated by a state public service commission the way Dominion or We Energies are. Its rates are set through the City Council rather than a regulatory docket, which is a different process, not necessarily a worse one, and one that is at least nominally more accountable to local voters. The comparison to other states is a comparison of transparency and structure, not an assertion that MLGW has done anything improper.

Why It Matters for Memphis

Brookings Institution analysis has warned that without protective measures, residential electricity rates could rise 15 to 40 percent by 2030 as grid upgrade costs flow through to household bills. That is a forecast rather than a record, and it should be read as one. But it is the reason twenty-three states moved.

Memphis has the load. It has a municipal utility. It has a state law with an exception in it. What it does not have, so far as the public record shows, is a published rule saying who pays.

Accountability Watch

Who is accountable: Memphis Light, Gas and Water, which serves the load and sets service terms. The Memphis City Council, which approves MLGW rates and confirms its board. The Tennessee General Assembly, which wrote the cost-sharing exception.

What is pending: Disclosure of the negotiated terms for large-load customers under Section 12.4, and whether MLGW will adopt a published formula or rate class for customers above 5,000 kilowatts.

Timeline: Minnesota rate class law enacted 2025. Wisconsin very large customer tariff order, April 2026. Oregon PGE framework approved May 2026. Edison Electric Institute count of twenty-three approved state tariffs, May 2026. Tennessee data center law enacted in the 2026 session.

Status as of August 3, 2026: MLGW's published policy for demands over 5,000 kilowatts is individual negotiation. No formula or rate class for customers of that size has been identified.

How to verify: MLGW's Service Policy Manual is published at mlgw.com. Read Section 12.3 and Section 12.4 side by side. Rate schedules and any board action on industrial or large-load service classification are public and available through the utility and the City Council's records. The Edison Electric Institute publishes its list of large customer projects and tariffs. State orders in Wisconsin, Oregon and Minnesota are published by their respective commissions.