TVA Books $1.7 Billion Data Center Capacity Deal at $1.5 Million per MW

The Tennessee Valley Authority has signed its first disclosed data center deal under a new up-front pricing regime, and it is worth $1.7 billion. The federal power producer entered a Capacity Commitment Charge agreement on Nov. 10, entitling it to $31 million at signing and the balance across 59 installments, according to its annual report filed Nov. 13 for the fiscal year ended Sept. 30.

TVA did not name the customer or the site. The filing states the mechanism plainly. "Capacity commitment charges under the agreement are based on a rate of approximately $1.5 million per MW of requested capacity above 5 MW," it says. At that rate, $1.7 billion corresponds to roughly 1.1 GW of requested capacity. That figure is a calculation, not a disclosure; TVA did not report the megawatts.

How the charge works

The agreement sits inside a broader rate overhaul. TVA's board approved changes to its wholesale rate structure in August 2026, including new power rate schedules for data centers, effective Oct. 1 and phased in through 2029. Alongside them, TVA created the Capacity Commitment Charge for new and expanding data center loads above 5 MW, in its words, "to cover the incremental capacity costs of data center demands."

The roughly $1.5-million-per-MW rate is not permanent pricing. It "reflects TVA's current cohort-based pricing methodology, which may be revised for future customer cohorts," the filing says. In short, later data center customers could pay a different rate.

TVA frames the change as protection for its existing base. The structure aligns with the Ratepayer Protection Pledge, the subject of a March 4, 2026, proclamation, and is meant to shield existing customers "from cost shifting and rising rates." The charge also gives TVA an additional source of liquidity. For the Nov. 10 deal, TVA plans to book the $31 million initial payment as a receivable with an offsetting regulatory liability, and it has not yet decided over what period to amortize it.

Who pays for data center power?

The question extends well beyond Tennessee. Disputes over who bears the cost of data center electricity are active from Talen's Ohio capacity sales to Texas bills targeting data center tax breaks. The US Energy Information Administration expects national power use to set records in 2026 and 2027.

TVA's own risk disclosures show the pressure from both directions. The 10-K lists "unexpected increases (driven by factors such as AI data centers, cryptocurrency mining, electric vehicles, and new large customer loads)" alongside unexpectedly low demand as risks that "could result in stranded costs, rate actions, curtailments, or a need for unplanned capital." If data center demand outruns its plans, TVA warns it may have to buy power at higher prices, delay serving new industrial customers or, in an emergency, curtail load.

What is TVA adding on supply?

New generation is moving on several tracks:

• Three of four generators at the Cumberland combined-cycle gas plant began pre-commercial operation in fiscal 2026.
• The board approved another 1,550 MW of gas generation targeted for 2032.
• The Nuclear Regulatory Commission approved a construction permit for a GE Vernova Hitachi BWRX-300 small modular reactor at the Clinch River site in Oak Ridge, Tennessee, though TVA "has not yet decided whether to construct a reactor at the site."
• TVA holds a power purchase agreement for up to 50 MW from Kairos Power's Hermes 2 plant.

Fiscal 2026 results

The year to Sept. 30 was strong across the board:

Metric	2026	2025	Change
Operating revenue	$14.22B	$13.67B	+4.0%
Operating income	$3.29B	$2.57B	+28.1%
Net income	$2.12B	$1.36B	+56.0%
Sales (billion kWh)	171.7	167.6	+2.4%

Operating expenses fell 1.6% to $10.93 billion, while interest expense rose 5.4% to $1.26 billion. Sales to local power companies, which resell TVA power to homes and businesses, rose 3.9% to $12.82 billion. Capital spending reached $4.9 billion.

The takeaway from the numbers is that TVA is converting data center demand into contracted, up-front revenue while shifting capacity costs onto the customers who create them. Whether the cohort-based rate holds as a benchmark will depend on how competing utilities price the same demand.