Energy

Plain English Breakdown

The official source material does not provide specific details on how the surcharge is calculated and enforced, leaving some uncertainty in these areas.

Bring Your Own Generation (BYOG) Act

This bill requires large data centers and artificial intelligence facilities to generate at least half of their electricity from on-site carbon-free sources and imposes a surcharge for grid upgrades, while also prohibiting fossil fuel incentives.

What This Bill Does

• Requires the state energy policy council to impose and collect a clean energy transition surcharge on data centers with peak demand of at least 100 megawatts (MW) to fund new clean energy resources and transmission upgrades.
• Mandates that large data centers or AI facilities generate at least half of their electricity from on-site carbon-free sources, ensuring no reduction in public energy supply.
• Prohibits the use of fossil fuel power purchase agreements for state economic development incentives or reduced utility rates.

Who It Names or Affects

• Data centers and artificial intelligence facilities with peak loads exceeding 100 MW
• The Tennessee environmental protection fund

Terms To Know

Clean energy transition surcharge

A fee collected from large data centers to fund new clean energy resources and grid improvements.

Qualified data center

A data center that meets certain criteria, such as peak demand of 100 MW or more, and is subject to specific regulations.

Limits and Unknowns

• The exact fiscal impact cannot be determined due to unknown factors like the number of affected data centers and the amount of surcharges collected.
• This bill does not specify how the clean energy transition surcharge will be calculated or enforced.

Official Summary Text

Th
is bill requires the
state energy policy council
to
impose and collect a clean energy transition surcharge on a data center that has a peak demand of 100 megawatts or more. The clean energy transition surcharge must equal 100% of the proportional costs of adding new clean energy resources to the grid, in
cluding transmission upgrades. The council must collect the surcharge and deposit the funds into the Tennessee environmental protection fund. The state energy policy council must ensure that no costs associated with serving the data center are shifted t
o
customers.

ONSITE CLEAN ENERGY GENERATION AND PROHIBITION OF FOSSIL FUEL INCENTIVES

This bill requires a
new data center or artificial intelligence facility in this state that has an estimated peak load exceeding 100 megawatts
to
derive 50% of its electricity supply from new, carbon-free energy sources located onsite or through direct interconnection. The amount of new, clean energy generated must prevent a net decrease in the energy available to the public transmission and dist
ribution system.

This bill prohibits fossil fuel power purchase agreements from being used to qualify for any state economic development incentives or reduced utility rates. A qualified data center must not utilize state-subsidized fossil fuel generation for its primary
power load.

Current Bill Text

HOUSE BILL 2463
By Pearson

SENATE BILL 2681
By Kyle
SB2681
011037
- 1 -

a*68,67-6-102,39-17-1002
AN ACT to amend Tennessee Code Annotated, Section
39-17-1002; Section 67-6-102 and Title 68,
relative to the Bring Your Own Generation (BYOG)
Act.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 68, is amended by adding the following
as a new chapter:
68-206-101. Short title.
This chapter is known and may be cited as the "Bring Your Own Generation
(BYOG) Act."
68-206-102. Chapter definitions.
As used in this chapter:
(1) "Artificial intelligence" has the same meaning as defined in § 39-17-
1002;
(2) "Data center" has the same meaning as defined in § 67-6-102;
(3) "Qualified data center" has the same meaning as defined in § 67-6-
102; and
(4) "State energy policy council" means the council created by § 68-204-
101.
68-206-103. Clean energy transition surcharge.
The state energy policy council shall impose and collect a clean energy transition
surcharge on a data center that has a peak demand of one hundred megawatts (100
MW) or more. The clean energy transition surcharge must equal one hundred percent

- 2 - 011037

(100%) of the proportional costs of adding new clean energy resources to the grid,
including transmission upgrades. The council shall collect the surcharge and deposit the
funds into the Tennessee environmental protection fund, pursuant to § 68-203-101. The
state energy policy council shall ensure that no costs associated with serving the data
center are shifted to customers.
68-206-104. Onsite clean energy generation mandate.
A new data center or artificial intelligence facility in this state that has an
estimated peak load exceeding one hundred megawatts (100 MW) shall derive fifty
percent (50%) of its electricity supply from new, carbon-free energy sources located
onsite or through direct interconnection. The amount of new, clean energy generated
must prevent a net decrease in the energy available to the public transmission and
distribution system.
68-206-105. Prohibition of fossil fuel incentives.
(a) Fossil fuel power purchase agreements (PPAs) cannot be used to qualify for
any state economic development incentives or reduced utility rates.
(b) A qualified data center shall not utilize state-subsidized fossil fuel generation
for its primary power load.
SECTION 2. Tennessee Code Annotated, Section 68-204-103(b), is amended by
adding the following as a new subdivision:
(7) Create and impose a clean energy transition surcharge on a data center that
has a peak demand of one hundred megawatts (100 MW) or more, pursuant to § 68-
206-102.
SECTION 3. Tennessee Code Annotated, Section 68-203-101(b)(1), is amended by
adding the following as a new subdivision:

- 3 - 011037

(O) The Bring Your Own Generation (BYOG) Act, compiled in chapter 206 of this
title.
SECTION 4. The headings in this act are for reference purposes only and do not
constitute a part of the law enacted by this act. However, the Tennessee Code Commission is
requested to include the headings in any compilation or publication containing this act.
SECTION 5. This act takes effect July 1, 2026, the public welfare requiring it.