Part 5 in a series about data centers, power, and the grid in Middle Tennessee.

Last month we covered how Memphis got here. This month is about what a city can do once a facility is running, and what Tennessee has already decided for them.

Last month I wrote that Colossus was running before Memphis had rules for it. This month is about what a city can still reach once that has happened.

The short version: seven weeks in, nothing has been settled.

On Aug. 18, Memphis City Council members introduced a 12-month moratorium on new data center development. It passed first reading. On Sept. 1, it passed second reading. On Sept. 15, a few hours before the third and final vote, council member J.B. Smiley Jr. pulled it from the agenda and moved the vote to Oct. 6.

He did not withdraw it. He said he would amend it to include suggestions from other council members and narrow it to hyperscale facilities like SpaceXAI’s Colossus I and II.

The council did approve two sets of guidelines that afternoon, from council members Philip Spinosa and Jeff Warren, on second reading. Spinosa’s would require any data center drawing 20 megawatts or more to disclose its site plan, electrical demand, computing capacity, cooling design, water use, and backup generation. It would also require closed-loop cooling, with no groundwater or aquifer water used for cooling. Warren’s would bar facilities that rely on evaporative cooling using large amounts of water or large local water withdrawals, and would add disclosure requirements, penalties, and enforcement.

Second reading is not final either.

Why It Is Hard
These three obstacles would face any city. First, a moratorium is forward-looking. It applies to permits going forward, not to development already permitted. Memphis is not arguing about whether Colossus gets to stay. That was settled the day it opened.

Second, a moratorium is a legal instrument with costs attached, not a free timeout. After Metro Nashville passed its own moratorium and moved to acquire the land through eminent domain, the data center company DC BLOX sued in federal court.

Third, the Memphis council’s own attorney has told them a pause may not be the right tool. Allan Wade explained that a framework like Spinosa’s moves faster than a year-long pause, and that once rules are in place governing how these facilities operate, a moratorium is no longer necessary. He also noted a moratorium cannot run forever.

He has also told the council its primary authority over these facilities is likely through zoning, in deciding where they can be located, and that the council should not assume it has powers it does not have.

The View From Nashville
State Rep. Justin J. Pearson represents a Memphis district near the Colossus facilities, co-founded Memphis Community Against Pollution, and is the Democratic candidate for Tennessee’s 9th Congressional District. He does not think the city has to choose.

“First of all, yes, cities need a moratorium, for one year minimum, for city governments and voters to get a grip on what the facts are and what the environmental and financial implications could be with these data center projects,” Pearson told me in a written response.

He also drew a line between what a city can do and what the state can do. “As a state legislator, our power is broader, but is flexed less often,” he said, “like this very moment, where cities have the power to say yes or no, quickly.”

He wants the legislature to define what a data center is and lay out the process an applicant must clear.

“The state needs to slow the development of these data centers, full stop,” Pearson said. “The state needs to be able to safeguard the taxpayers by shifting energy costs away from ratepayers and ensure extremely tight environmental protections and policies for clean air and water.”

What the State Already Did
Tennessee passed a data center law this year, and it got little attention.

Public Chapter 961, signed May 7, generally bars a municipality or electric utility from absorbing the cost of electrical infrastructure to serve a data center projected to draw 50 megawatts or more in its first three years. Sen. Brent Taylor, a Shelby County Republican, sponsored it in the Senate. Taylor is also Pearson’s opponent in the 9th District race, so their disagreement over what comes next is also a campaign issue.

Pearson voted against the House version. Taylor has made that a talking point, telling The Center Square it was the only bill regulating data center costs to clear the General Assembly.

The bill lets a utility allocate part of the infrastructure cost to general system improvements and lets a utility reimburse a data center under its standard policies. It also lets data centers buy power directly from independent producers inside Tennessee, including behind their own meter.

Taylor said that in his view, testimony at a recent council meeting showed no major air pollution issues near the xAI site, and that industrial users should be monitored. He also argued a moratorium would give xAI a monopoly, since it would reach only new data centers and leave existing operations untouched.

That last point is not partisan. It is the same limitation described above, arriving from the opposite direction.

What This Means Across the State
Public Chapter 961 protects ratepayers from paying for somebody else’s substation and, in the same act, opens a path for data centers to buy power outside the utility entirely. Pearson voted no. Taylor wrote it. That is the law Middle Tennessee operates under. A local government can write zoning rules. It cannot write itself authority the state has already spoken on.

The Memphis council votes Oct. 6.