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The US Secretary of Energy Chris Wright has directed the Federal Energy Regulatory Commission (FERC), an independent agency that regulates the interstate transmission of electricity, to make a rule that would help rapidly move electricity onto the US grid in large amounts. Wright’s announcement last month responded to frustrations of data center developers about access to energy as well as customer concerns about high prices due to increased electricity demand.
Data centers power artificial intelligence (AI), which has huge energy needs that can sometimes make electricity scarcer and result in higher utility bills for ratepayers. The price of electricity was a campaign issue in the November gubernatorial elections in New Jersey and Virginia. Once written, FERC’s new rule could connect large electric loads to the grid more efficiently, helping both AI companies and Americans who struggle to pay their bills.
FERC will issue an advance notice of proposed rulemaking (ANOPR) and will seek public comment on its proposal. Wright has directed that the rule be issued no later than April 30, 2026.
In this Q&A, Neil Chatterjee—distinguished visiting fellow at the Center on Global Energy Policy and former chair of FERC—answers questions about why the decision is important, what trends inspired it, how it could affect consumers and companies using the US grid, and how the rulemaking may unfold.
The US faces three major energy challenges. The first is to win the AI race for national security purposes and economic purposes. The second is to reduce the cost of electricity for Americans who have been burdened by high prices and are concerned about affordability. The third is to maintain reliability and resource adequacy. There are huge consequences to losing the AI race or sacrificing reliability or affordability.
Hyperscalers [data centers] need energy and the resilience benefit of being grid-connected. Most importantly, they need power in a timely fashion. Time to market matters when it comes to winning the AI race. This action is being taken, in part, in response to companies that are frustrated by delays in the time to power dynamic.
Traditional utilities and state regulators are concerned about jurisdictional questions and what they will mean for their ability to build out the infrastructure necessary to maintain the reliability and affordability of their systems. Flexibility is having a moment.
Loads of more than 20 megawatts will be affected by this ruling, which is generally in line with how FERC has historically defined large interconnections and would seem to cover most data centers, if not all, which are likely to be far greater in size.
The coming surge in electricity demand is being driven not just by AI and data centers to support AI, but also by streaming services, increased vehicle and building electrification, a reshoring of manufacturing and semiconductor manufacturing, crypto and Bitcoin mining, cloud computing, and quantum computing. The current US system for interconnecting large electric loads has caused widespread frustration. Data center developers are frustrated by a slow interconnection process and customers are worried about higher bills. Stakeholders are also concerned about resource adequacy, grid reliability, peak periods, and whether residential consumers will suffer in the face of capacity constraints during peak times on the grid.
The fundamental challenge in the energy space is meeting the advancing surge in demand and maintaining reliability and resource adequacy without compromising affordability. FERC has been wrestling with this for some time and DOE is trying to provide some guidance on an adequate and fair path forward.
If the US does not take action, it potentially cedes the AI race to China, which is likely to have both national security and economic implications. However, if the policy is not balanced, residential consumers could see significant increases in their bills when they are already being challenged by high electricity costs. During a time when capacity is already limited, more and more capacity could be taken off the grid and redirected to data centers. That could lead not just to price hikes but reliability challenges. Regulators will have to account for the hottest hours of summer and the coldest hours of winter, when air conditioning or heat ceases to function. DOE is trying to address that by focusing on load flexibility. If this process can foster load flexibility by reducing and curtailing electricity use during the small number of hours per year when electricity supply is limited, data centers and other large load customers could obtain service without spurring a need for more power plant capacity.
The sources of large loads want to be grid-connected and have access to the resilience that the grid provides. The problem is a complex Gordian knot that FERC could solve.
There are at least a few FERC tariffs with load interconnection provisions, but that jurisdiction is now, for the first time, a serious issue. The discussion around jurisdiction could revolve around the idea that interconnection service for retail customers—including large load customers—has always been regulated by the states. The Federal Power Act notes that retail service to end users is regulated by the states. Large load customers are retail customers. As a result, these arrangements inherently tee up jurisdictional questions that will be the subject of further debate.
State regulators, utilities, and large load customers have also been working to put retail tariffs and other frameworks in place to bring large loads online and protect everyday customers. They may make the case that FERC action should take care not to disrupt that forward progress. Others, including DOE and hyperscalers, could argue that the implication of the DOE’s ANOPR is clear, that transparent rules of the road and speed to power are necessary, and that this will also promote more efficient siting, meaning less overbuilding of the transmission system.
In this proposal, DOE was clear about the problem it is trying to solve but left FERC with significant latitude in deciding how to solve it. However, some may question whether FERC has this authority or whether it is instead treading into retail jurisdiction. Although an accelerated comment period has been announced, the ANOPR will almost certainly be converted into a notice of proposed rulemaking and FERC is going through the proper process with a goal of establishing rules that are defensible and can withstand scrutiny.
FERC has opened a comment period. DOE would like stakeholders that are confronting these issues to comment in the docket so that FERC is informed of the opportunities, challenges, and potential solutions that can be brought to bear by stakeholders.
FERC already has a robust record in this area. It has held a technical conference on this issue, and, for more than a year, has begun to address data center co-location. April 30, 2026, is an ambitious deadline but is possible given the work FERC has already completed to date. FERC could also request more time.
That being said, time is of the essence. If the US is to win the AI race, Americans need clarity on the path forward for providing the power necessary for it.
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From Aaron Bartnick, New York, NY, US
