FERC issues Show Cause Order accelerating power grid hook-ups for AI data centers and large advanced manufacturing loads.
The Federal Energy Regulatory Commission (FERC) has approved orders requiring six regional power grid operators to remove bottlenecks that could slow connections for AI data centers and other large energy users to the nation's grid. The move addresses consumer concerns about data centers driving up electricity prices while maintaining state control over retail rates.
Under the order, data centers will bear the full cost of necessary grid upgrades. Grid operators have 30 days to respond with plans to ensure adequate power supplies for new and future data centers, and 60 days to respond with detailed plans to integrate large power users in line with the new guidelines. These grid operators and transmission owners must also explain why their current rules are justified or state whether they will make changes in five main categories, including establishing clear processes for connecting very large energy users and allocating infrastructure costs to large customers.
FERC described the orders as aimed at "moving to ensure that Americans have reliable, affordable power—even as electricity demand and technology accelerates." The commission used Section 206 of the Federal Power Act, which gives FERC authority over interstate transmission and wholesale markets while leaving retail sales, local distribution, and siting to the states. This approach bypasses the lengthy Notice of Proposed Rulemaking (NOPR) process, which typically requires 2 to 5 years to draft, review public comments, and finalize. As part of these orders, FERC indicated it would no longer automatically consider cumulative environmental impacts in its rulemaking under the National Environmental Policy Act.
The commission also encouraged new frameworks for very large energy users to build their own power supplies, such as on-site plants, and to integrate advanced technologies that make existing infrastructure more efficient. In December, FERC approved "co-location agreements" in the mid-Atlantic grid (PJM Interconnection), allowing tech companies to connect data centers directly to power plants. The latest order seeks to make this option available nationwide.
Data centers currently account for 4 to 5 percent of U.S. electricity demand, but according to the Electric Power Research Institute, this demand could triple by 2035. More than 4,000 data centers currently operate in the United States, with an additional 3,000 planned or under construction. The order could prompt states to create new utility rate classes for large-load customers, particularly AI data centers. Virginia's state corporation commission, for example, approved a new electricity rate for large-scale customers beginning January 2027, requiring affected customers to pay for at least 85 percent of contracted distribution and transmission demand and 60 percent of generation demand.
The Trump administration has characterized AI infrastructure development as a national security priority in the country's competition with China. Energy Secretary Chris Wright previously asked FERC to accelerate connections to high-voltage transmission lines to support AI computing infrastructure. President Trump this month signed an executive order establishing a framework for the federal government to vet national security risks of advanced AI systems for up to one month before their public release.
Despite tech companies' continued spending on data center construction and equipment, evidence suggests projects are encountering roadblocks, including permitting delays, growing local opposition, and bottlenecks involving gas turbines, transformers, and skilled labor. Public concerns also focus on data centers' consumption of energy and water, as well as impacts from noise, air pollution, water shortages, and loss of farmland and open space.