AI data centers are starved for power, and Washington is scrambling to write new rules to address it.

AI companies are starved for power, specifically electric power. Silicon Valley's appetite for rapid development is running up against the slow pace of government rulemaking.

The five-member Federal Energy Regulatory Commission, or FERC, is drafting a new proposal that would expand its authority to manage the country's surging demand for electricity. In the meantime, AI developers' ambitions to connect a fleet of data centers across the country to the power grid are colliding with fragmented governance among state regulators, public utilities, and the federal government.

Experts have long said the antiquated power grid needs upgrades, as it was originally built to generate electricity for American homes from coal and gas plants. The little-known FERC now sits in the middle of the upheaval, caught between hyperscalers pushing for more access to a grid under strain and its responsibility to shield ratepayers from painful price hikes.

"FERC is doing its best to be proactive and anticipate these changes," said Daniel Palken, director for infrastructure energy and permitting at Arnold Ventures. "They're trying to make it so that new power can come online as quickly as reasonably possible, while making sure that costs aren't being unfairly shifted."

Electricity prices have risen sharply nationwide, stoking frustration among voters already struggling with the rising cost of living. Since early 2020, prices for residential customers have increased 46%, according to the Bureau of Labor Statistics.

The Trump administration has moved to curb power bills, beginning with President Donald Trump's push to let tech companies build their own power plants to serve data centers as part of a "speed to power" campaign. The plan has supporters in Congress, who see it as a way to make an aging grid more resilient to crises.

"If you're going to do data centers, plan on bringing your own power, and let's put some incentives in so that they can actually build the power with the data centers," said South Dakota Republican Sen. Mike Rounds. "I like that idea because as we grow, it means we could have excess capacity in some areas in case we ever needed it in an emergency."

This is where FERC comes in. The regulator oversees wholesale power in the U.S. Its jurisdiction covers three main regional power grids, while state-level utilities manage local power plants and set retail rates for commercial and residential customers. Most utilities hold a monopoly over their local energy markets, relying on a public mandate to provide low-cost electricity.

The rapid pace of the AI boom, however, is outpacing regulators' ability to write new rules for power generation. The challenge is enormous. Some data centers consume enough electricity to power cities or small states like Vermont. Data centers currently account for 4% of U.S. electricity consumption, and projections show that share could triple to 12% by 2028.

"Our demand growth for electricity was flat for many, many years, really more than a decade, until this recent boom that we've seen in data centers," said Jeff Dennis, a former FERC official who is now executive director of the Electricity Customer Alliance. "So there wasn't a very strong signal to keep building forward for the future."

There is an unmistakable signal now. The private sector is flooded with capital spending driven by demand for AI. Tech companies including Google, Amazon, and Meta are projected to spend at least $700 billion developing artificial intelligence.

**They don't speak FERC**

Liza Reed, a climate and energy expert at the Niskanen Center think tank, said the Trump administration was seeking to create "a North Star" for the business community on a compressed timeline. That effort has not always gone according to plan.

FERC initially missed an April 30 deadline from the Department of Energy to establish national standards for connecting data centers to the power grid. In mid-June, the agency released orders requiring regional grid operators to justify within two months how their pricing structures can pave the way for more data centers, or to alter them immediately. Analysts say the rapid timeline will likely shrink the multi-year interconnection backlog.

FERC Chair Laura Swett said in March that tension exists between AI hyperscalers and government regulators, describing a landscape marked by "a breakdown of communication in many instances."

"The hyperscalers, when they do come speak to us, they don't speak FERC," Swett said. "Their complaints about the utilities, quite frankly, to me show a lack of understanding of how the utilities normally function and how the grid functions."

Swett compared the electric grid to a "slow-moving ship" that must be overhauled into a "speedboat" on short notice so it can function as intended.

FERC's attempt to expand federal authority over grid management may also run into legal obstacles.

"It's almost definitely going to lead to litigation from states who think FERC shouldn't have the authority," Reed said.

FERC has been pressing PJM Interconnection, the largest power market on the East Coast, spanning 13 states and Washington, D.C., to reform its process so more energy-producing projects can connect to the grid faster. PJM recently said it will set up a temporary fast-track route to consider up to ten interconnection requests every two years.

What's at stake, however, extends well beyond connecting data centers to an aging grid. "This stops being a question just about data centers, and starts being a question about any ambition that the country has to grow its electrical use," Palken said. "So whether it's about reshoring manufacturing of traditional industries like aluminum smelting or steel, or new industries like battery manufacturing, all of these things are going to require a lot more electricity."