By Kennedy Maize
“Ideas have consequences. Even new pathbreaking ones that are shaking the foundations of the Federal Power Act of 1935 and state public utility regulation.”
The Department of Energy has asked the Federal Energy Regulatory Commission to federalize and streamline the connection of large data centers to the interstate transmission grid. DOE last week (Oct. 23) sent FERC a 16-page draft notice of proposed rule making, asking the commission to enact the new, unprecedented rule by the end of April, which is unlikely.
Under the DOE proposal, FERC would take over interconnection decisions for “large load” data centers, defined as those with a load of 20 MW or greater. These decisions are now made by regional transmission organizations, such as the PJM Interconnection, or by state regulatory agencies.
The DOE proposed rule states:
In light of the unprecedented current and expected growth of large loads seeking to interconnect to the transmission system, and to provide open access and non discriminatory access to the transmission system, it has become necessary to standardize interconnection procedures and agreements for such loads, including those seeking to share a point of interconnection with new or existing generation facilities (hybrid facilities).
In a cover letter, Energy Secretary Chris Wright linked his plan for FERC to make the interconnections to the Trump administration’s ambitions for artificial intelligence. Wright wrote, “This Administration is committed to revitalizing domestic manufacturing/ and driving American AI innovation, both of which will require unprecedented and extraordinary quantities of electricity and substantial investment in the Nation’s interstate transmission system.”
Reactions
DOE’s action quickly generated some head-scratching and skepticism as well as qualified and sometimes lukewarm support. Mark Christie, former FERC member and chairman until last summer — when the White House nominated former FERC staffer Laura Swett to the commission with the intent to name her chairman (which occurred on Oct. 23, the same day as the Wright plan) — posted an analysis of the DOE data center proposal on Linkedin.
Christie, who now heads the new Center for Energy Law and Policy at the William and Mary Law School, commenting that “the evil is always in the details,” raised three “core questions” about the Wright proposal:
- “1. Will reliable power service be threatened by FERC-mandated interconnection of large load customers without sufficient generation capacity available to the grid operator?”
- “2. Will residential and other customers be forced to bear the costs of FERC-mandated large-load interconnections?”
- “3. Does this proposal represent an unprecedented expansion of federal control and intrusion on the states’ historic retail regulatory authority?”
Christie’s final advice on the proposed rule: “Stay tuned.”
On Twitter, Travis Kavulla, independent power producer NRG’s regulatory guru and former Montana utility regulator, commented, “Utilities will oppose this & they’ll seek to make it a dead letter by saying there is always *some* part of interconnection that is ‘distribution’ (not ‘transmission’), thus retaining a parochial claim to their gatekeeper status. If DOE/FERC are serious, pay attention thereto!”
Kavulla also parenthetically said of Wright’s proposal: “(And fwiw, that is probably not the worst idea!)” The call for a final rule by April 30 is “light speed as far as that agency’s regulatory process,” he said.
In response to an email request for comment from The Quad Report, Drew Maloney, president and CEO of the Edison Electric Institute, offered an anodyne comment, “We share the Administration’s commitment to American energy dominance and appreciate their leadership to accelerate energy to win the AI race and fuel our economy. We look forward to working with FERC to strengthen the grid, drive down costs for customers, and improve reliability across our country.” EEI is the Washington lobbying group for the nation’s investor-owned utilities.
The DOE proposal also comes as the commission has been grappling for months over data center-related issues, particularly the contentious issue of co-locating data centers with existing generation and the implications of the practice on the grid.
DOE’s Thinking–and ACRE
In a Twitter post, Chris Wright made clear that the administration supports co-location. He said, “The proposed rule allows load and generation to be built together, instead of waiting years for sequential approvals for critical infrastructure. By co-locating energy generation with large loads, this order could slash interconnection timelines and fast-track the next wave of AI and energy growth, boosting American competitiveness.”
An alternative way to prevent the apparent collision of data center power demand and an already stressed interstate grid is to keep new data center power supplies off the grid. Houston-based Advocates for Consumer Regulated Electricity (ACRE, lead by Travis Fisher and Glen Lyons) has been pushing the idea of data centers contracting directly for power supply, not connected to the grid.
That concept has been getting some momentum. In August, New Hampshire Gov. Kelly Ayote signed legislation to exempt from complex state utility regulation off-grid power supplies for data centers in the state. A Wall Street Journal op-ed by Fisher and Lyons commented:
New suppliers can start projects unencumbered by decades of heavily regulated business practices. Off-grid suppliers can consider innovation in all aspects of the business, beyond the usual choice of generation types.
Ideas have consequences. Even new pathbreaking ones that are shaking the foundations of the Federal Power Act of 1935 and state public utility regulation.
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Co-location of generation and load makes sense. In the gas pipeline world, compression and/or processing facilities take on the order of two years to build from conception to startup. Depending on location, grid connection could take 3+ years. The answer was always to build the substation privately, include the generation and add the grid connection whenever the transmission folks could get wire to us. Granted that the loads were an order of magnitude less than a data center, typically 20-50 MW; But the same principle applies. Build the substation and generation privately and let the data center island until the grid is ready to connect. This lessens the importance of sufficient grid connections so long as there is sufficient gas supply (and the grid is not too far away).
The real fly in the ointment is getting access to hardware. Turbine production is sold out for 5+ years. I imagine the same holds true for large transformers and yard switches/breakers, etc.
I still am not convinced that a large percentage of the datacenter craze is not overexuberance. Everyone wants to get up and running to make hay while there is a shortage of capacity, but eventually overbuilding occurs and creates the bust in the boom/bust cycle.
I agree with everything you say except I’m not worried for a long time about power boom/bust cycles. There is always a use for more power – or power reserves. Something will come up. New York and California are bound to wake up and realize wind and solar cannot supply their needs. They are on the edge of a power crisis. They’ll need real power-generating hardware – lots of it – or be left in the dust.
When states realize that power can/should work differently I want it to be a state decision.
Since no form of generation has a 100% capacity factor how does this off grid phase work?
A backup unit would be needed and portable generation would have to be brought in for scheduled maintenance outages if the grid is not available.
Story Tip:
“America’s super-rich are running down the planet’s safe climate spaces, says Oxfam”
https://www.theguardian.com/environment/2025/oct/29/americas-super-rich-running-down-planet-safe-climate-spaces-oxfam
The hypocrisy is strong in this one as 10s of thousands of elite and rich head to Brazil.
There are safe climate spaces? Maybe they mean actual greenhouses?
“running down the planet’s safe climate spaces”
Words without meanings
Probably took Toastmaster’s lessons from K. Harris.
Story tip: Thinking? What’s that, then?
Labour considers scrapping North Sea windfall tax in dash for growthChancellor could use Budget to end energy profits levy early over fears it is stifling investment
https://www.telegraph.co.uk/business/2025/10/30/labour-prepared-to-scrap-north-sea-windfall-tax-in-dash-for/
Panicking Reeves ‘could cripple economy with 2p income tax hike’ – the first for 50 YEARS – as she bows to Labour MPs by kicking welfare reforms into long grasshttps://www.dailymail.co.uk/news/article-15241653/Reeves-economy-2p-income-tax-hike-bows-Labour-MPs-welfare-reforms.html
All over the place.
In Beautiful British Columbia, we have abundant hydro electric power that costs CDN 11 cents per kWh. We also have abundant deposits of natural gas for future CCGT power plants. Unfortunately, BC is located far the major populations centers of the US and Canada, so the AI revolution might not come here.
BC… if only AGW could make it warmer.
Just as rationality and ideology cannot occupy the same mind space at the same time, any level of intelligence (artificial or real) cannot occupy the government benches as long as the NDP holds the majority in BC.
(or anywhere for that matter)
All you need is a fiber optic cable. AI generates with electricity but travels on glass. No population required. Look at the Columbia Basin. More server farms than people (almost). BC may have other issues…
Not as abundant as many believe. Site C may have changed things for now. As far as I know BC has needed to import in very cold winter weather. The great abundance is during the freshet season. River flows are low in winter.
There has been tremendous opposition to gas generation. New gas heat has been banned for a decades.
“Under the DOE proposal, FERC would take over interconnection decisions for “large load” data centers, defined as those with a load of 20 MW or greater. These decisions are now made by regional transmission organizations, such as the PJM Interconnection, or by state regulatory agencies.”
DANGER: Big government taking power from little government.
Town->County->State->Federal
Some day the other side will be in power.
So true.
Australia’s national grid removed State monopoly on power generation and distribution and essentially gave control to Federal bureaucrats. The removal of monopoly power worked to reduce costs for a decade. Then the grid became the easiest place to virtue signal on climate change without any assessment of the cost. It has destroyed Australia’s economy.
Beware government rules that pick winners.
Is AI good for society or good for a few wealthy people. I know it has already made Nvidea the largest global company as measured by market cap.
Painfully true. The Columbia River hydro system (Bonneville Power) was designed and used for aluminum smelting. Those companies were driven out in the 1970’s ostensibly for salmon. Now the Big Tech and bitcoin mine the kilowatts with giant server farms. The salmon are forgotten (never were actually endangered anyway), and so are the smelters (they went to Brazil). The electricity prices to homes have doubled since 2020 because the PUC’s are bought and paid for by zillionaires.– Warren Buffet owns my power co (Pacific Power). But the Big Daddy, Bonneville, is Fed and they’re ruled by evil barons in dark chambers.
I don’t know the ins and outs of this issue but I don’t want the government more involved in it. The current administration will push things we like and that would make us happy. The next administration and all future administrations may not hold our views and use this new power to block all the stuff we like. No, no more power to the government, they already have too much.
We are from the government and we are here to help!
Run away! Run away!
There is a Constitutional issue at hand.
Those powers not specifically granted to the Federal government within the Constitution are rights of the States.
Federalizing the grid is unconstitutional.
Then again, so was the Affordable (giggle) Health Care Act.