Given marching orders by a Trump administration cabinet department as key to artificial intelligence sector growth, independent agency Federal Energy Regulatory Commission (FERC) now is pushing to absorb nearly 200 diverse power sector comments to finalize by next April 30 a rule that would extend FERC’s role in how data centers and other large power loads over 20 MW will connect to transmission grids—a long-held state regulatory arena.
The controversial mandate, which U.S. Energy Secretary Chris Wright directed FERC to develop and implement, comes as AI hyperscalers want expedited data center power connections while states and utilities worry about grid overload, reliability and ratepayer cost hikes and want more time for added impact analysis.
“While many FERC rulemakings take years to finalize—especially those dealing with contentious or complicated jurisdictional issues—the agency has about six months to take final action on the … proposal,” says R Street Institute, a nonpartisan, nonprofit think tank focused on public policy issues.
But U.S. data centers drove a 22% increase in electricity demand in 2025, set to triple by 2030, making them one of the largest sources of load growth, studies say.. With the power demand surge—the highest in two decades—also driven by rapid growth of large industrial energy users, “it has become necessary to standardize interconnection procedures and agreements for such loads,” the Energy Dept. said.
Insufficient power supply also is leading to a decline in government and business investment in long-term assets that “means lower economic growth in the long run” for rich countries as well as developing ones, said Bloomberg Economics in a new study.
The FERC rule, proposed in late October, is set to address issues such as how to get needed infrastructure online quickly and how power will be paid for. While the Federal Power Act gives states jurisdiction over retail load grid connections regardless of size, the federal view is that linking a large load, which can extend to 300 MW for a data center, to the U.S. transmission system “falls squarely within” FERC jurisdiction under law even though the agency has not historically exercised it.
The proposal aims not to challenge state authority over local power distribution and generation siting, but commenters and others point to gray areas—and Wright has said new federal jurisdiction is in the public interest—claiming that administration priorities for American AI dominance over China and revitalized domestic manufacturing require an unprecedented amount of power and substantial investment in interstate transmission.
FERC uses a 100% participant funding model that would require large load customers to pay the full cost of grid network upgrades to expedite projects, according to a proposal analyis by think tank Center for Strategic and International Studies’ Energy Security and Climate Change Program. It said U.S. data centers drove a 22% power demand hike in 2025, set to triple by 2030, making them one of the largest sources of load growth.
“This policy marks a sharp departure from the traditional socialized model, in which transmission upgrades are treated as shared infrastructure and recovered through regional transmission rates,” authors say. But they caution that while tech firms would pay, more capital-intensive manufacturing customers with large loads may not be able to absorb high interconnection costs up front.
Respondent Pros and Cons
Among the commenters, the Data Center Coalition, which represents major tech firm and other owners and operators of the facilities, said the rulemaking will directly affect sector ability to plan, invest and interconnect critical digital infrastructure in a timely, predictable and cost-effective manner. It is “fundamental to ensuring the U.S. can reliably power data centers, AI innovation and advanced manufacturing,” the trade group said, claiming the current patchwork of state rules governing large load interconnections add uncertainty and delay to investments.
The Steel Manufacturers Association is concerned about the required 100% transmission upgrade payment. “While data centers may be able to absorb these costs without rendering their projects uneconomic, new electric arc furnace steel mills almost certainly cannot,” the group said, proposing instead that new loads remain under state authority. “This approach preserves a standardized accelerated federal pathway for data centers facing state-level delays, without penalizing new manufacturing projects locating in states that actively support industrial growth.”
A coalition of industrial energy customers urged FERC to guard the “cost-causation principle,” which assigns costs to those who cause the costs, while beneficiaries are assigned costs according to their use or benefit. Issues include demand for new generation and transmission infrastructure without time to plan, permit and build resources. “The power sector must now grapple with the implications of speed-to-market as a cost driver and planning constraint … without undermining reliability, affordability or access for any sector,” the groups said. The Federal Power Act is designed to protect customers from excessive rates and charges, they noted.
The National Association of State Utility Consumer Advocates, which represents ratepayers, termed FERC’s proposed new jurisdiction an “unprecedented expansion” into the supply market, without enough detail. Reliable and affordable service must be “loadstars” that guide FERC as it considers reforms.
American Transmission Co., a Wisconsin for-profit transmission company, noted that many new AI data centers represent gigawatts of load and are electrically equivalent in size to adding a substantial city to the current grid. This “new breed” of data centers often have extreme operating variability and need to ramp load up and down by hundreds of megawatts on a second-to-second basis. “This is equivalent to turning Wisconsin’s capital city of Madison on and off, repeatedly,” the firm said, requiring specialty power electronic devices at mega-scale to safely integrate the variable load.
FERC’s 2011 Order 1000 requiring competitive bidding for transmission projects adds 18 to 24 months to new construction completion. “This was an inconvenience in the past, but it is a catastrophe in the race for AI dominance,” American Transmission said. The delays are incompatible with timelines to bring new data centers online, it noted, adding that the federal NEPA environmental review process also needs substantial changes to expedite projects.
Edison Electric Institute, which represents investor-owned utilities, said it seeks a 100-MW minimum threshold for large load customers to pay for use of the transmission system to avoid shifting costs to large customers not meant to be captured by the federal reforms. Interconnection service for large load retail end-use customers is regulated by states under existing regulations, and FERC must recognize that those customers use local distribution service, the group said.
Also it said transmission reliability studies must be conducted if existing power plants would be used to serve large loads, since removal of generation off the grid “to serve a new large load raises significant reliability and affordability concerns,” the institute said. FERC “must grapple with this reality” and consider other steps to ensure that “necessary incremental generation resources are available to address any resource adequacy.”
A group of southern U.S.-based environmental advocacy group said FERC could have jurisdiction over some aspects of large load connections, which would set a nationwide floor of protection against sudden cost shifts while states retain full authority to regulate retail customers. But they urged the commission to resolve “many conflicting interests from all sectors of the industry,” in the new approach, rather than “rush to meet an unreasonable deadline for final action.“
MISO, the large multi-state Midwest transmission operator, said pursuing a federal one-size-fits-all approach could not only risk delaying the addition of large loads but also frustrate the discovery of new and innovative solutions “Best practices need time to be discovered and tested,” it said.
Microsoft told FERC that timely access to electric power has been and continues to be the biggest iindustry-wide obstacle to U.S. deployment of advanced computing technology. The tech giant builds, owns and operates more than 400 data centers in North America and other regions, and said it is in discussions with national, state and local stakeholders to support responsible growth.
Studying load and generation together has potential to speed up the interconnection process and reduce the scale and cost of grid system upgrades, the company explained. The rulemaking can aid collaboration among state and federal regulators to develop a nondiscriminatory framework for large load connection with user transparency, efficiencies, lower costs and enhanced regulatory certainty, Microsoft said.
“If states do not allow these new large loads to take flexible end-use service or delay building power plants to meet the demand of the interconnected large loads, all of this effort could be for naught,” said R Street Institute. “FERC has limited time to gather a record to craft and support any action, raising the prospect that detractors could argue [in lawsuits] that the final action is legally infirm.”
AI Regulation Issues Ahead
Even before the FERC large load rule completes, a 230-member environmental group coalition wants Congress to enact a data center moratorium to enable more study of risks in power and water supply, among other issues.
“The sudden explosion of the Big Data industry represents an existential threat for communities ill-equipped to handle the massive environmental and economic hardships these data centers inflict,” Wenonah Hunter, executive director of Food & Water Watch and other group officials told Congress in a Dec. 8 letter. Maria Cantwell (D-Wash.), ranking member of the Senate Commerce, Science and Transportation Committee, instead urged groups to “call for an … energy plan that allows for the construction of renewables.” House Democrats Greg Landsman of Ohio and Don Beyer of Virginia on Dec. 9 introduced more narrow legislation to require FERC recommendations to avoid residential energy rate hikes in areas with data centers.
Also industry participants and observers are watching how FERC will rule in a dispute between utilities and independent power producers over major grid operator PJM Interconnection’s approach for colocating large loads at power plants. The agency posted last week that a decision is on its Dec. 18 open meeting agenda. PJM has urged the agency to hold that action in light of the pending large-load rule, but one energy research group speculates that the meeting listing “suggests a positive outcome for nuclear and gas plant owners hoping to contract with data centers behind-the-meter and avoid paying full grid charges,” said a Dec. 12 report in Utility Dive.
Meanwhile, President Donald Trump signed an executive order on Dec. 11 that sets up a litigation taskforce to legally challenge state laws and regulations on AI technology that the administration believes undermine U.S. dominance and a “minimally burdensome” federal regulatory framework. The order also directs federal agencies to possibly withhold funding for states that pass AI laws and to develop congressional legislation to preempt them, despite previous defeats of such bills and new pushback by some governors in both parties.
