State utility regulators this week called on the Federal Energy Regulatory Commission to respect their authority over local power systems as the Trump administration pushes to quickly connect data centers to interstate transmission grids.
The resolution passed by the National Association of Regulatory Utility Commissioners at a meeting in Seattle granted broad support for FERC to address reliability and cost issues emerging from the rush to pull huge data centers for artificial intelligence onto the grid.
But the NARUC resolution insisted that existing utility customers served by regional grids should be protected from higher costs. In addition, it said that any FERC rule should not infringe on state authority under the Federal Power Act to regulate retail electricity sales.
In October, Energy Secretary Chris Wright called on FERC to develop rules and standards to speed up grid connections for AI projects. Since January, the Trump administration has sought to accelerate the build-out of AI infrastructure. Sprawling data centers critical to the booming AI industry house rows of computer servers and advanced chips that require access to huge amounts of power.
But the prospect of a multiyear process to connect an AI data center to a regional electric grid has caused some tech companies to tap their brakes on projects or look for other sources of power.
The debate over Wright’s proposal comes amid skyrocketing electricity demand growth, which is now at a 20-year high, according to North America’s grid monitor. The main culprit is the proliferation of data centers to host popular but energy-intensive generative AI models.
“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,” Wright wrote in his Oct. 23 letter to FERC.
Wright urged FERC to use its authority to clarify and standardize rules for large electricity consumers. That would include expediting engineering studies that grid managers undertake to ensure a data center or power plant connection is safe and won’t jeopardize reliability.
He enumerated principles including prioritizing interconnection for facilities that agree to be flexible with their consumption or generation; making large loads “responsible for 100% of the network upgrades that they are assigned”; and imposing requirements meant to deter speculative projects and help grids more accurately forecast future demand.
State regulators criticized the plan, saying FERC has limited jurisdiction. The lines of dominion over the grid are often blurry. While FERC has power over interstate transmission, states regulate local distribution of power. The problem: Interstate and intrastate systems are inextricably interconnected, making it difficult to discern the bright lines between state and federal turf.
The resolution urged FERC to respect state authority and to ensure that grid reliability isn’t compromised in the process of getting AI data centers on the grid more quickly. It called on federal regulators to not “impose undue costs on retail customers, and respect state tools for promoting system flexibility and equitable cost allocation.”
“The resolution highlights the importance of collaboration between state and federal partners, recognizes jurisdictional boundaries, and emphasizes the need for durable, long-term solutions to meet the growing demands on the nation’s energy system,” said Brian Rybarik, chair of the Washington Utilities and Transportation Commission.
“Energy abundance depends on strong cooperation and shared commitment,” Rybarik added. “This resolution reinforces the importance of collaboration and respect for state roles in this process.”
The legal angle
“I totally agree that as a country we desperately need to build a lot more generation, and fast,” former Republican FERC Chair Mark Christie wrote in an email. “But this proposal will actually undercut that goal, because of its major legal risks and assault on the traditional authority of the states, who are key players in getting generation built.”
Christie pointed to two recent Supreme Court cases.
In West Virginia v. EPA, the court found that federal agencies couldn’t make decisions with major political or economic impacts unless Congress provided a clear statement authorizing such an action. The case was argued and won by Lindsay See, now a Republican FERC commissioner.
Then there’s Loper Bright Enterprises v. Raimondo, which overturned the Chevron doctrine that had previously offered agencies strong deference in implementing regulations under Congressional statutes.
Combined, the decisions indicate that — if FERC does take action — the courts will likely want strong evidence that Congress permitted FERC involvement in load interconnection.
Ed Hirs, an energy fellow at the University of Houston, says that the move would be a dramatic break from the historical understanding of grid authority.
“This is a proposed extension not just of FERC’s oversight of the grid, but an extension into management of the grid. This is a slippery slope,” Hirs said.
The DOE proposal counters that FERC’s regulatory authority over interstate transmission includes large load interconnections, just as it includes generation interconnections, whenever they utilize jurisdictional facilities. Because large loads are a critical part of open access transmission, they must have minimum, nondiscriminatory terms and conditions for service, Wright contends.
Kent Chandler, the former chair of Kentucky’s utility regulator, said a large load rule is probably something “inside FERC jurisdiction that FERC has chosen not to exert jurisdiction over.”
“The DOE letter contends that what happens with transmission facilities and at upper voltages is still a FERC jurisdictional issue under the Federal Power Act, whether it’s requiring that poles be painted purple or that states must allow certain customers to connect to facilities at a certain voltage threshold,” Chandler continued. “That doesn’t necessarily exceed FERC jurisdiction.”
The merits
But many state regulators also argue that too broad federal authority would be dangerous to the grid. Large loads aren’t appearing evenly across the country, and some regions are seeing significant power plant decommissioning.
“Any large load interconnections without sufficient available generation capacity could threaten reliable power service to existing retail customers, as grid operators may lack the resources needed to maintain system stability during peak demand or extreme weather events,” the resolution reads.
Given the diverse array of projects, electricity supply, and geography, NARUC argues that states need an important seat at the table to prevent critical errors.
“Where’s the impact going to be? Probably through the mid-Atlantic states, probably targeting PJM,” said Hirs with the University of Houston. “It’s where the primary concentration of data centers is. It’s not going to have any significant impact whatsoever on [Texas].”
The grid operator for the mid-Atlantic is already struggling to manage grid reliability, with many power plants slated for retirement soon and comparatively few replacement projects underway.
Concerns extend to utility bills, which are rapidly growing in many parts of the country.
“There’s a serious concern that any new FERC rule would place the cost of building that transmission on the preexisting consumers, and not on the new consumers who are driving it,” Hirs said.
