Feds pave the way for Big Tech to plug data centers right into power plants in scramble for energy

HARRISBURG, Pa. (AP) — Federal regulators will allow tech companies to effectively plug massive data centers directly into power plants, issuing a long-awaited order Thursday, as the Trump administration urges it to help the U.S. lead the world in artificial intelligence and revive domestic manufacturing.

The Federal Energy Regulatory Commission’s unanimous order is designed to clear up pressing issues around so-called “colocation” agreements in the nation’s largest grid territory, which stretches across mid-Atlantic states to parts of Illinois and Indiana.

But it could become a blueprint for how FERC handles an October request from Trump’s energy secretary, Chris Wright, to ensure that data centers and large manufacturers get the power they need as quickly as possible.

It also comes amid concerns that the mid-Atlantic territory covering some 65 million people will face electricity shortages in the coming years, as the build out of data centers outpaces the speed of new power sources coming online.

Laura Swett, FERC’s chair, told Thursday’s meeting that clearing the way for massive energy users — like data centers — to get electricity straight from power plants was a “critical step to give investors and consumers more certainty on how FERC believes we can solve the problem of meeting historic surging demand and realize our greatest potential as a country.”

It would, she said, also protect regular ratepayers, even as evidence mounts in various states that regular ratepayers are bearing the cost of new power plants and transmission lines to feed energy hungry data centers.

Power plant owners applauded the step, as their share prices rose steeply in Thursday’s trading. Advanced Energy United, whose members provide solar and wind power, said the FERC order should help clarify how big power users can set up their own power sources.

The Edison Electric Institute, which represents for-profit utilities, said only that it would “continue to work” to support rapid data center connection, protect ratepayers from cost-shifts and strengthen the grid for everyone.

Jeff Dennis, executive director of the Electricity Customer Alliance, said the order showed that FERC is trying to address looming issues around fast-growing power demand and underscored the urgency to reform grid policy.

Thursday’s order grew out of a dispute between power plant owners and electric utilities over a proposed colocation deal between Amazon’s cloud-computing subsidiary and the owner of the Susquehanna nuclear power plant in Pennsylvania.

For tech giants, such arrangements represent a quick fix to quickly get power while avoiding a potentially longer and more expensive process of hooking into a fraying electric grid that serves everyone else.

But utilities protested that it allows big power users to avoid paying them to maintain the grid. Some consumer advocates maintained that diverting energy from existing power plants to data centers could drive up energy prices without an answer for how rising power demand will be met for regular ratepayers.

FERC’s Thursday order sets up a couple new regulatory tracks.

It requires the operator of the mid-Atlantic grid, PJM Interconnection, to develop rates and conditions for different colocation scenarios involving new power plants or sources.

That could mean allowing a big power user to pay for only the transmission services they use, considerably less than they might otherwise pay to connect to the grid through a utility.

The order also could require a big power user that colocates with an existing power plant to pay the cost to replace the energy that it diverts away from the broader electric grid.

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Follow Marc Levy on X at https://x.com/timelywriter.