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

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

The Federal Energy Regulatory Commission’s unanimous order is designed to eliminate pressing issues surrounding so-called “collocation” contracts in the nation’s largest grid region, which spans parts of the Mid-Atlantic states 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 region, home to about 65 million people, will face power shortages in the coming years, as the construction of data centers outpaces the pace at which new energy sources come online.

FERC Chairwoman Laura Sweat said at Thursday’s meeting that clearing the way for large energy users such as data centers to receive electricity directly from power plants is “an important step to give investors and consumers more certainty that FERC can address the historic surge in demand and realize our greatest potential as a country.”

It also protects regular ratepayers, she said, despite mounting evidence 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 move as share prices rose sharply in Thursday’s trading. Advanced Energy United, whose members provide solar and wind power, said the FERC order should help clarify how large power users can set up their own energy sources.

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

Jeff Dennis, executive director of the Electric Customer Alliance, said the order underscores the urgency of FERC’s efforts to address growing issues surrounding rapidly growing electricity demand and the need 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 get power quickly while avoiding the potentially lengthy and expensive process of hooking up to the electricity grid that serves everyone else.

But utilities protested that it would allow large power users to avoid paying to maintain the grid. Some consumer advocates argued that diverting energy from existing power plants to data centers could raise energy prices without answering how rising electricity demand would be met for regular ratepayers.

FERC’s Thursday order sets up some new regulatory tracks.

It requires PJM Interconnection, the operator of the Mid-Atlantic grid, to develop rates and terms for various colocation scenarios involving new power plants or resources.

This means that a large power can allow users to pay only for the transmission services they use, much less than they would pay to connect to the grid through a utility.

The order would require large power users to pay the cost to replace energy diverted from the wider electricity grid by combining with existing power plants.

___

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