FERC Orders Grid Operators to Fast-Track Data Center Power Connections

The Federal Energy Regulatory Commission unanimously approved orders on June 18 directing six major US grid operators to fast-track electricity connection requests from data centers and other large industrial customers. The ruling gives AI data centers — whose power demands are expected to nearly triple by 2035 — a government-mandated priority lane to the electrical grid, though it does not solve the underlying shortage of generating capacity that is driving wholesale electricity prices up sharply across the country.

The six grid operators covered by the order include PJM Interconnection, which manages the grid for 13 states from Illinois to New Jersey, as well as MISO, SPP, CAISO, NYISO, and ISO-NE. Together they serve the bulk of US electricity transmission infrastructure and have accumulated multi-year backlogs of interconnection requests from data centers seeking power contracts.

What the Order Requires

Grid operators have 30 days to submit reports on available generating capacity in their service areas and 60 days to review and either defend or revise their regional wholesale electricity rates. The commission also directed operators to evaluate alternative transmission technologies — specifically mentioning solid-state transformers and superconducting lines — that could accelerate capacity expansion beyond what conventional infrastructure timelines allow.

Data centers that connect behind the meter (generating their own power on-site, typically via gas turbines or fuel cells) receive more favorable treatment under the order than those seeking grid connections. FERC has framed this as an incentive for operators to invest in on-site generation rather than waiting in the interconnection queue.

The cost of interconnection must be borne by the data center operators themselves — the order accelerates the process but does not subsidize it.

Why the Grid Is Under Pressure

Wholesale electricity rates have risen as much as 267% compared to five years ago in the markets most affected by data center demand, according to analysis cited in FERC filings. The primary driver is the scale of AI infrastructure buildout: a single large AI training cluster can consume 100–200 megawatts continuously, comparable to a small city. As hyperscalers — Amazon, Microsoft, Google, Meta — race to build capacity, grid operators in high-demand regions like Northern Virginia, Iowa, and the Dallas-Fort Worth corridor have seen interconnection queues balloon from months to years.

PJM, which manages the grid serving the largest concentration of US data centers, has faced particular scrutiny. The operator has a backlog of over 3,300 projects totaling more than 400 gigawatts of requested interconnection — far more than can realistically be accommodated in the near term. Many AI data center developers have responded by pursuing power purchase agreements in advance of interconnection approval, betting on queue position rather than confirmed contracts.

What the Order Does Not Fix

FERC's authority covers transmission infrastructure — the lines and substations that move electricity — rather than generation. The order cannot require more power plants to be built. Even with fast-tracked interconnection, a data center that secures a grid connection still needs a source of electricity behind it, and new generating capacity (whether natural gas, nuclear, or utility-scale solar) takes years to permit and build.

The commission acknowledged this gap explicitly in the order text, noting that the fast-lane directive addresses queue processing speed but does not address "the underlying shortage of dispatchable generating capacity." Several commissioners used the order's release to call on Congress to consider complementary legislation targeting generation permitting reform.

For AI companies planning large US data center investments, the ruling reduces one bureaucratic bottleneck without eliminating the longer-term constraint. Industry analysts expect companies with existing grid relationships — particularly hyperscalers that have been building data centers in the same regions for decades — to benefit most from the faster interconnection reviews.