FERC Orders Grid Operators to Fast-Track AI Data Center Interconnections

The Federal Energy Regulatory Commission on Thursday ordered six major U.S. grid operators to fast-track interconnection requests from AI data centers and other large electricity users, creating a government-mandated priority lane for a sector whose power demand is expected to nearly triple by 2035.

The unanimous order requires grid operators including PJM, MISO, and ISO-NE to demonstrate they can connect data centers in a timely and orderly manner. Data centers will bear the costs of their own interconnection. Grid operators have 30 days to report their spare generating capacity and 60 days to defend or revise their regional electricity rates.

A backlog that dwarfs the existing grid

At the end of 2023, the queue of power plant interconnection requests exceeded the total capacity of the entire existing U.S. power plant fleet, meaning the line to get on the grid was longer than the grid itself could theoretically serve. Wholesale electricity rates have risen as much as 267 percent compared with five years ago, according to Bloomberg. FERC also directed grid operators to be more accommodating to behind-the-meter power for data centers and to consider alternative transmission technologies such as solid-state transformers or superconducting lines.

The order did not address the underlying shortage of generating capacity. Many new power plants are themselves stuck in the same interconnection queue. Grid operators accustomed to near-zero demand growth for two decades have struggled to adapt. PJM, the country's largest grid operator, has descended into near chaos, with major utilities threatening to withdraw.

Private capital moves to bypass the queue

While FERC's fast lane addresses administrative delays, start-ups are racing to solve the power bottleneck on the ground. Verse Enterprises, a San Francisco company backed by Nvidia, raised a $54 million Series B round led by Bessemer Venture Partners. Verse helps AI data centers secure on-site power generation, effectively skipping the grid queue altogether. The round included GV and Norrsken VC, signaling strong investor belief that the race to AI is now a race to power.

Secretary of Energy Chris Wright prodded FERC to act in October, warning that delays in grid connections threatened U.S. competitiveness in AI. Since then, public sentiment toward AI and data centers has soured considerably. The fast lane gives data centers regulatory priority, but unless generating capacity is expanded, the grid may simply have no power to deliver. FERC's next deadline is the 30-day capacity report, which could trigger broader policy responses.