For two years, the binding constraint on AI was silicon. GPUs were scarce, and the wait was for fab capacity. The firms that locked up chip allocation set the pace for everyone else. That era is closing.
The constraint now is electricity, and it shows up in the interconnection queue, the line a project waits in to plug into the grid. At the end of 2024 that queue held roughly 2,290 gigawatts of capacity against an installed base of about 1,280 gigawatts. The line to reach the grid had grown to nearly twice the size of the grid.
On June 18, the Federal Energy Regulatory Commission moved on that line. It issued show-cause orders to the six regional grid operators under its jurisdiction, directing each one to prove its rules for connecting data centers and other large loads are still just and reasonable, or to rewrite them. The orders reach markets serving roughly 200 million Americans across more than thirty states, and the clock is sixty days.
The action sits with energy regulators, and it runs straight into the budget of anyone scaling AI. FERC has reopened the oldest question in utility law: who pays for the wires and the power plants. The answer is about to fracture by region, and where a company builds will decide what its power costs and how long the wait runs.
The Thesis
FERC has declared that the tariffs governing how large electricity users connect to the grid likely fail the legal standard every utility rate has to meet, and it has put six regional grid operators on a sixty-day clock to defend or rewrite them.
The reform centers on cost allocation, meaning the rules that decide whether a data center pays for its own grid upgrades or spreads that cost onto everyone else’s electricity bill. The Commission declined to set one national rule.
Each region will answer for itself, on its own timeline, which means the cost and the speed of powering an AI deployment now depend on the grid territory it sits in.
The Signal
Three developments turned grid access into a board-level variable this cycle.
What happened. On June 18 FERC issued tailored show-cause orders under Section 206 of the Federal Power Act to PJM, MISO, the Southwest Power Pool, CAISO, ISO New England, and the New York ISO. Each operator has sixty days to justify why its existing large-load tariff remains just and reasonable or to file reforms, with a separate thirty-day report due on how it will keep enough generation available to serve new and existing demand. PJM’s deadline lands on August 17. The Commission reviewed more than 3,500 pages of comments before acting, and it reached for customized orders in place of a Notice of Proposed Rulemaking, a choice that compresses a process which normally runs for years into one that runs in weeks.
Why it matters. A show-cause order carries a preliminary finding inside it. FERC is saying the existing rules appear to be unlawful and the burden now sits with the grid operators to prove otherwise. The thirty-day generation reports double as the clearest official signal yet that supply adequacy, the question of whether the power physically exists, has moved from a planning footnote to a federal priority. The agency made the posture plain. As FERC’s David LaCerte put it to the grid operators, the Commission expects real responses and exercised “considerable restraint” by issuing show-cause orders and leaving the fixes to the regions, when it could have dictated them outright.
Second-order effect. Grid operators may request an abeyance of up to ninety days to work proposals through their stakeholder processes, so the practical window stretches toward late autumn. The reforms that emerge will reshape what a megawatt costs and how long it takes to energize, which feeds directly into the unit economics of every model trained and every inference served on that power.
What happened. FERC built its action around regional difference. Chair Laura Swett said there is “no universal formula” for integrating these loads, and the orders direct each grid operator to design rules suited to its own market structure, geography, and stakeholder mix. The Commission named five areas open for reform, including the cost-allocation mechanisms meant to keep existing customers from paying for upgrades that large new loads require, the treatment of co-location and behind-the-meter generation, and new transmission services tailored to flexible loads.
Why it matters. A single federal rule would have given developers one set of assumptions to underwrite against. Six regional proceedings give them six. Mona Dajani of Cooley framed the consequence precisely: “The era of one national standard for data center interconnection is over before it began,” replaced by “six regional answers to the same question, decided on six different timelines.” She drew the operational line for anyone signing deals right now. A term sheet written against today’s PJM tariff carries different risk than the same sheet written against today’s MISO or CAISO tariff, because each region’s rules are about to move in different directions and on different schedules.
Second-order effect. Site selection now carries a regulatory bet on top of the power-availability one teams already weigh. The region that resolves its tariff first, with the cleanest cost-allocation rules, gains an edge in attracting capacity that has nothing to do with land, climate, or fiber. Companies with multi-region footprints will start pricing the regulatory trajectory of each territory into where they place the next cluster.
What happened. FERC built consumer protection into the framing of every order, directing operators to show their rules guard against shifting large-load costs onto other ratepayers. The political backdrop is concrete. PJM’s capacity auction, the forward market that sets what generators are paid to stay available, cleared at $28.92 per megawatt-day for the 2024/25 delivery year and at $329.17 for 2026/27, more than a tenfold rise. PJM’s independent market monitor attributed 63 percent of one auction’s increase to data centers, which works out to $9.3 billion that ratepayers across the region will carry in a single year. In December the auction for 2027/28 came up 6,623 megawatts short of the reliability target, the first such shortfall in PJM’s history. Data centers now draw about 5 percent of US electricity, and in Virginia, the densest data center market in the world, the share already exceeds 25 percent and is tracking toward 40 percent by 2030. Community resistance has scaled with the bills. Grassroots groups blocked or delayed at least 75 data center projects worth a combined 130 billion dollars in the first quarter of 2026, the most ever recorded in a single quarter, and the number of active opposition groups more than doubled between December and March to 833 across 49 states.
Why it matters. Swett was candid that FERC’s authority reaches only so far. The Commission governs cost allocation among transmission customers, and it cannot by itself stop costs from shifting among the retail customers that state commissions oversee. She called on the states to “finish the job,” which guarantees a second wave of activity at the state level layered on top of the federal proceedings. For an operator, the exposure is no longer only the price of power. It is the political durability of the arrangement that delivers it, in a climate where a data center can become a local election issue.
Second-order effect. Denmark shows where an unmanaged version of this leads. Its grid operator paused all new large-load connection agreements in March after the queue hit roughly 60 gigawatts against a national peak demand near 7 gigawatts, and that pause still holds. A connection moratorium is the outcome FERC is trying to head off with speed, and the Danish example sharpens the strategic question for any operator: lock in firm, well-documented grid access now, or risk discovering that the queue has closed.
The Playbook
Five moves are of essence before the next site decision, infrastructure contract, or board review of AI cost.
The cost and timeline of power now depend on which RTO territory a facility sits in. Build a simple register of where compute runs today and where it is planned, tagged by grid operator, so the regulatory trajectory of each region becomes visible on its own line. Today that trajectory hides inside a vendor invoice, where nobody prices it.
A contract signed against a tariff FERC has flagged as likely unlawful carries risk the headline price does not show. Before signing, confirm how the agreement allocates the cost of network upgrades, and who absorbs the change if the region’s rules shift inside the sixty-day window.
Interested parties can respond to each operator’s filing within thirty days of submission. A company with material power exposure in a region has a direct channel to shape the cost-allocation rules it will live under, and the position it argues now carries into the outcome. The firms that file are the ones whose operational reality reaches the record before the rules harden.
The territory that resolves its tariff first, with the cleanest protection against cost-shifting and the clearest path to firm service, becomes more attractive for reasons unrelated to the usual site criteria. Add regulatory trajectory to the land, power, climate, and fiber checklist already in use.
Denmark proved a connection queue can freeze. For any deployment that depends on new grid capacity, document the fallback if energization slips by a year, whether that means a flexible-load arrangement, co-located generation, or a secondary region held in reserve.
The Verification Test
Claim. Our AI infrastructure has firm, durable grid access at a known cost, insulated from the reforms now underway.
Test. Confirm three things in writing for every material deployment. First, name the grid operator whose tariff governs the site and the date of its show-cause response. Second, produce the clause in the power or colocation agreement that allocates network-upgrade costs and states who bears the change if the regional rules move. Third, confirm whether the load is firm or interruptible under the new transmission-service categories FERC has asked each region to define.
Pass criteria. A named region with a tracked compliance deadline, a contract that assigns upgrade-cost risk explicitly and does not leave it to a tariff in flux, and a documented position on firm versus flexible service. All of it should be retrievable on demand.
Fail smell. The power arrangement is described as settled with no reference to the region’s pending proceeding; or the contract is silent on who absorbs a cost-allocation change; or the load is assumed firm against a tariff that FERC has already called into question. Any one of the three points to a cost base that can move without warning.
The Metric
What it measures. The window FERC gave each of the six regional grid operators to justify or rewrite the rules governing how large loads connect to the grid, with PJM’s response due August 17, 2026 and abeyance of up to ninety days available.
Why it matters now. The clock is the leverage point and the risk point at once. Inside this window the rules that set the cost and speed of AI power get rewritten across two-thirds of the country, and the contracts signed against the old rules carry the exposure. After it, the regional answers begin to harden into the cost base every operator in that territory lives with. The companies tracking the deadline for each region they operate in are the ones who will see the change coming.
The Lens — Horizon Search Institute
The build-out is now colliding with physical grid limits, and the collision is setting the terms of AI growth. Denmark’s connection freeze and the 2,290-gigawatt US interconnection queue are the same signal in two forms: the binding constraint has shifted from capital to capacity, and capacity will shape where and how fast AI scales. Energinet
FERC’s choice of regional orders over a national rule fragments the regulatory map at the moment operators most need a single set of assumptions, and it hands the states a second front to open. The cost of AI power is becoming a question of jurisdiction. Utility Dive
Links Worth Your Time
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FERC — Launches Aggressive Targeted Action to Speed Large Load Integration
The primary source. The six operators named, the sixty-day and thirty-day clocks, the five reform areas, and the consumer-protection framing in the Commission’s own words. Read it before any site or infrastructure decision.
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Akin Gump — FERC Directs PJM to Revise Tariff to Expedite Data Center Development
The deepest read on the PJM order specifically, with the August 17 deadline, the abeyance mechanics, and the cost-recovery agreement language. The piece to hand to counsel before signing in PJM territory.
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Utility Dive — 6 Takeaways from FERC’s Data Center Interconnection Decision
The clearest account of the regional-fragmentation consequence, including the Cooley analysis on why a term sheet now carries different risk by region. Read it for the strategic picture.
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Bloomberg Law — PJM Tackling Data Center Demand Requires Federal, State Juggling
The jurisdictional fault line between FERC and the states laid out by practitioners, including why FERC can police cost-shifting among transmission customers but cannot finish the job at the retail level alone.
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CNBC — Denmark Data Center Moratorium
The cautionary case in detail: a 60-gigawatt queue against 7 gigawatts of peak demand, and a pause that has not lifted. The picture of what FERC’s speed is racing to avoid.
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IEEFA — Projected Data Center Growth Spurs PJM Capacity Prices by a Factor of 10
The clearest walk-through of the capacity-auction math, including the $28.92-to-$329.17 climb and the market monitor’s finding that data centers drove 63 percent of one auction’s increase, or $9.3 billion in a single year.
- Federal Energy Regulatory Commission, “FERC Launches Aggressive Targeted Action to Speed Large Load Integration,” news release, June 18, 2026. ferc.gov
- Akin Gump Strauss Hauer & Feld LLP, “FERC Directs PJM Interconnection to Revise Tariff to Expedite Data Center Development,” Speaking Energy, June 2026. akingump.com
- Utility Dive, “6 Takeaways from FERC’s Data Center Interconnection Decision,” June 2026. utilitydive.com
- Bloomberg Law, “PJM Tackling Data Center Demand Requires Federal, State Juggling,” June 2026. news.bloomberglaw.com
- Data Center Knowledge, “FERC Targets Grid Rules for Data Centers, Large Loads,” June 2026. datacenterknowledge.com
- American Action Forum, “FERC Data Center Orders Accelerate Grid Connection,” June 2026. americanactionforum.org
- TechTimes, “FERC Mandates Fast-Track Data Center Grid Access, Shielding Ratepayers from Costs,” June 20, 2026 (citing JLL, EPRI, Associated Press, and Data Center Watch / 10a Labs figures). techtimes.com
- CNBC, “Denmark Data Centers Moratorium: Grid Pause, Power Demand,” May 4, 2026. cnbc.com
- Energinet, “Energinet Introduces Temporary Pause on New Grid Connections and Accelerates Capacity Measures,” 2026. en.energinet.dk
- Institute for Energy Economics and Financial Analysis, “Projected Data Center Growth Spurs PJM Capacity Prices by a Factor of 10,” 2026 (citing Monitoring Analytics, the PJM independent market monitor). ieefa.org
- PJM Interconnection, “PJM Auction Procures 134,479 MW of Generation Resources,” news release, December 17, 2025 (2027/2028 Base Residual Auction, 6,623 MW reliability shortfall). pjm.com