In a landmark decision aimed at fuelling the artificial intelligence boom, United States federal regulators have voted to allow technology corporations to connect their massive data centres directly to power plants. The unanimous order, issued by the Federal Energy Regulatory Commission (FERC) on Thursday, 18 December 2025, is designed to address the urgent scramble for electricity driven by the rapid expansion of data processing facilities.
Addressing a Looming Energy Crisis
The ruling is intended to clarify rules for so-called "colocation" agreements within the PJM Interconnection, the nation's largest power grid which serves the mid-Atlantic region and parts of Illinois and Indiana. This move comes as the Trump administration pushes for policies to ensure the US leads in AI and revives domestic manufacturing. There are growing concerns that the PJM territory, covering approximately 65 million people, could face electricity shortages in the coming years as data centre construction outstrips the development of new power sources.
FERC Chair, Laura Swett, stated that enabling large energy users to source electricity straight from generation plants was a "critical step" to provide certainty for investors and consumers. She argued it was necessary to meet historic surging demand and realise the country's potential. Swett also claimed the framework would protect regular household ratepayers, despite evidence from several states suggesting these consumers are already bearing costs for new infrastructure built to feed power-hungry data centres.
Winners, Losers, and Regulatory Tracks
The decision was immediately welcomed by power plant owners, whose share prices saw a steep rise following the announcement. Industry groups like Advanced Energy United, representing solar and wind providers, said the order should help clarify how major users can establish their own power sources. The Edison Electric Institute, representing for-profit utilities, gave a more measured response, saying it would "continue to work" to support rapid connections while protecting other customers from cost-shifts.
The order establishes new regulatory pathways. It mandates that PJM develop specific rates and conditions for different colocation scenarios. This could allow a large user to pay only for the transmission services it uses, which is likely to be considerably less than a traditional grid connection fee. Crucially, the order also stipulates that a company colocating with an existing plant may have to cover the cost of replacing the energy it diverts from the wider grid.
Rooted in Corporate Dispute
Thursday's ruling originated from a dispute between power plant owners and electric utilities over a proposed deal between Amazon's cloud-computing subsidiary and the owner of the Susquehanna nuclear power plant in Pennsylvania. For tech giants, such direct arrangements offer a quicker, potentially cheaper way to secure vast amounts of power, bypassing the congested and ageing public grid. However, utilities had protested that this allows big users to avoid contributing to grid maintenance costs, while consumer advocates warned it could drive up energy prices for everyone else without a clear plan to meet the soaring overall demand.
Jeff Dennis of the Electricity Customer Alliance said the order shows FERC is trying to tackle the looming issues of fast-growing power consumption and underscores the urgent need for broader grid policy reform. The FERC decision may now serve as a blueprint for handling a separate October request from Energy Secretary Chris Wright to prioritise power for data centres and large manufacturers.
