Part 1: The demand surge and the DOE’s Section 403 direction
Over the past six months, the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) have each taken major steps that challenge the 90-year-old boundary between federal and state authority over the electric grid. FERC regulates the interstate wholesale electricity market and the high-voltage transmission system that supports it; state public utility commissions regulate retail sales to end-use customers and the local distribution infrastructure that delivers power to homes and businesses.
The question at the center of this dispute is which sovereign controls the process by which very large electricity consumers, particularly data centers, connect directly to the transmission grid. A final framework, almost certain to be tested in the D.C. Circuit, is expected by the end of June 2026
U.S. data centers consumed an estimated 183 TWh of electricity in 2024 (more than 4% of total U.S. consumption), projected to exceed 426 TWh by 2030. Individual hyperscale facilities now request 500 MW to 1 GW at a single point, compressing decade-long utility planning cycles. The effects are most visible in PJM Interconnection (PJM), the regional transmission organization (RTO) that coordinates the wholesale electricity market and transmission planning across 13 states and the District of Columbia. RTOs like PJM use capacity markets to ensure that enough generation will be available to meet projected demand years into the future; generators bid to provide that capacity, and the clearing price is passed through to ratepayers.
In PJM, data center demand drove a $9.3 billion capacity market price increase for 2025–2026. The December 2025 auction for 2027–2028 was worse: PJM fell 6,623 MW short of its reliability target for the first time in its history, with total capacity costs reaching $16.4 billion, 40% attributable to data center load. Before any new generator or large electricity consumer can directly connect to the grid, it must pass through an interconnection queue: a study and approval process in which the RTO evaluates the impact on existing infrastructure and determines what upgrades, if any, the new entrant must fund. That queue, now four to seven years in many regions, has become the primary chokepoint despite efforts to fast-track some interconnection approvals. PJM, MISO and SPP have each implemented targeted expedited interconnection processes for certain gas-fired generators deemed critical to near-term reliability, characterizing these programs as one-time and extraordinary measures necessary to avoid reliability shortfalls. Critics have assailed these programs as queue jumping, and they do not address the underlying backlog: the queue remains dominated by renewable generation projects that are ineligible for these fast-track processes.
Four categories of stakeholders have different stakes in the outcome: state public utility commissions, retail customer advocates, competitive generators and power developers, and hyperscale data center operators and large industrial loads. These groups’ interests do not always align. State commissions, for instance, have often charted a middle course in data center tariff proceedings, sometimes at odds with consumer advocates.
The DOE’s Section 403 direction
On Oct. 23, 2025, Secretary of Energy Chris Wright invoked Section 403 of the DOE Organization Act to direct FERC to undertake a rulemaking titled Interconnection of Large Loads to the Interstate Transmission System, Docket No. RM26-4-000, and demanded that FERC take final action no later than April 30, 2026. Load is the industry term for electricity demand; load interconnection refers to the physical and contractual process by which an electricity consumer connects to the grid. Historically, FERC has regulated the interconnection of generators to the transmission system, while the interconnection of retail customers (loads) has been managed by states and local utilities. The DOE direction asks FERC to extend its authority to the load side of that equation. Section 403 permits the secretary to propose rules within FERC’s jurisdiction and set a deadline for action, but FERC retains authority to accept, modify or reject the proposal. It has rarely been invoked, and its use here signals the administration’s view that the interconnection backlog is a national priority.
Secretary Wright acknowledged that FERC historically “has not exerted jurisdiction over load interconnections” but asserted that direct interconnection of loads exceeding 20 MW to the interstate transmission system “falls squarely within the Commission’s jurisdiction.” The accompanying Advance Notice of Proposed Rulemaking (ANOPR) set out 14 principles. Among them are a 20-MW applicability threshold; a joint study of co-located loads and generation (arrangements in which a data center and a power plant are sited together, with the generator supplying the data center directly and the grid serving as backup); an expedited 60-day study process for curtailable loads willing to accept service interruptions; and full cost responsibility for network upgrades. FERC docketed the direction on Oct. 27, 2025. Comments were due Nov. 21, 2025 (replies Dec. 5), drawing extensive participation. On Nov. 11, the National Association of Regulatory Utility Commissioners (NARUC), which represents the state commissions that regulate retail electricity service, passed a resolution urging FERC to resist the expansion of federal authority over large load interconnections.
The direction sets up a real collision. Secretary Wright’s letter calls large-load interconnection a matter that falls squarely within FERC’s jurisdiction, yet FERC has never claimed that authority before, and the state regulators have already urged it not to start now. The reliability numbers press for a fast federal answer, while the statute and decades of practice point toward the states. Whether FERC has the power to act at all is the question the direction mostly assumes, and it is the one that has to come first.
Be on the lookout for our part two post, which takes up that question through the Federal Power Act’s 1935 jurisdictional line, the two Supreme Court decisions on either side of it and FERC’s first concrete step in the fight: the December 2025 PJM Co-Location Order.
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