The constraint on the AI buildout stopped being the chip a while ago. It moved to the power plant, and more precisely to the years-long queue to connect a gigawatt-scale data center to a grid that was not built to absorb it. On June 18, federal regulators moved to do something about the queue, and the way they did it matters as much as the fact that they did.
The Federal Energy Regulatory Commission issued what it called tailored “show cause” orders to all six regional grid operators under its jurisdiction (PJM, MISO, SPP, CAISO, ISO New England, and the New York ISO), along with their transmission owners. The vote was unanimous. Each operator now has 60 days to either justify why its current rules for connecting large energy users remain “just and reasonable,” or file changes. Within 30 days, each must also report whether it has enough generation to actually serve the large loads it is being asked to connect.
The mechanism is the story
The headline reads like procedure. The detail underneath it is not. FERC used Section 206 of the Federal Power Act, and a Section 206 show-cause order inverts the usual burden of proof: a tariff survives only if the operator successfully defends it. If the operator cannot, FERC directs the change. That is the difference between asking the grid operators to consider reforms and telling them their current rules appear unjust until proven otherwise, which is, in fact, the language FERC used. The commission said the six markets’ existing tariffs “appear to be unjust and unreasonable” because they do not adequately address how large and co-located loads connect to the system.
Just as telling is the route FERC did not take. The expected path was a single national rulemaking, a Notice of Proposed Rulemaking, the kind of proceeding that can run for years before anything binds. Instead, the commission went market by market with hard deadlines, converting more than a year of FERC signaling into binding clocks. It follows the agency’s April statement that it intended to act by June, and it resolves, at least for now, the open question of whether FERC would issue one broad rule or move operator by operator.
What it does not do
The orders are not a blank check for data centers, and FERC was careful to say so. The commission paired the speed-to-power language with consumer safeguards: preventing cost-shifting onto other transmission customers, and requiring transparency into how the cost of serving large loads gets identified and allocated. It left retail-rate authority, the part that shows up on a household electricity bill, with the states. And it stopped short of asserting the broader jurisdiction the Department of Energy had pushed for. Rob Gramlich of Grid Strategies, a widely cited grid-policy analyst, read the action as going right to the edge of FERC’s authority without crossing it.
There are also real gaps. The single largest data-center market in the country, Texas, is untouched, because ERCOT operates outside federal jurisdiction. And a show-cause order is the start of a proceeding, not the end of one: each operator’s filing enters its own docket, where state commissions, load-serving entities, and other intervenors get to contest it before FERC acts. The 30- and 60-day clocks are real, but they produce filings, not finished rules.
Why it matters for anyone building on this
For the companies racing to stand up AI infrastructure, the practical question the order raises is narrow and concrete: will faster, clearer interconnection rules actually arrive before contracted in-service dates, and who pays for the grid upgrades a new gigawatt of load triggers. The order does not answer either. What it does is force the operators to put their answers on the record, on a deadline, instead of leaving interconnection as an open-ended queue.
That is the shift worth noting. The bottleneck for AI compute has moved from the silicon to the substation, and the federal government just acknowledged it in the most binding way it has so far: not by promising more power, but by telling the people who run the grid that the rules for connecting to it are now theirs to defend.
The Counter Brief — one email, every Monday.
The week's AI-for-revenue moves in a 5-minute read: which tools are worth the budget and which to skip, plus what to do this week. Source-checked, no vendor decks.
Edited by Aditya Marin Gasga
Free. One click to unsubscribe.
Frequently asked questions
What did FERC actually order?
FERC issued tailored 'show cause' orders under Section 206 of the Federal Power Act to all six regional grid operators (PJM, MISO, SPP, CAISO, ISO-NE, NYISO) and their transmission owners. Each has 60 days to either justify why its current tariffs are just and reasonable for large loads or file reforms, plus a 30-day report on whether it has enough generation to serve those loads.
Why does the Section 206 mechanism matter?
A Section 206 show-cause order shifts the legal burden onto the grid operators. A tariff stays in place only if the operator successfully defends it as just and reasonable; otherwise FERC directs changes. That is the opposite of the usual posture, and it is why this is more than signaling; the deadlines are binding.
Who does it affect, and who does it not?
It reaches roughly 200 million people across more than 30 states and Washington, D.C., about two-thirds of the load served under FERC-jurisdictional rates. It does not apply to Texas, whose ERCOT grid operates outside federal jurisdiction, even though Texas is one of the fastest-growing data-center hubs.
Does this mean data centers can connect faster regardless of cost?
No. FERC paired the speed-to-power goal with explicit consumer safeguards: preventing cost-shifting onto other transmission customers and requiring transparency into who pays for the grid upgrades large loads trigger. The orders left retail-rate authority with the states.