Federal Regulators Block Data-center Power Restrictions as Grid Faces Blackout Emergency

America’s electricity grid is struggling to keep the lights on. Yet federal regulators have rejected a plan to make power-hungry data centers bear greater responsibility during shortages.

The decision came just three days before the Trump administration issued an emergency order to prevent blackouts across a regional grid serving 67 million Americans.

The episode exposes a growing conflict between Washington’s ambitions for artificial intelligence and the electricity infrastructure needed to support them. It also raises a more fundamental constitutional question: Why is the federal government deciding how electricity is generated, distributed, and rationed rather than leaving those responsibilities to states and localities?

No Data-center Restrictions

Last Friday, the Federal Energy Regulatory Commission (FERC) rejected key provisions of a proposal from PJM Interconnection, the nation’s largest regional grid operator.

PJM coordinates electricity transmission across 13 states and Washington, D.C., including major data-center markets in Virginia, Pennsylvania, and Ohio. Its service territory also extends into Maryland, Delaware, New Jersey, West Virginia, Kentucky, Tennessee, North Carolina, Indiana, Illinois, and Michigan.

The proposed new framework sought to accommodate rapidly growing demand without jeopardizing existing customers. According to the company,

PJM’s proposal … would establish a new Interim Resource Adequacy Service (IRAS) for those new Large Load customers who do not bring their own power supply. When electricity supply on the grid approaches dangerously low levels, a new emergency procedure would notify utilities to reduce or transfer the electricity demand from new Large Load customers ahead of any action that would serve to shut off traditional consumers, including residential consumers.

FERC rejected that arrangement, arguing that PJM had exceeded its authority.

Utility Drive quoted the commission’s explanation:

We find that several provisions of the proposed tariff appear to place obligations directly on eligible new large loads[.]

The regulators noted that those customers generally fall under state jurisdiction. They also questioned why PJM would disconnect certain large users before others.

That federalist argument, however, did not prevent FERC from approving a separate proposal establishing a registry of large electricity customers. The database will track facilities’ locations, electricity requirements, planned operations, and other information.

According to Reuters, PJM expects data-center electricity demand in its territory to roughly triple by 2030, reaching approximately 29 gigawatts.

The commission left open the possibility that PJM could submit a revised proposal. For now, however, the grid operator lacks approval for its proposed mandatory curtailment framework.

A Blackout Emergency Three Days Later

This Monday, Energy Secretary Chris Wright issued an emergency order covering the same PJM region.

The order followed a Sunday request from PJM, which warned that looming electricity shortages could threaten grid reliability and public safety. It said,

The forecasted conditions raise a significant risk of emergency conditions that could jeopardize electric reliability and public safety.

PJM attributed the threat to a combination of elevated electricity demand, continuing hot temperatures, and extensive power plant maintenance during the autumn outage season. Planned transmission line outages and obligations to export electricity to neighboring regions further strained the system.

PJM forecast electricity demand of at least 111,500 megawatts for October 13. Meanwhile, generation outages were expected to reach 61,591 megawatts, leaving a substantial portion of the region’s generating capacity unavailable.

By October 14, PJM warned, available supplies could come within just 900 megawatts of its required reserve margin, the electricity capacity kept in reserve to handle unexpected shortages or equipment failures.

The grid operator identified particularly severe constraints in areas served by Baltimore Gas and Electric, Pepco, and Dominion Energy.

Emergency Power Measures

To avert potential blackouts, the Department of Energy (DOE) invoked Section 202(c) of the Federal Power Act, which grants federal authorities emergency powers to address electricity shortages.

The order authorized PJM to dispatch certain power plants beyond their normal operating limits, including restrictions imposed by environmental permits.

It also allowed the grid operator to direct large electricity customers, including data centers, to activate their own backup generators as a last resort during severe grid emergencies.

The authorization took effect October 13 and remained in force through October 16, when PJM expected regional temperatures to decline. Wright said,

This order will help ensure millions of American families and businesses across the mid-Atlantic have access to affordable, reliable, and secure electricity by making additional power generation, including backup power, available to use as needed.

The department estimated that more than 35 gigawatts of unused backup generation remained available nationwide.

The emergency order did not overturn FERC’s earlier decision. It relied on separate legal authority and addressed an immediate reliability threat rather than establishing permanent rules for large electricity customers.

Still, the sequence was striking. Three days after federal regulators rejected PJM’s proposed framework for restricting large electricity users, the DOE authorized emergency measures that could require those same types of customers to generate their own electricity to help prevent blackouts.

Who Gets Electricity When Supply Runs Short?

The dispute raises an uncomfortable question: Should households and hospitals face the same risk of losing electricity as commercial data centers consuming enormous amounts of power?

FERC Commissioner David Rosner addressed that question in his October 9 concurring statement:

To be clear, in an emergency, data centers not serving critical functions should be shut off before ordinary customers (Hint: homes, hospitals, and schools should never be curtailed before data centers).

Rosner did not define “critical functions” or specify which data centers should receive preferential treatment. Facilities supporting hospitals, emergency communications, financial infrastructure, or national security could plausibly qualify. Those primarily running commercial AI workloads, advertising algorithms, or entertainment platforms might not.

The distinction becomes more complicated when a single data center hosts both essential and nonessential services.

Rosner called on state regulators to establish clear priorities for emergency electricity allocation. But the fundamental questions remain. Who decides which data center operations are essential, under what criteria, and who loses power first when supplies run short?

The Problem With Mandatory Disconnections

Despite supporting priority protections for ordinary customers, Rosner criticized PJM’s proposal.

“PJM’s filing flips this paradigm,” he wrote. The plan would force certain large electricity users offline “in the earliest stages of emergency conditions,” before activating voluntary demand-response programs that compensate customers for reducing consumption.

The official warned that mandatory disconnections could distort electricity markets:

The result could be a capacity market signaling that PJM has more than enough capacity while the region sheds thousands of megawatts of demand on an involuntary basis.

Such distortions could weaken incentives to build additional power plants.

Rosner maintained that mandatory disconnections should occur only when necessary to protect grid reliability, “after voluntary demand response resources have been exhausted.”

The Constitutional Question

The dispute raises a more fundamental question: Why should Washington decide who gets electricity, who loses it, and who pays for it?

FERC regulates electricity markets, while the DOE intervenes directly in power generation, even directing private facilities to operate during emergencies. Both exercise authority rooted in expansive interpretations of federal powers that constitutional federalists have long challenged.

States and localities already regulate much of the electricity system. Yet Washington increasingly shapes the market, then invokes emergency powers when that market struggles to meet demand.

The deeper question is whether America’s power grid needs more federal intervention, or whether responsibility should return to states and localities, with interstate coordination where necessary.

Related Article:

Energy Secretary Wright Says Data Centers Will Bring Power Prices Down. The Grid Says Otherwise