Grid operator PJM Interconnection recently released an energy demand forecast that should alarm every elected official in its 13-state region: summer peak demand could reach 222 gigawatts within a decade, driven largely by AI data centers. Each large facility consumes as much power as San Francisco. Someone has to pay for infrastructure to meet that demand. Right now, families are footing the bill.
The political backlash is building, and elected officials have responded with a flurry of proposals.
President Trump announced the Ratepayer Protection Pledge in his State of the Union address. Previously, New Jersey's governor froze electricity rates, while New York demanded data centers fund their demand.Everyone agrees that ratepayers shouldn't subsidize Big Tech's power consumption. But many proposed solutions — emergency auctions, rate freezes, curtailment requirements — don’t meet demand while protecting ratepayers. Better options exist: utilities can expedite interconnection for projects supplying their own power, or facilities can bypass the grid entirely.
The issue comes down to electricity costs’ driver: power delivery infrastructure. Once a new power plant is built, utilities still need to build miles of transmission and distribution lines and substations, not to mention years securing regulatory approvals. Some projects wait 5-7 years to get online, far too slow for the tech industry.
Though energy generation costs in the U.S. have dropped by 35% over the last twenty years, energy transmission and distribution costs have risen 181% and 149%, respectively. Too often, utilities pass infrastructure costs to all customers, not just those driving demand.
Electricity bills have become a political flashpoint. Virginia households saw monthly bills jump from $120 to $170 in four years, while New Jersey ratepayers faced 17-20% increases last year. With midterms approaching, legislators who campaigned on affordability will face voters asking why bills keep climbing. The political window to act is closing.
"Bring Your Own Generation" — an approach where data centers provide their own power rather than relying solely on the grid — has emerged as the consensus solution. Alongside President Trump, governors from Pennsylvania, Maryland, Virginia, and New Jersey have endorsed it. FERC mandated PJM create frameworks for it. Senator Dave McCormick has advocated for the approach to balance AI competitiveness with ratepayer protection. Microsoft, Meta, and Google are pursuing versions of it.
The key is giving utilities and data centers flexibility. Policymakers should enable two approaches:
Expedited interconnection allows data centers to bring onsite generation while maintaining grid connection for backup power or to sell excess capacity. These projects reduce transmission strain without requiring major grid buildout. PJM expects to file a voluntary framework for this approach by August.
Grid-independent operation allows facilities to operate entirely off-grid, delivering electricity directly without transmission infrastructure. Some of these systems run on natural gas without pollution and can transition to hydrogen as that emissions-free fuel becomes available.
Either approach offers deployment in months, not years, with cost protection for other ratepayers. Utilities would benefit too. In 2019, Con Edison avoided $1.1 billion in grid upgrades by incentivizing distributed generation. Ohio utilities are partnering with data center operators on projects that capture revenue without burdening customers. Utilities in other states should follow suit.
The main obstacle is regulatory uncertainty. Most state utility commissions lack clear frameworks for both expedited interconnection and islanded generation. Without that clarity, projects that could ease grid strain face the same delays as those adding to it. For elected officials, this is a solvable problem with political upside: enabling AI growth while protecting ratepayers.
State and federal policymakers should:
Grid operators, for their part, should differentiate between projects that add stress to the system and those that relieve it.
The data center power debate has exposed deep fissures between tech companies, utilities, grid operators, and state governments. Whether through expedited interconnection or grid-independent operation, onsite generation solves multiple problems: speed, affordability, and reliability. The technology is proven. The economics work. With midterms approaching, policymakers can provide regulatory clarity now – or explain to voters why they didn't.
James Roth is Head of Policy & Government Affairs at Bloom Energy, where he leads the company’s engagement in Washington, D.C., and in foreign capitals.
