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NERC, the federally designated organization that coordinates and enforces bulk-power reliability standards in North America, warned in its June 2025 reliability report that fast-growing data centers are creating a significant near-term grid challenge. The concern is not that data centers have already caused a nationwide blackout. It is that large, concentrated loads can grow and change faster than the generation, transmission and operating plans needed to serve them safely. That can also create local infrastructure costs that matter to electricity customers.
What NERC warned about—and what it did not
NERC’s 2025 State of Reliability report identified the size and speed of data-center expansion, particularly facilities serving AI and cryptocurrency workloads, as a reliability concern for the bulk power system. It said new facilities can be built faster than the generation and transmission infrastructure required to serve them, and pointed to voltage sensitivity and rapidly changing, sometimes unpredictable, electricity use.
“US regulator” is an imprecise description of NERC. NERC is the North American Electric Reliability Organization, with a role focused on bulk-system reliability. The Federal Energy Regulatory Commission (FERC) is the federal agency overseeing interstate electricity markets and transmission, along with certain reliability-related matters. Regional transmission organizations and independent system operators—including PJM, ERCOT, MISO and SPP—operate regional systems and wholesale markets.
The distinction matters: NERC’s warning concerns reliability of the interconnected bulk power system. Local distribution constraints, such as an overloaded neighborhood feeder or a utility needing to replace a transformer, are related but separate problems and may be governed by state and local processes.
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Why data centers can create grid stress
Fast, concentrated demand growth
A large computing campus can add substantial demand in one location. The grid must have enough generation to supply it and enough transmission and substation capacity to deliver that power at the right place and time. If a campus is built or expanded before those investments are ready, operators may face bottlenecks, tighter reserves or reliance on existing resources for longer than planned.
In its 2025 State of the Markets report, FERC staff estimated that more than 50 GW of data-center capacity was in service at the end of 2025. Capacity is not the same as actual electricity consumption: a facility’s nameplate capacity, contracted load, peak demand and annual energy use are different measures. Separately, the Energy Information Administration (EIA) estimated servers used about 7% of commercial-sector electricity in 2025. That server estimate does not necessarily include every support system at a data center, such as cooling.
EIA’s AEO2026 scenarios project server electricity use of 446–818 billion kWh in 2050, with servers potentially accounting for 22%–33% of commercial-building electricity use in those modeled cases. Those are scenario projections, not a settled forecast; the range reflects uncertainty about future demand and technology. See the EIA analysis of data-center server energy use and its AEO2026 outlook.
Voltage sensitivity and abrupt changes
Computing facilities rely on power-electronic equipment—including server power supplies, uninterruptible power supplies (UPS), cooling equipment and other inverter-connected systems. Their response to a voltage disturbance may differ from that of more traditional loads. NERC says operators need better models of how large data centers behave in real operating conditions, including how quickly demand can change and whether facilities may disconnect during a disturbance.
NERC Chief Engineer Mark Lauby reportedly cited two Northern Virginia voltage-related events in which about 1.5 GW of data-center load tripped offline in one event and another 1.8 GW in a later event. Those figures were reported by Data Center Knowledge, reproducing Bloomberg reporting; they should be understood as attributed event figures, not independently audited totals.
A large, sudden loss of demand can disrupt the balance between generation and consumption. NERC compared a loss of the magnitude discussed with a large nuclear plant unexpectedly coming online immediately: in both cases, the system must respond to a sudden shift in the generation-load balance. That is an analogy about the disturbance, not a claim that a data center is technically equivalent to a generator.
Supply and grid construction take time
Power plants, transmission lines, substations and distribution upgrades generally require planning, approvals, equipment and construction. A data-center project may advance on a different timeline. That mismatch can contribute to interconnection queues, reliance on older generation, tighter reserve margins and greater exposure to extreme weather or fuel-supply disruptions. FERC’s 2025 summer assessment said margins were tightening as generation retired and load increased, including from hyperscale users such as data centers. It also cited other factors, including weather, renewable output, wildfires and transmission limitations; data centers were not identified as the sole cause.
Where the risk is concentrated
The issue is most acute where large projects cluster, rather than uniformly distributed across the country. Northern Virginia and other Mid-Atlantic locations served by PJM have some of the largest data-center concentrations. Texas’s ERCOT region has seen rapid load growth and significant large-load requests. MISO, SPP and utilities in the Southeast are also dealing with growing large-load forecasts.
FERC’s summer assessment identified PJM, ERCOT, MISO, SPP and New England among regions that could face tighter generation availability under unfavorable conditions. That is a regional risk assessment, not a prediction that each region will have a shortage or that data centers alone will cause one. Local constraints can also arise on distribution systems even when a region has adequate overall generation.
What this could mean for electricity customers
Whether data-center growth raises household or small-business bills depends on the utility, the location, the infrastructure required and the regulator’s cost-allocation decisions. It would be inaccurate to say that data centers are already raising every customer’s bill nationally. The concrete concern is that new generation, transmission, substations or reserves may be needed, and regulators must decide which costs belong to the new large load and which are shared across the system.
Key questions include whether a developer pays the incremental cost of serving its project, whether it must make a firm financial commitment before construction starts, and who bears the cost if a proposed campus is canceled after the utility has begun building infrastructure. In co-location arrangements, regulators also have to clarify whether on-site generation serves only the data center or affects the wider grid, and how backup service and transmission costs are allocated. FERC’s co-location proceedings explicitly address tariff clarity, reliability and fair costs to other customers.
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For customers, the practical signals to watch are utility rate cases, special tariffs for large loads, proposed transmission and substation investments, and state decisions about who pays for new capacity. The outcome can vary substantially by region and utility.
How regulators are responding
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February 20, 2025: PJM co-location review. FERC opened a review of PJM’s rules for large loads, including AI data centers, co-located with generating facilities. It examined whether the tariff rules were clear, just, reasonable and fair to other customers. FERC’s order describes the initial action.
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December 18, 2025: direction to PJM. FERC directed PJM to develop transparent rules for serving AI-driven data centers and other large loads co-located with generation, including reliability, cost allocation and demand flexibility. Details are in FERC’s fact sheet.
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June 18, 2026: broader large-load action. FERC issued show-cause orders to the six regional grid operators under its jurisdiction, directing them to justify or reform tariffs for data centers, manufacturing facilities and other large users. The actions also sought explanations of how adequate generation would be available for existing and new large loads. FERC’s fact sheet says the actions do not displace state authority over generation siting and permitting or state public-utility commissions’ authority over retail rates. The agency also described the broader action in its announcement.
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What can reduce the risk?
Better planning and operating data
Grid operators need accurate load models at interconnection, realistic forecasts of campus expansion, telemetry that provides visibility into large loads, and studies that account for rapid ramps and simultaneous disconnection. Where technically appropriate, operating rules can set expectations for voltage response, ride-through, ramp rates or staged increases in load.
Phased connections and fair cost commitments
Utilities and regulators can tie energization to verified grid readiness, require financial commitments from speculative projects and coordinate generation, transmission and distribution planning. Tariffs can assign incremental costs transparently and limit the risk that existing customers are left paying for infrastructure built for a project that never arrives. The trade-off is that stricter requirements may slow development, while weak requirements may transfer costs or reliability risks to other users.
Flexibility, storage and backup
Some computing workloads may be shifted or reduced, depending on latency needs, customer agreements and operational constraints. Training work may offer more flexibility than real-time inference, but moving a workload geographically shifts electricity demand rather than eliminating it. UPS systems can bridge short disruptions; batteries can respond quickly, smooth brief changes or provide reserves when properly controlled and allowed to participate. Their duration, interconnection, controls and market rules matter, and a battery behind a data-center meter may protect that facility without providing services to the wider grid.
NERC observed improved frequency response in some areas with significant battery-storage resources and incentives or requirements for participation. That is evidence of a useful grid role, not proof that batteries alone solve data-center reliability problems or replace long-duration energy supply.
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On-site or co-located generation can reduce dependence on constrained transmission, but it does not automatically make a campus independent of the grid. Operators still need to establish whether the facility can import or export power, whether its generation is firm during peak periods, how protection systems coordinate with the regional grid and who pays for backup transmission. Fuel availability, permitting, emissions limits, construction time and cost also shape whether a particular resource can help.
Quick Recap
Terms that help make sense of the debate
- Bulk power system: The large interconnected network of generation and high-voltage transmission. NERC’s warning is about reliability at this level.
- Resource adequacy: Whether enough generation and other dependable resources are available to meet expected demand, including during stressed conditions.
- Voltage stability: The system’s ability to maintain acceptable voltage as conditions change or disturbances occur.
- Frequency response: The ability of resources and controls to help arrest changes in grid frequency after generation and demand become unbalanced.
- Interconnection: The technical and contractual process for connecting a new load or resource to the grid.
- Co-location: Placing a large load, such as a data center, at or near a generating facility; the arrangement does not by itself settle grid-service or cost-allocation questions.
- Behind-the-meter generation: Power produced on a customer’s side of the utility meter. It may serve the facility, but its grid effects depend on controls and whether it can export.
- Demand response: A planned reduction or shift in electricity use in response to grid conditions, contracts or price signals.
- Capacity and energy: Capacity describes a rate of power, often in megawatts; energy measures electricity used over time, often in kilowatt-hours or megawatt-hours.
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