Data centers face hefty grid costs as feds fast-track lines

The federal backstop for interstate transmission begins with the Energy Policy Act of 2005, which created the statutory foundation by adding Federal Power Act §216 and tying federal involvement to a prior DOE corridor finding. On August 8, 2005, Congress enacted that law, which “authorized DOE to designate National Interest Electric Transmission Corridors” and “gave FERC limited backstop permitting authority when states delayed or blocked interstate transmission projects,” establishing a narrow federal role rather than a general siting power.

A decade later, Congress revisited that same framework instead of replacing it, refining how the limited federal authority would operate when state regulators said no. On December 4, 2015, Congress enacted the Fixing America’s Surface Transportation Act, which “amended Federal Power Act §216 to revise standards governing FERC’s backstop authority and required consideration of state denials based on jurisdictional concerns,” confirming that the 2005 regime had evolved into a more specific set of rules for reviewing state denials under §216.

BAAJA’s core change is procedural: it tries to replace open-ended review with enforceable speed. Bipartisan Policy Center noted that “On Wednesday, September 30, 2026… leaders of the Senate Environment and Public Works (EPW) Committee and the Energy and Natural Resources (ENR) Committee introduced… the Bipartisan American Affordability and Jobs Act,” making it the immediate vehicle for NEPA changes that narrow “NEPA reviews to impacts tied to the project rather than every hypothetical downstream effect,” bar agencies from waiting on late-breaking research, and impose “a 150-day clock on certain lawsuits,” all aimed at cutting delay in transmission approvals. The article says the bill “makes the 170-page Energy Permitting Reform Act of 2024 (EPRA) look piddling in comparison” and “represents a tremendous effort… on the Hill and in the White House.”

The bill also gives federal transmission oversight more teeth where the old system failed. According to the October 9 explainer, Order 1000’s interregional regime had been “incredibly toothless”; across “15 region to region borders” over “225 region pair years,” the number of interregional lines planned and built was “identically zero,” so BAAJA writes a “toothsome” planning rule and, as the October 27 analysis put it, creates “a more usable federal siting backstop” by allowing parallel federal-state processing and removing the DOE corridor designation step, reducing states’ ability to stall interstate lines outright.

The cost fight that set up the legislation was not abstract: Inside Climate News reported that 80 Maryland lawmakers warned in a June 16 letter that, absent refunds, “Maryland electric customers will pay $1.6 billion for just these projects over the next ten years, and much more over longer periods” for transmission upgrades tied to data-center demand they did not cause. That complaint goes directly to who pays, arguing households and ordinary businesses were being billed for infrastructure built to serve hyperscale loads, especially out-of-state data centers, instead of assigning those costs to the customers driving them.

Federal regulators then moved to change that allocation logic: Inside Climate News said FERC’s June 18 order told PJM and five other grid operators “to either defend or revise their tariffs” and to improve transparency and assignment of transmission-upgrade costs tied to large loads such as data centers, explicitly to prevent unlawful cost-shifting onto ratepayers. The legislative debate followed the same path, with Capital Mischief noting one bill “aims at any single site pulling 100 megawatts or more” and would require regulators to consider making those large users pay for the upgrades built to serve them rather than socializing the expense across everyone’s rates.

That burden shift was reinforced in utility practice, where developers increasingly face direct payment obligations instead of relying on the broader rate base. Analysis on October 12 said utilities “are starting to demand upfront cash deposits (up to 50% of infrastructure costs in some cases) and 10 to 15 year take or pay contracts” “to protect themselves, and residential ratepayers,” while American Electric Power in Ohio, after receiving requests to triple current data-center power supply, imposed a tariff requiring 85% minimum capacity payments on 12-year contracts—evidence that fixed grid-upgrade costs are being pushed onto hyperscale users, not households.

The stakes are large because multiple independent models point to systemwide savings, not marginal gains. C2ES, working with Greenline Insights, found that the permitting and transmission reforms under debate in Congress, including expanded interregional transmission and interconnection queue reforms, could reduce grid costs by $7 billion, while nationwide reform could reduce cumulative grid costs by roughly $125 billion and residential electricity bills by $19 billion between 2026 and 2040; Resources for the Future separately estimated overall electricity system costs would run 3.5% to 7% lower each year through 2041, saving more than $350 billion in present-value terms through 2050.

Those savings are tied to a much larger, more flexible clean-power system. Axios reported Resources for the Future’s central case showed roughly 60 gigawatts more clean energy capacity on the grid in 2028 than under current law, while C2ES said that in regions covering about half of U.S. electricity demand, power-sector carbon dioxide emissions would fall 9%, or 71 million tons in 2035 alone, as battery storage rises 65%, solar 22%, and wind 14%, natural-gas generation falls from 45% to 39%, shortage costs drop by more than 76%, and savings nearly double to roughly $13 billion when gas prices are high.