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Policy & Community

Policy Framework

Who regulates data centers? No single agency—authority is fragmented across federal, state, and local levels. Current frameworks weren't designed for gigawatt-scale facilities.

5 min read

Key Takeaways

  • 1 No single agency regulates data centers—authority is fragmented across federal, state, and local levels
  • 2 FERC controls grid access; states regulate utilities; localities control land use
  • 3 Current frameworks weren't designed for gigawatt-scale single facilities
  • 4 Location determines regulatory experience—PJM differs from ERCOT differs from MISO

The Governance Gap

When Microsoft announced a 20-year deal to restart Three Mile Island's reactor exclusively for its data centers, a question emerged: who approved this?

Who Has Jurisdiction?
NRC Reactor safety
FERC Wholesale markets
State PUC Retail rates
PJM Grid reliability
Local Land use
EPA Environment

Three Levels of Authority

Power is divided among federal, state, and local governments—each with distinct but incomplete authority.

Federal
FERC
  • Interstate transmission
  • Wholesale markets
  • Interconnection rules
Cannot: Approve projects or set retail rates
State
PUC / DEQ
  • Utility rate approval
  • Environmental permits
  • Economic incentives
Cannot: Control local land use
Local
Zoning Board
  • Land use decisions
  • Conditional permits
  • Development review
Cannot: Regulate grid or rates

The Democracy Deficit

Local volunteer boards evaluate billion-dollar projects with limited resources.

Developer Side
  • Multi-billion dollar budget
  • Sophisticated legal teams
  • State political pressure
  • Full-time project staff
Community Side
  • Small municipal budget
  • Volunteer board members
  • Limited technical expertise
  • 3-minute comment periods

Regional Variation

Where you build determines what rules apply—and how long approvals take.

PJM
4-8 years to approval
Rigorous but slow
13 states, thorough studies
ERCOT
1-2 years to approval
Fast but risky
Texas only, isolated grid
MISO/SPP
2-4 years to approval
Middle ground
Rural, less local experience

Fundamental Tensions

No framework can optimize for competing values simultaneously.

Speed vs Community Input

12-18 months for developers, 24-36 months for communities

Environment vs Development

Strict standards push projects to other states

National Security vs Local Control

AI priority framing vs. traditional local authority

Recent Federal Actions

FERC has attempted to address interconnection backlogs, but fundamental gaps remain.

Order 2023 July 2023

Cluster Studies

  • Study groups together, not sequentially
  • Higher deposits to discourage speculation
  • Target: 150 days for initial studies
Order 1920 May 2024

Long-Term Planning

  • 20-year forward transmission planning
  • Consider load growth and retirements
  • Proactive vs. reactive approach
Still Unaddressed
Priority access rules Cost allocation disputes State policy fragmentation Local capacity gaps

The fragmented framework means no one asks the fundamental question: should this project happen?

Go Deeper

Chapter 12 of This Is Server Country examines how authority became fragmented across federal, state, and local levels, traces recent FERC orders, and analyzes possible reforms and the political economy challenges any reform effort would face.

Learn more about the book → Browse all 50 state policies →