Federal, state and the reliability referee
On September 9, 2025, the North American Electric Reliability Corporation, or NERC, issued a Level 2 alert on large loads. It asked transmission owners, planners and grid operators across North America to report how they study, commission and operate very large customers such as data centers, with responses due in January 2026. NERC does not issue alerts about ordinary customers. It did so because a series of events had shown that computing loads can behave in ways the planning models did not expect. The most cited came in July 2024 in Northern Virginia, when a fault on a transmission line caused roughly 1,500 megawatts of data center load to switch to backup power almost at once. The lights stayed on. The operators were nonetheless surprised, and in grid engineering surprise is the thing to avoid.
That alert introduces the third layer of grid governance, after the utility and the regional operator: the reliability referee. Under the Energy Policy Act of 2005, Congress created a single organization to write and enforce mandatory reliability standards for the bulk power system. The Federal Energy Regulatory Commission, or FERC, certified NERC for that role in 2006. NERC writes standards, FERC approves them, and regional entities audit compliance. Violations can carry penalties. Before 2005, reliability rules were largely voluntary, a fact that surprises most people who learn it.
The legal architecture above all of this is a division of labour set by the Federal Power Act. Broadly, FERC regulates transmission in interstate commerce and wholesale sales of electricity. States regulate retail sales, the rates households and businesses pay, and usually the siting of power plants and transmission lines within their borders. Each state does this through a public utility commission, though the names vary. Virginia's is the State Corporation Commission. Ohio's is the Public Utilities Commission of Ohio. Texas has the Public Utility Commission of Texas.
The seam between federal and state authority is where much of the current argument sits. A data center is a retail customer, so its tariff is a state matter. But when it connects directly to high-voltage transmission, or sits beside a power plant and draws power before it reaches the wider grid, the question of who has jurisdiction becomes genuinely contested. In November 2024, FERC rejected an amended agreement that would have expanded the power a co-located data center campus could take from the Susquehanna nuclear plant in Pennsylvania, owned by Talen Energy, with Amazon as the customer. The majority found that the filing had not justified its departures from standard terms, and the dispute turned largely on who should bear the cost of the transmission network the campus would still rely on. It was not an objection to data centers as such.
For someone reading a jurisdiction, this layering produces a simple rule of thumb. Questions about price are usually answered in the state capital. Questions about the transmission network and the wholesale market are answered by the regional operator and, behind it, by FERC in Washington. Questions about whether a new kind of load can be connected safely are increasingly answered by NERC. A project that satisfies one layer can still be held up by another, and each moves at its own pace.
It helps to think of the three as asking different questions. The state commission asks whether the rate is fair to other customers. FERC asks whether access to the network is open and not unduly discriminatory. NERC asks whether the system will stay up. A large load can be fair, open and unsafe all at once, and it is the third question that has become more pressing as individual facilities grow toward the size of small cities.
Faraday's read is that reliability will become a siting variable in its own right. Until recently it was treated as the utility's problem, solved behind the meter with backup generators and invisible to the customer. NERC's alert, and the stronger Level 3 alert on computational load that followed in May 2026, suggest that operators will ask more of large loads: better data on how they respond to faults, clearer commissioning tests, perhaps limits on how quickly they can ramp. None of that is settled. The direction, however, is visible in the documents.
The lesson for a newcomer is not to memorize the statutes but to recognize which door a question should be knocked on. A tariff dispute goes to the state commission. A queue dispute goes to the regional operator and then FERC. A ride-through problem ends up in a NERC standard. Knowing the right door saves months.