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Data centers are the physical backbone of the AI revolution. But they will place enormous demands on America's electricity infrastructure. As data center expansion continues, policymakers are grappling with how to facilitate infrastructure growth without burdening ratepayers. Senator Tom Cotton's Decentralized Access to Technology Alternatives Act of 2026, known as the DATA Act, is a recent legislative proposal to address that tension at the federal level.
The DATA Act Approach
The DATA Act amends the Federal Power Act by creating a new category of electric utility: the “consumer-regulated electric utility,” or CREU. A CREU is defined as an electric generation and supply system established exclusively to serve new electric loads that were not previously served by any retail electricity supplier, and that is physically islanded from the bulk-power system and all regulated utilities.
Despite the CREU name emphasizing consumer regulation, what the DATA Act actually does is remove regulation. It exempts CREUs from a sweeping range of federal regulatory requirements, including:
- Rate regulation;
- Corporate and financial oversight;
- Transmission and distribution regulation;
- Reliability standards;
- Interconnection requirements;
- Participation in regional transmission planning or cost allocation; and
- Merger, consolidation, acquisition, or disposition approval.
The bill also grants CREUs the right to construct and operate facilities within existing public rights-of-way, subject to permitting, restoration, and public-safety requirements, though the scope of review for such applications is limited exclusively to right-of-way restoration and storm-response planning.
Critically, the exemptions are conditional. If a CREU elects to connect to the bulk-power system or any other electric transmission or distribution system for primary or backup supply, it immediately ceases to qualify as a CREU and becomes subject to all applicable federal regulation.
Implications for Data Center Development
Adoption of the DATA Act would have significant implications for the data center industry. By allowing companies to build privately financed, off-grid electricity systems free from federal utility regulation, the bill creates a pathway for data center operators to bypass long interconnection queues and avoid potentially complex regulatory oversight. As emphasized at a recent House Science, Space, and Technology Committee hearing, it can take five to ten years to interconnect new facilities.
The DATA Act would not, however, change state and local siting and permitting requirements. And, because CREUs could include any type of “generation, energy storage, transmission, or distribution,” many would face significant permitting and approval needs. Indeed, data centers are currently exploring a range of generation resources including natural gas turbines, battery storage, renewables, and nuclear power, among others. Moreover, some of the exemptions in the DATA Act, for instance exemptions from reliability standards, are likely to be controversial. Thus, the DATA Act would address some—but not all—of the challenges causing long development timelines.
The DATA Act is intended to let companies that need power quickly
build their own electrically isolated generation, storage, and
distribution systems if they bear the full costs. This pathway
could insulate existing ratepayers from the cost of serving
high-intensity industrial users. When introducing the bill, Senator Cotton emphasized this
point: “American dominance in artificial
intelligence and other crucial emerging industries should not come
at the expense of [ ] higher energy costs.” The approach,
however, requires data centers to forgo any connection to the
grid—a constraint that may not be realistic for all data
centers.
Federal Actions Guiding Data Center Growth
On the legislative front, Representative Begich of Alaska announced he would soon introduce a House companion bill for the DATA Act. Meanwhile, the House-passed bipartisan SPEED Act, which includes reforms to the National Environmental Policy Act permitting process, awaits action in the Senate. The House Natural Resources Committee has also advanced six bills by unanimous consent to streamline permitting for geothermal energy development, which is a potential steady power source for data centers. These measures reflect growing bipartisan recognition that the current permitting and regulatory framework is not suited to the pace of AI-driven infrastructure development.
The Trump administration has also signaled support for data center development. Earlier this week, the Ratepayer Protection Pledge Proclamation endorsed leveraging data center development while addressing energy affordability. Seven technology companies signed on to the pledge, promising to “build, bring, or buy the new generation resources and electricity needed to satisfy their energy demands, and pay for all new power delivery infrastructure upgrades to service their data centers.” While this commitment is broadly welcome, following through in practice will be more complex than simply signing a pledge. Allocating power system costs among customers is already complex. The DATA Act simplifies this issue by assuming data centers will be served by completely disconnected systems. For data centers that remain grid-connected, ensuring that no new costs flow to other consumers will prove more difficult.
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