Most days Eakinomics’ interest in electricity is limited to whether flicking the switch turns the lights on. If yes, the day’s electricity thoughts are complete. But suddenly electricity policy is everywhere and, to the average mere mortal, super confusing. For example, a big question in competition policy is the proposed acquisition of Dominion Energy by NextEra Energy – a roughly $67-billion deal that would create the world’s largest regulated electric utility.

Is that a good idea? How could one tell? How does the analysis of competition translate to the arcane, regulated world of wholesale and retail electricity? Fortunately, AAF has Fred Ashton to answer these questions in Mega-merger Proposed to Power Data Center Alley. It is a nice roadmap through the companies, the regulators, the retail market for electricity, and the wholesale market for electricity.

There is a lot of information, but two key takeaways. First, the key competition issue occurs in the so-called capacity market and the potential for a generating firm with a large market share to manipulate the capacity it offers to the grid to raise retail electricity prices. Stay tuned to see how the regulators sort that out. Second, the driving motivation for NextEra is the fact that:

Dominion’s presence in Virginia has positioned the firm as the primary energy provider to the AI data center industry. With Ashburn, Virginia at the epicenter – home to 133 of the state’s 609 data centers – Northern Virginia’s Loudoun and Fairfax counties host the largest concentration of AI data centers globally, earning the region the nickname “Data Center Alley.” According to Dominion, 28 percent of electricity sales through its wholly owned subsidiary, Virginia Power, directly service data centers. The company has connected an average of 15 data centers annually since 2013.

As readers are well aware, the big juice needs of the big data centers required for AI is a nationwide concern. Indeed, it has prompted unusual and aggressive action by the obscure Federal Energy Regulatory Commission (FERC, don’t lie – you’ve never heard of it). This is the subject of Shuting Pomerleau’s FERC Data Center Orders Accelerate Grid Connection. Again, this a good way to catch up on an agency and jurisdiction that may seem quite arcane.

What FERC did was issue specific orders to the six regional transmission organizations (RTOs) and Independent System Operators (ISOs). (PJM Interconnection LLC, Midcontinent Independent System Operator, Inc., Southwest Power Pool, Inc., California Independent System Operator, ISO New England Inc., and New York Independent System Operator.)

The first thing of interest is how FERC did this. Instead of following the usual sleepy, tedious rulemaking process that could stretch out many years, FERC issued so-called “show cause orders” that demand a response within 60 days. Also, by and large states control electricity regulation; FERC’s jurisdiction is mostly narrow issues of interstate transmission. Had it issued a one-size-fits-all rule, FERC would have left itself open to lawsuits claiming it had usurped state’s jurisdiction. Instead, these are six “tailored” orders that do not tell the RTOs and ISOs what to do but rather simply ask for results in any fashion they may choose.

The second thing is what FERC wants. In English, it wants everyone to have a way to get data centers – or any big power-user like a data center – onto the grid quickly. Two– and three– year timelines won’t work for AI. It wants a guarantee that the grid will not become unstable as a result. Those will be costly to meet, so FERC wants each utility to have a rate structure that insulates other customers from sharp rate hikes to cover these costs.

Electricity policy is at the center of policy toward AI. These two papers are excellent introductions to this now-important policy area.