Federal Regulators Block Amazon Nuclear Power Pact Citing Grid Reliability Risks
The Federal Energy Regulatory Commission (FERC) has officially rejected a pivotal interconnection agreement involving Amazon Web Services (AWS) and Talen Energy, sending shockwaves through the rapidly expanding artificial intelligence sector. The ruling specifically targets the amended service agreement allowing an AWS data center campus to draw up to 480 megawatts directly from the Susquehanna Steam Electric Station in northeastern Pennsylvania. This decision, delivered in a 2-1 vote by the commission, directly challenges the growing trend of “co-location,” where hyperscale data centers are constructed adjacent to nuclear power plants to bypass traditional transmission charges and secure uninterrupted carbon-free energy. The rejection validates concerns raised by utility giants such as Exelon and American Electric Power, who argued that such arrangements could threaten grid reliability and unfairly shift up to $140 million in transmission costs annually onto regular ratepayers.
At the center of this dispute is the massive Cumulus Data campus, which Amazon acquired from Talen Energy earlier this year for $650 million. The facility was designed to scale its energy consumption to 960 megawatts—roughly the capacity of a standard nuclear reactor—exclusively to power the energy-intensive graphical processing units required for training large language models. While Talen Energy argued that the co-location would not impact the broader PJM Interconnection grid, FERC Commissioner Mark Christie stated in his concurring opinion that co-location arrangements of this magnitude present complex legal and technical issues that require closer scrutiny. The commission found that the proposed agreement failed to adequately prove that the diversion of power would not degrade the reliability of the regional transmission system, specifically in the PJM zone which serves 65 million people across 13 states and the District of Columbia.
The immediate fallout of this regulatory intervention extends well beyond Amazon and Talen Energy, casting doubt on similar high-profile nuclear partnerships recently announced by other tech titans. Microsoft’s highly publicized deal with Constellation Energy to restart Unit 1 at Three Mile Island, located just 85 miles south of the Susquehanna plant, relies on a similar economic model of dedicated nuclear baseload power. Industry analysts atTudor, Pickering, Holt & Co. have indicated that while the Microsoft deal involves restarting a dormant reactor rather than diverting active baseload, the FERC ruling signals a more hostile regulatory environment for all “behind-the-meter” power deals. The decision effectively forces tech companies to reconsider their strategy of circumventing the lengthy interconnection queues that currently plague the US electrical grid, where wait times for new transmission projects can exceed four years.
From a technical standpoint, the ruling highlights the physical constraints of the aging US power infrastructure against the unprecedented demand surge from AI data centers. The Susquehanna plant, producing 2.5 gigawatts of power, is a critical baseload asset for the Pennsylvania-New Jersey-Maryland (PJM) grid. Utility operators demonstrated that diverting nearly a gigawatt of this stable power directly to Amazon would force the grid to rely more heavily on intermittent renewable sources or expensive natural gas peaker plants to balance supply and demand. FERC’s insistence on a more rigorous review process implies that future co-location proposals will need to include substantial grid-support investments or “make-whole” payments to offset the loss of baseload generation, potentially adding hundreds of millions of dollars to the operational costs of AI infrastructure projects.
