US Senator Proposes Bill to Exempt Off-Grid AI Data Centers from Federal Power Regulations

Senator Cotton Introduces DATA Act to Streamline Energy Infrastructure for AI January 13, 2026 A new legislative proposal in the U.S. Senate seeks to remove a significant regulatory hurdle for the booming artificial intelligence industry by allowing AI data centers to develop their own independent power infrastructure free from federal oversight. The move highlights the intense pressure on energy grids and regulatory frameworks posed by the exponential growth of compute-intensive AI workloads, which demand unprecedented and reliable power. Senator Tom Cotton (R-Arkansas) introduced the "DATA Act of 2026," a bill designed to amend the Federal Power Act. The legislation would create a new category of utility called a "consumer-regulated electric utility" (CREU). Companies that build completely isolated, off-grid power plants solely to serve new data center loads would qualify for this designation and be exempt from key federal regulations. Under the proposed framework, these exempted utilities would avoid oversight from the Federal Energy Regulatory Commission (FERC), including its rate regulations, mandatory reliability standards, interconnection rules, transmission planning requirements, and merger approvals. To maintain its exempt status, a CREU must remain entirely disconnected from the main public grid; any subsequent connection would result in the loss of its regulatory bypass. The bill also contains a provision allowing these islanded systems to sell retail electricity to other customers. In a statement explaining the bill's rationale, Senator Cotton argued, "American dominance in AI and other crucial emerging industries should not come at the expense of Arkansans paying higher energy costs. My bill will ensure that America can continue to lead in these spaces by eliminating outdated regulations." He contends the act would accelerate energy innovation and enable data centers to build dedicated power systems without impacting existing grid reliability or causing costs to be passed on to other utility ratepayers. The proposal is likely to face strong opposition from established electric utilities, as it could divert significant revenue and large-scale energy customers away from the traditional grid. It follows a similar policy approach enacted at the state level in New Hampshire last year. If passed, the DATA Act could fundamentally reshape how major AI infrastructure projects are powered, encouraging a wave of private, off-grid energy development but also raising questions about national grid planning and long-term energy policy coordination. Source: datacenterdynamics