Allison Clements is principal of 804 Advisory and a former member of the Federal Energy Regulatory Commission. Lori Bird is U.S. director of the WRI Polsky Energy Center.
As we face growing turmoil in energy markets, a steady stream of infrastructure-damaging storms and the race to develop AI, we can be sure of one thing: the need to focus our attention on rising consumer energy costs and surging electricity demand in the U.S.
We find ourselves in unprecedented times — last year’s gubernatorial elections in Virginia and New Jersey and more recent interventions by the White House and all 13 Mid Atlantic governors have affirmed heightened public concern over increasing electricity prices and cost of living more broadly. With 36 more states preparing for governors’ races in 2026, voters’ concerns over their utility bills are sure to become even more pronounced this year. And as winter storm Fern reminded us, systemic challenges require systemic solutions and will not all be solved with one policy or even within one jurisdiction.
Of course, with challenge comes opportunity. Never before have so many perspectives been aligned around the need to ensure our country’s electricity grid is reliable and affordable. Although the factors that influence today’s electricity prices have long been in the making, decision makers, especially state policymakers and utilities, are anxious to start implementing cost-reducing solutions now.
While there’s no shortage of important longer-term policy reform opportunities, there are several policies states can implement now to drive cost savings more quickly:
Utilize AI to address AI-driven load growth.
States can require utilities to implement artificial intelligence-enabled software that allows for the consolidation of planning, interconnection and dispatch into one or more complementary models that vastly improve efficiency — and results in cost savings. In regional power markets, states can require their utilities to petition the grid operators to adopt such modeling capability, or even file at the Federal Energy Regulatory Commission to compel this capability.
Some regions have taken initial steps toward these solutions — last year, PJM announced a partnership with Tapestry, Alphabet’s moonshot for the electric grid, to enhance aspects of regional planning and interconnection processes using AI. Portland General Electric has partnered with AI startup GridCARE to reduce costs and expedite data center interconnections in the state of Oregon. It is time to deploy AI to better support the grid that is working hard to support AI.
Expand the existing grid with new technologies.
States can also encourage or require utilities to deploy cost-effective advanced transmission technologies, or ATTs, which include grid enhancing technologies and advanced conductors on the transmission and distribution systems. ATTs allow more efficient and dynamic planning and operations in a manner that can facilitate new loads with less investment in grid upgrades.
More than a dozen states have already taken legislative or regulatory action to encourage ATTs, and the results are compelling: investor-owned utility PPL deployed the first market-integrated dynamic line rating solution in the U.S., reducing congestion by over $60 million year-over-year on a single line and avoiding a lengthy, expensive ($50 million) line rebuild. Similarly, in 2024, AES deployed dynamic line ratings to increase capacity on highly congested transmission lines, and the deployment took less than a year to complete — much faster than building new transmission lines.
Increase demand-side flexibility
States can reduce barriers to the adoption of demand-side flexibility, which would enable us to get more out of the existing grid and build less new infrastructure.
State policymakers can encourage use of virtual power plants and responsive distributed energy resources to reduce peak demand and decrease costs. Rewiring America, in what it calls its “homegrown energy” solutions, estimates that the adoption of heat pumps, residential solar and batteries can make significant dents in satisfying new power-hungry demand. Flexible distributed energy assets like electric vehicles are already driving down rates. Policies and programs that further encourage smart, grid-integrated charging hold even greater potential to deliver system level savings.
Encourage grid-friendly loads that pay their own costs
Data centers can contribute to lower costs for all customers, if policy frameworks enable that outcome. Recently, seven leading AI companies and hyperscalers signed the White House “ratepayer protection pledge,” a voluntary commitment to avoid shifting costs to households and to support grid reliability. States can take several steps to help implement this and ensure consumers are protected from cost increases by improving load forecasting, encouraging projects to be grid-friendly and ensuring that new loads pay their own costs.
Last October, FERC proposed exercising preemptive jurisdiction in this area via its large load Advance Notice of Proposed Rulemaking. Even if FERC does act, any potential rulemaking will take time, and in any case, states will still be centrally involved in load forecasting, retail rate determinations and rules for data centers bringing their own capacity.
Some states and utilities have already taken action by directing or developing large load tariffs. The efforts have generally created a level of stringency in interconnection requirements to help deter speculation. AEP’s tariff for large data center loads, for example, resulted in cuts to its load interconnection queue from 30 GW to 13 GW. Large load tariffs should also focus on transparency to ensure accountability for utilities and customers. States can require that utilities offer accelerated interconnection and or lowered distribution rates for flexibility commitments, which avoid the need for costly upgrades.
There is no magic button to press for achieving electricity bill savings. But these policy suggestions offer states a means to start bringing relief to their residents relatively quickly. States and utilities do not have to wait for elections to prioritize policies that quickly cut electricity costs for consumers while they build out longer-term energy affordability plans.
