Will the Senate's BAAJA Bill Let AI Giants Outmuscle Utilities?

Yesterday the US Senate approved a preliminary version of a bill, the Bipartisan Affordability and Jobs Act, commonly referred to as BAAJA. We previously published an article in Oilprice titled, “The AI Power Grab That Could Upend America’s Utility Industry.” Our thesis was simple. Today’s AI giants (we referred to them as T-Rexes because economically they are akin to apex predators), thanks to their enormous size and political influence, will be permitted to build whatever electric power generating facilities they choose, regardless of pre-existing environmental or other legal constraints. The BAAJA bill approved by a large Senate majority, provides the legislative roadmap for new power generation at data centers as well as other changes for the power industry.In our previous report, we said that the search for huge amounts of incremental electric power has resulted in a “grab for gas”. Most of these large AI-related facilities will power themselves by utilizing relatively small, inefficient, and highly polluting gas combustion turbines (CTs). Anthropic this week announced a multi-billion-dollar purchase of mostly gas CTs to power a new facility in Texas. Until we see something different, despite the November 2026 election, we will assume this is the new rule rather than the exception. In order for the rapid data center build-out to continue, there are three things that need to happen: 1) a rapid build-out of electric power transmission and gas pipelines to power these new facilities; 2) a limit on the ability of intervenors like state AGs or tribal authorities to stop these new lines; and 3) a willingness to completely ignore existing environmental regulations pertaining to air and water pollution. The BAAJA bill provides all three.Taking a step back, this is an early draft of a bill that will likely be heavily revised several times and may still die in a newly reconstituted House of Representatives. The bill makes these four assertions about how it will improve the lot of the electric industry and its consumers by: 1) increasing generation supply, 2) increasing transmission, 3) improving use of grid capacity, and 4) facilitating connection of consumers to cheaper generation. As for no. 1, we would have to agree given the possible addition of 40-50 gigawatts of gas-fired generation at these proposed facilities. However, the overall grid impact is highly uncertain because these data centers are adding gas combustion turbines that will produce power at uncompetitive prices for most of the year. As for increased transmission, it is likely to occur if all of the potential legal intervenors are stifled and legally eliminated, which this bill proposes to do. As for improved use of grid capacity, this might be true where a data center buys power directly from a utility at its full wholesale rate. But this seems likely to be a minor part of future utility-data center interaction. As for connecting consumers to cheaper sources of generation, we have only two words: Hello Texas. In September, ERCOT (Electric Reliability Council of Texas) published an update listing 158 gigawatts of solar requesting grid interconnection. This compares with only 38 gws of installed utility-scale solar at present. In addition, 166 gws of batteries also requested grid interconnection, along with 49 GWs of wind. Not all of these projects will get funded and built. And multiple requests for transmission access are often made such that some of these numbers are duplicative. But the enormity of this queue should be acknowledged. So as for number four, it is possible that at least power consumers in Texas may gain access to cheaper power, although probably at the expense of future utility profitability.In conclusion, we previously likened the political clout and rapid build-out of data centers to T-Rexes stomping on relatively puny electric utilities. Shifting gears (and metaphors), we are reminded of an old Broadway show tune about a supposed emissary from the Devil, a temptress named Lola. As our readers of a certain age know, “whatever Lola wants, Lola gets.”By Leonard S. Hyman and William I. Tilles for Oilprice.comMore Top Reads From Oilprice.comOil Prices Rise as Iran Peace Optimism FadesEuropean Gas Prices Rebound on Iran War UncertaintyBurnham Heads to COP31 Torn Between Cheaper Power and Net Zero