Exploration of the Impact of the Reconciliation Bill on the AI-Energy Synergy

In a move that has sparked controversy, a recently proposed bill aims to establish a 10-year moratorium on state and local regulation of artificial intelligence (AI) in the power sector. Critics argue that this move could have significant implications for the health and operation of the power system, as well as for the clean energy industry.

The bill, if passed as written, would render all existing state and local AI regulations in 31 states immediately unenforceable. This includes regulations in states like California, which has been at the forefront of AI decision-making in hiring, and Utah, which has regulations for mental health chatbots. In total, 28 US states have enacted at least 61 new AI laws as of 2025, with 38 states introducing over 100 AI-related measures.

Proponents of the moratorium argue that it is necessary to prevent a patchwork of state and local regulations from stifling AI innovation. They believe that a uniform federal approach is needed to encourage the development and adoption of AI technologies in the power sector. However, critics view this move as lazy lawmaking at best, and deeply irresponsible at its worst.

The bill's language is broad and includes automated decision systems in the power sector, such as demand response, virtual power plants, managed EV charging, and smart meter home energy management. Some fear that the moratorium could limit the options for developers eager to add capacity and flexibility to the grid, making project development more costly.

Furthermore, the moratorium on state and local regulation of AI may run afoul of the Byrd Rule, a Senate rule that prohibits extraneous provisions from being included in budget reconciliation bills. The bill's language lumps "artificial intelligence models" and "artificial intelligence systems" together with "automated decision systems" in the power sector.

The passage of the bill could potentially lead to the unintended consequence of softening demand for AI tools in the power sector due to eroding trust. This could be particularly problematic given that support for new capacity on the grid in 2025 is expected to come primarily from renewables and storage. The bill, however, shifts support to relying more on nuclear and fossil fuels to meet anticipated load growth in the U.S.

The reconciliation bill, now sent to the Senate, largely guts the Inflation Reduction Act's support for the clean energy industry. The passage of the bill sent a chill through the clean energy industry, with concerns about the future of AI regulation in the power sector adding to the uncertainty.

Regulatory innovation and pace at the state and local level in AI and energy is considered exceedingly worth preserving. The AI-Energy Nexus newsletter published a version of this story on May 28.