U.S. energy regulators have once again pushed back on a controversial power-sharing arrangement involving Amazon and a nuclear facility, refusing to reconsider an earlier decision that blocks a major expansion of electricity use at one of the tech giant’s data centers.

The project in question involves a cutting-edge setup: a data center directly tethered to Talen Energy’s Susquehanna nuclear plant in Pennsylvania—a “co-located” deal designed to bypass traditional grid delays and fast-track the explosive demand for power-hungry AI operations.

As tech companies scramble to secure dedicated, high-capacity energy supplies for their next-gen data centers, co-location deals like this have emerged as a promising, albeit contentious, solution. These arrangements have even driven up the stock value of independent power producers like Talen, with investors betting on a wave of similar deals in the AI era.

However, the Federal Energy Regulatory Commission (FERC) has expressed caution. The panel raised red flags over how diverting such massive amounts of electricity away from the grid might impact broader power reliability and consumer prices. In a ruling last November, FERC capped the Amazon-linked facility's power draw at 300 megawatts—far below the nearly 1,000 megawatts Talen had envisioned.

On Thursday, FERC doubled down, rejecting Talen’s appeal to revisit the decision. The ruling leaves Amazon's high-energy ambitions at a standstill for now, pending the outcome of a broader regulatory review into how such co-located energy setups should be governed.

While the denial is a setback for Talen and Amazon, it underscores growing regulatory unease around the energy demands of Big Tech—and the need for clearer, more comprehensive rules as AI data centers become ever more entwined with the nation's power infrastructure.