NEW YORK, Nov 1 (Reuters) - Costs and reliability

concerns related to the burgeoning trend of building

energy-intensive data centers next to U.S. power plants were the

focus of a technical conference held on Friday by the Federal

Energy Regulatory Commission.

As the technology industry races to deploy data centers for

technologies like generative artificial intelligence, quickly

accessing the massive amounts of electricity for the centers has

become a critical problem.

Connecting data centers directly to power plants, in an

arrangement known as co-location, has presented a fast route to

accessing large amounts of electricity, instead of toiling for

years in queues to connect to the broader grid.

"I believe that the federal government, including this

agency, should be doing the very best it can to nurture and

foster their development," said FERC Chairman Willie Phillips,

adding he considered AI centers vital to national security and

the U.S. economy.

This year Amazon ( AMZN ) bought a data center powered directly by a

Pennsylvania nuclear plant owned by Talen Energy ( TLN ). Shares of

fellow major independent nuclear operators, including

Constellation and Vistra ( VST ), have shot up this year partially on

the prospect of striking similar deals.

The possibility of a ballooning number of co-located data

centers has raised questions about potentially higher power

bills for everyday customers because the centers will use grid

infrastructure and services paid for by the public.

Connecting data centers directly to power plants that had

been supplying power to the public has also sparked reliability

concerns, in part, because they can divert steady power from the

grid.

FERC questioned whether the co-located centers will use

the grid as backup power and what will happen if the neighboring

power plant unexpectedly goes offline.

"Does the customer get to still draw power from the grid?

Because if it does, that's going to have a huge impact," said

Commissioner Mark Christie.

The technical conference could lead to new co-located data

center guidelines, including ones that determine who is

responsible for transmission and distribution upgrade costs and

how agreements for the centers are governed.

FERC is also currently gathering details on a regulatory

battle being waged by electric utilities over the co-located

Amazon ( AMZN ) data center agreement with Talen Energy ( TLN ). Talen's

interconnection agreement for the center is being opposed by

utilities Exelon ( EXC ) and American Electric Power ( AEP ), and FERC's

decision on the case could set a precedent for similar deals.

The data center would take as much as 960 megawatts, or

enough to power nearly 1 million American homes, of nuclear

energy from the largest U.S. electrical grid.

At Friday's conference, Joseph Bowring, watchdog for PJM

Interconnection market activity, said more co-located data

centers at nuclear plants would exacerbate the region's

supply-demand imbalance.

"It is not a way to solve the problem, it is a way to

actually make it worse," Bowring said, recommending that data

center developers instead help bring more power online.

Brian George, Google's head of global energy market

development and policy, said Google's interest in co-located

developments is being driven by a need to access electricity and

not to avoid the associated costs.

"We will pay for our fair share of those costs," George

said.