According to two people familiar with the matter, earlier this year, Mississippi utility Entergy warned Amazon.com (ASX: AMZN) that during peak demand periods, it might need to disconnect the company's Mississippi data center from the public grid to safeguard supply for other customers.

The AWS cloud unit operates a data center near Jackson, Mississippi, and is expanding it, while also building two new data centers in the same area, making Mississippi a key part of Amazon's data center footprint. Utilities rarely cut off power to large customers, but this previously unreported warning shows that surging electricity demand from AI cloud providers is pushing utilities to take unprecedented steps to balance the power needs of different users.

The two people said Entergy's warning prompted AWS to overhaul its automation system, which was originally designed to switch data center power from the public grid to backup sources such as gas generators. One of the people said Amazon introduced a new mechanism called Project Falcon: utilities can trigger a data center's switch from the grid to backup power on their own, without contacting AWS to start the switching process. Mike Sloane, chief executive of data center power services provider Synergetic, said: "Data centers are enormous and are constantly pushing against the grid's carrying capacity and response speed. Grid operators and utilities therefore create special rules for these customers. Data centers must accept curtailment arrangements, which means data centers themselves need a set of tools to handle that risk."

The people said that while Project Falcon was developed for AWS data centers in Mississippi, Amazon may deploy the approach in other parts of the United States in the future. Multiple utilities across the country have warned that they may temporarily disconnect data centers from the grid in the future. Last year, the Texas legislature passed a bill allowing grid operator ERCOT to force large customers to cut grid power use under certain conditions. A spokesperson for Duke Energy, a North Carolina power provider, said Duke has recently added clauses to large-customer contracts allowing it to cut grid supply when necessary. PJM, the largest grid operator in the United States, handles power dispatch in Virginia, Illinois and other states. To address power shortfalls, PJM has introduced several plans, one of which is to seek federal regulatory approval to prioritize cutting power to large customers rather than ordinary users in emergencies.

Other cloud providers have also developed their own systems to ease grid overload pressure. Amazon.com (ASX: AMZN) rival Google, for example, focuses on reducing its own data centers' electricity consumption from strained grids. Through a mechanism called demand response, Google can shift computing tasks to data centers in regions with more abundant power supply. Earlier this year, Google said it had signed framework agreements for this with five utilities. Under the agreements, once utilities need to allocate power, Google promises to release up to 1 gigawatt of grid electricity load.