By Kennedy Maize
After more than a year in process, the Federal Energy Regulatory Commission last week (Dec. 18) laid out a policy to facilitate co-location of data centers and power plants on the PJM Interconnection’s interstate high-voltage transmission grid. It could take nearly at least as long to see the new rules in action.
In an order of more than 100 pages, FERC told PJM, serving some 67 million customers in 13 midatlantic states and the District of Columbia, to establish three new transmission services for “co-located loads willing and able to limit their energy withdrawals from the transmission system.”
The origin of the order goes back to November 2024, when the commission in a notational order rejected a plan from PJM for independent energy generator Talen Energy to host a Microsoft data center at the company’s Susquehanna nuclear plant near Allentown, Pa., because of uncertainties of the impact on the PJM grid. At the same time, FERC held a technical conference on co-located large loads. In February, the commission gave PJM a “show-cause” order arising from the case and the technical conference.Â
The new transmission services would be on top of PJM’s existing “Network Integration Transmission Service,” in which a 1,000-MW power plant with a 100-MW data center snuggled up to it would see all of its load on the PJM grid.
With the new interconnection rules, the same plant could perhaps add only 100 MW of load to the grid or maybe none at all.
In the services FERC wants PJM to construct, a new “Firm Contract Transmission Service” for a 100-MW data center from a 1000-MW plant would see the generator paying for only 100 MW of firm transmission service. PJM would have no obligation to serve a load above 100 MW.
With the new “Non-Firm Contract Demand” service, the load would pay for non-firm transmission on an “as-reserved basis,” and PJM would have no obligation to serve any of the load if the grid is not available.
A third new service would be “Interim Network Integration Transmission”, a bridge where the load and generator could get non-firm service immediately and convert to the network service “when grid upgrades are complete,”
PJM must also revise its current “Behind the Meter Generation” rules to “establish a transition period and grandfather certain existing contracts.”
PJM is to report back to FERC by January 16 “on the status of its proposals to speed up the addition of generating capacity,” including an “expedited interconnection process for shovel-ready projects, changes to PJM’s reliability backstop mechanism for resource shortfalls, and enhanced load forecasting and demand flexibility measures to identify new capacity needed for system reliability.”
The order also calls for a later “paper hearing” and an “informational report” on “additional topics detailed informational report on the status of the proposals to fast track adding new generation “on an expedited basis…That is sufficient to serve large loads, like data centers, while meeting PJM’s near-term system resource adequacy needs.”
The commission voted unanimously for the PJM order, although the two Democrats on the commission — David Rosner and Judy Chang — issued concurrences expressing some “concerns” about the implementation, specifically measures to prevent cost shifting to retail customers. Both focused on retail consumer protection, as PJM and its independent market monitor have pointed to the rush for data centers as the key factor in increased rates.
In his concurrence, Rosner said the order “protects existing customers—including families and small businesses—by directing PJM to assign transmission costs to ensure that a co-located load, such as a data center, always pays its fair share. A co-located load that does not withdraw energy from the grid will pay for at least the essential grid service on which it still relies (i.e., regulation and black start services).”
Describing the order as a “first step,” Chang wrote, “Designing this new co-location framework highlights an essential component of the overall package: how we protect other customers from adverse reliability impacts and unjustified cost shifts. The Commission will ultimately resolve the rates, terms, and conditions of these new services following the paper hearing and compliance processes we direct today.”
Chang said the final PJM package should include “some form of minimum transmission service charge, which would protect other customers against cost shifts resulting from Co-Located Loads that rely upon the transmission system but do not directly or meaningfully contribute to its costs via transmission service payments. This minimum charge would provide a floor to the Co-Located Load’s cost responsibilities to pay for a portion of system costs, commensurate with the benefits that the Co-Located Load receives from the system, even where it plans to draw little or no energy from that system.”
New Republican Chairman Laura Swett (this was her second commission meeting in the chair) also stressed consumer protection. “Consumer cost concerns really hit home,” she said, citing her personal background growing up in a family of limited economic means. “I want to ensure our progress does not come at the expense of consumers.”Â
FERC deliberately avoided taking up the Trump administration’s request through the Department of Energy to issue a nationwide fast track order for connecting data centers to the transmission grid, bypassing existing state and regional mechanisms. Talking with reporters after the meeting when the DOE issue came up, she said it was “procedurally simple. PJM brought it to us over a year ago. There’s a fully developed record.” She added that the commission “wanted to give relief as soon as possible” rather than wade into the “bigger issue in the DOE proposal.”
Swett also defended the independence of the commission in the face of Trump administration assertions that independent agencies must bow to the president. “FERC is an independent agency,” she said. There is “no reviewing authority at DOE.”Â
She added that the commission’s work is guided by the Administrative Procedures Act and “anything we have to rule on has to be based on the record before us,” noting that “without a majority vote” on the bipartisan commission, “we cannot do anything.”
While last week’s order may be a first step, the commission surely hopes the prediction in an iconic 1962 song written by Carole King and Gerry Goffin and first sung by Little Eva comes true: “I know you’ll get to like it if you give it a chance now.”