FERC, rather suddenly, is preparing to assert the maximum scope of its Federal Power Act authority by treating hyperscale data center load growth as a problem of interstate transmission planning and wholesale market reliability. The commission is positioning its actions at the boundary between federal jurisdiction over transmission and state jurisdiction over retail rates. The legal basis is the Federal Power Act’s provisions governing reliability, economic efficiency, and the planning and operation of interstate transmission facilities. FERC is avoiding direct involvement in retail rate design, but it is making clear that the scale of data center driven load additions now produces regional impacts that fall within its oversight. Many state governments and their PUCs will surely differ, and this may merely be the opening salvo.
For now, though, FERCs actions will seek to place new requirements on all its jurisdictional RTOs and ISOs, including PJM, ISO New England, NYISO, MISO, SPP, and CAISO. Grid operators will be required to adopt standardized methods for modeling large load additions, incorporate what has felt to many as unfettered data center growth into comprehensive long‑term transmission planning, and conduct interconnection studies that reflect the full, very considerable, and increasingly system-burdening impacts of hyperscale facilities. FERC is also preparing to require revisions to cost allocation rules such that entities driving new transmission investments are identified and assigned a proportionate share of the costs. These changes will alter how regional operators evaluate load, plan networks, and distribute upgrade costs.
The technical driver is the unprecedented scale of transmission and interconnection spending required to serve data centers trigger the need for new substations, high‑capacity feeders, and in many cases new high‑voltage transmission lines. Costs routinely reach into the billions of dollars and are currently socialized across all customers under existing tariff structures. Residential and small business customers in PJM, in particular, are highlighted as bearing a disproportionate share of these costs because PJM hosts the largest concentration of new data centers, and its cost allocation rules spread their massive interconnection and upgrade expenses across the ratepayer base, to the great benefit of the billionaire techbros, their shareholders, and data center developers. In Maryland, for example, the issue recently reached a boiling point, as Maryland legislators asserted in a recent filing at FERC: “While PJM’s rules are unfair for many PJM states, they impact Maryland disproportionately simply because Maryland sits next to Data Center Alley in Virginia. Given the projections of massive data center growth — more than 80,000 megawatts over the next 20 years — PJM is likely to bill Maryland customers billions more for future data center-driven transmission costs.”
This creates a structural fairness problem rooted in a mismatch between cost causation and cost responsibility. Hyperscale operators and their investors capture the economic benefits of data center expansion, while ordinary ratepayers absorb the infrastructure costs required to support that expansion. State regulators have faced increasing political pressure, and several states are considering legislation to restrict, pause, or even outlaw new data center development, buttressed by grassroots opposition that has become increasingly well-organized, vocal, and unrelenting. The scale of the impacts has pushed FERC to intervene because the consequences extend beyond individual states and affect the reliability and economic performance of entire regional grids.
To be sure, FERC’s approach will be contested. Some state regulators and legal experts argue that FERC is encroaching on state authority by influencing how costs ultimately flow to retail customers. FERC is attempting to remain within its authority by focusing on transmission planning, interconnection, and wholesale market impacts, but the boundary between federal and state authority will be tested and will likely end up in the courts. The coming rules are also likely to trigger political challenges and consequences within and among the states, yet they reflect a growing recognition that the current framework cannot manage the speed and magnitude of data center driven load growth without stronger federal coordination and basic fairness to ratepayers.