A report from the Union of Concerned Scientists (UCS) finds that ratepayers in seven PJM states are already paying for transmission upgrades that were needed to stand up and operate data centers. Even though only those facility owners directly--and significantly--benefited, the entirely of the upgrade costs are being foisted onto all customers, because cost-recovery rules in place didn't anticipate that individual ratepayers could create such enormous demand and associated charges.
The report says "Historically, the typical new data center’s electricity demand has been under 10 megawatts (MW), and grid connections have been similar to ubiquitous, low-voltage retail service on existing distribution lines. In contrast, utilities usually charge the costs of connecting a new, nonstandard individual customer directly to that customer. Now, the development of 100–400 MW data centers is widespread, and numerous states host projects under development that will call for utilities to deliver 1,000 MW or more. This leap in demand requires something new: high-voltage transmission infrastructure built to reach new customers, which are, increasingly, data center facilities (Lazar et al. 2020). In PJM’s service area, a hotbed of data center activity, states and commonwealths with utilities designing and building connections for 100–1,000 MW load requests include Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia."
This anomaly, which the reports says is "the worst outcome," is because apportioning transmission costs for data centers falls into what amounts to a "regulatory gap" that was never anticipated by authorities, with the data center costs effectively mixed in with typical costs and approved in rate cases by state regulatory commissions. It's also been driven by the assumption that customers' collective use drives transmission costs and therefore those costs should be shared across the entire customer base.
But Mike Jacobs, senior manager in the UCS Climate and Energy Program, said in the report released Monday that “State and federal regulators must require that costs be assigned to the specific customer — or an appropriate rate class that is causing the costs — to avoid subsidization by all other customers.”
In PJM Interconnection, for example, as I've written about here, data centers costs have driven up retail ratepayers' rates considerably, according to Monitoring Analytics, the grid operator's own Independent Market Monitor (IMM). According to the USC Report, Utilities in Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia initiated more than 150 local transmission projects to serve data centers from 2022 to 2024 and approved some $4.4 billion in projects last year alone, with nearly half the costs in Virginia. According to USC's Jacobs, while utilities' plans for building data center-related transmission in PJM are merely "disclosed" during so-called “informational” briefings in PJM’s transmission planning process, the information isn’t used during state reviews of utility retail rate proposals.
There's a clear association, too, of historically increased capacity prices in PJM, with massive load increases from data centers in PJM. According to Utility Dive in an October, 2025 article, "Monitoring Analytics contends it is “misleading” to say that PJM’s recent capacity market results simply reflect tightening supply and demand. “The current conditions are not (emphasis mine) the result of organic load growth,” it stated. “The current conditions in the capacity market are almost entirely the result of large load additions from data centers, both actual historical and forecast" (emphasis mine).
UCS recognizes the common-sense principle that "regulators must allocate the costs of transmission-level connections to the customer or class responsible for those costs. Doing so requires tracking the costs of that type of connection and the retail customers that are causing the costs." To that end, UCS makes four recommendations:
1) FERC should require transmission built for single customers to be paid for by those customers, as is the requirement for new generators.
2) FERC and state PUCs should require utilities to track transmission costs caused by specific customers through the rate-setting processes.
3) FERC should require utilities to create a customer class in FERC formula rates for customers with direct transmission connection costs.
4) State PUCs should require utilities to recognize the transmission costs created by direct connection customers in retail rate cost-of-service studies. Without one or more of these additional requirements, action by the utility, PUC, or state legislature to create a new customer class for very large consumers to be used in retail ratemaking will not capture transmission costs or new generation costs.