Building on the record of two dockets, the Federal Energy Regulatory Commission (FERC) initiated a new proceeding to evaluate certain issues with respect to the co-location of large loads, namely to serve data centers, in the provisions of the PJM Interconnection, L.L.C. (PJM) Tariff.
Growth of Data Centers in PJM
The footprint of PJM, the largest of the regional grid operators under FERC's jurisdiction, is increasingly populated with data centers associated with the rapid ascent of artificial intelligence and related technology. As a result, the peak load in PJM over the next five years is estimated to increase by nearly 30 gigawatts (GW) — from 154 GW to a just shy of 184 GW in the summer of 2030, according to PJM forecasts.1
| PJM Forecast Year | Projected Summer Peak | Change Over 5-Year Period |
| 2025 | 154.1 GW | |
| 2030 | 183.9 GW | + 29.8 GW |
| 2035 | 209.9 GW | + 26.0 GW |
| 2040 | 220.2 GW | + 10.3 GW |
In particular, the region of Northern Virginia (located in PJM) boasts the highest amount of data centers in the U.S., with the largest existing — and potential — market for co-located load (i.e., an on-site generating facility providing power directly to the data center). Based on research from the first half of 2024, Northern Virginia completed a little over 0.5 GW in data center co-location construction.2
Consolidated Proceedings at FERC
FERC recently presided over two dockets related to co-location of large loads. The first was a complaint, pursuant to Section 206 of the Federal Power Act (FPA), by a generator against PJM; the second was a Technical Conference that solicited input from a range of stakeholders on the broader issues at play.
FPA Section 206 Complaint
With respect to the FPA Section 206 proceeding, Constellation Energy Generation, LLC (Constellation) filed a complaint alleging that the PJM Open Access Transmission Tariff (Tariff) is unjust, unreasonable, and unduly discriminatory with respect to the lack of rules for interconnected generating resources in the provision of service to Fully Isolated Co-Located Load (i.e., behind-the-meter data center loads). Constellation asserted that the lack of applicable rules has impaired generators in PJM from entering into voluntary, bilateral service agreements for data center projects. Constellation stated that, while the PJM Tariff does not expressly prohibit Fully Isolated Co-Located Load, certain local utilities have served large loads in a manner that circumvents the filed rate doctrine.
- Prior to the complaint, in March and April of 2024, respectively, PJM promulgated guidance relating to co-located interconnection customers, which clarified certain existing practices and set forth new procedures that were not otherwise formally reflected in the PJM Tariff.3
A number of stakeholders filed comments, with the general consensus being that FERC needed to act to provide regulatory certainty for market participants by ensuring that co-located generating resources and large loads are not subject to unlawful barriers to market entry. Other parties recommended that, in lieu of incorporating certain sections of the PJM guidance, FERC could initiate settlement procedures to address current barriers to co-located load arrangements.
PJM responded to the complaint by asserting that Constellation sought to insert its own preferred method for co-locating data centers with large generators into the PJM Tariff without furnishing sufficient evidence that the already available methods are unjust and unreasonable. PJM stated that no company owning or operating data centers had submitted comments responsive to the complaint, and there was no record demonstrating that data centers require co-located configurations over traditional network configurations. Further, PJM reiterated that large co-located loads should be in front of the meter (i.e., designated as Networked Load), which would ensure reliability benefits and planning efficiencies. Rules for both Networked Load and Networked Co-Located Load — where the load is a Network Integration Transmission Service customer and relies on the grid in part and the behind-the-meter (co-located resource) in part — are already included in the PJM Tariff.
Technical Conference
Separately, FERC convened a Technical Conference regarding Large Loads Co-Located at Generating Facilities on November 1, 2024. The Technical Conference explored issues broadly related to data center co-location, such as the provision of wholesale transmission or ancillary services, related cost allocation, and potential impacts to resource adequacy, reliability, affordability, markets, and customers.
- For its part, PJM filed a statement indicating that nearly 8.5 GW of proposed large co-located loads have requested studies in its market, and referred to its guidance documents from March and April of 2024.
- Constellation also filed comments, again alluding to the lack of provisions in the PJM Tariff with respect to the governance of co-located loads, and implored FERC to focus "immediate attention" in closing the gap.
The Technical Conference did not purport to account for issues in PJM only, but rather sought to build a robust record and receive stakeholder input across the industry. Technology companies, such as Google, commented that FERC should implement certain requirements for co-location facilities, including a demonstration that it will not have a negative impact on reliability for other customers on the grid and that co-location should not lead to unduly shifting direct transmission and distribution costs to other ratepayers. To that end, Google and others also recommended that FERC adopt a commitment-backed readiness requirement (i.e., an upfront deposit) to incentivize only those large load adjustments that are financially viable rather than speculative or duplicative. Other parties alluded to the need for improved load forecasting in light of significant growth projections, as well as increased transparency by the regional grid operators in furnishing the information.
Scope of Show Cause Order
On February 20, 2025, FERC issued a Show Cause order,4 pursuant to Section 206 of the FPA. The order combines the records of the Constellation complaint proceeding and the Technical Conference, and includes both PJM and the PJM Transmission Owners (of which there are 51 entities listed in the caption of the order). The Show Cause order adopts the language used by PJM in its guidance documents by defining co-located load as "a configuration through which end-use customer load is physically connected to the facilities of an existing or planned generation unit on the interconnection customer's side of the point of interconnection to the PJM transmission system."5
FERC addresses a number of issues raised in the consolidated proceedings and sets forth certain questions, including but not limited to:
| Jurisdiction |
Context: Acknowledging the nexus of federal and state authority, FERC clarifies that states retain “exclusive jurisdiction” over the terms of retail sales, including the rate designs that determine how wholesale costs of electricity and transmission service are allocated among retail customers.6 Under the FPA, states determine which entities are “legally permitted” to provide electricity in co-location arrangements as well as determine how the wholesale costs are recovered by retail customers,” irrespective of where the load interconnects (i.e., to the distribution system, the transmission system, or the generator itself.”) FERC maintains that it has jurisdiction over sales for sale in interstate commerce, however. If the transmission of electricity — used to serve co-location arrangements — crosses state lines, FERC holds such authority. Questions Presented: In the Show Cause order, FERC asks parties to contemplate “when and under what circumstances” a co-located load could be designated as interstate commerce. FERC encourages comments relating to the jurisdictional status over the interconnection of co-location arrangements to the transmission system as an element of transmission service, which in effect could constitute a retail sale. To that end, FERC also seeks input on how to define a “fully isolated” co-located load, with respect to if such a facility would constitute an interconnection to the transmission system. |
| PJM Tariff |
Context: FERC finds the PJM Tariff, as currently effective, to be unjust and unreasonable due to a lack of provisions that set forth the rates, terms, and conditions of service applicable to co-location arrangements. In the Show Cause order, FERC states that without a “common and consistent understanding of entities’ responsibilities,”7 the co-location arrangements may be developed in a manner that leads to unjust and unreasonable outcomes for other ratepayers. Additionally, FERC points to potential violations of the cost causation principle — where all jurisdictional rates and charges must “reflect to some degree the costs actually caused by the customer who must pay for them.”8 With respect to the PJM Tariff terms, FERC acknowledges that PJM “does not have a process for determining what transmission service different co-location configurations must take,” including cost allocation. Questions Presented: FERC asks for input regarding whether it is appropriate to require co-location arrangements to procure point-to-point transmission service, Network Integration Transmission Service, or “other, as-yet undefined types of transmission service”9 under the PJM Tariff. Further, FERC also directs respondents to evaluate potential cost allocation for ancillary services (e.g., black start and reactive power) associated with co-location arrangements. |
| Reliability |
Context: FERC cites a concern with overall grid reliability, as well as resource adequacy, in the development of more behind-the-meter large loads associated with data centers. Specifically, the North American Electric Reliability Corporation (NERC) raises the prospect of voltage drops that may adversely affect grid operations, in the circumstance where a co-located load would momentarily disconnect from the bulk power system. Similarly, PJM states that “co-located loads that are not Network Loads are not holistically planned for.”10 FERC highlights the lack of “rules necessary [in the PJM Tariff] to provide PJM with sufficient information” to conduct analyses for reliable system operations. However, FERC concedes that co-located loads do not represent the only concerns associated with load growth and that resource adequacy issues writ large do not apply exclusively to data center proliferation. Questions Presented: FERC instructs respondents to propose any changes to the capacity market rules in PJM that may reflect the “unique physical and operational characteristics of the co-location arrangement.11 The Show Cause order also asks for potential Tariff provisions that would ensure co-located load is visible to the grid operator so as to avoid unintended — or unknown — system impacts. Additionally, FERC raises the idea of load shedding for co-location operators in the event of a declared emergency in PJM. |
Timeline and Future Outlook
In the Show Cause order, FERC directed PJM and the PJM Transmission Owners to file responses within 30 days (by March 24, 2025). The responses should either: 1) demonstrate that the provisions in the PJM Tariff remain just and reasonable, and, accordingly, the current rates, terms, and conditions of service that apply to co-location arrangements should be retained; or 2) explain what changes should be made to the PJM Tariff to remedy the concerns outlined in the prior consolidated proceedings and outlined in the Show Cause order.
Reply comments will be due 30 days following that period. Any other industry stakeholders and interested parties may submit substantive comments — or protests — although Chairman Christie confirmed that all comments previously filed in the Constellation and Technical Conference proceedings, respectively, would be incorporated into the new consolidated proceeding. As such, the formal record from which the Show Cause order originated has already been populated to a significant degree.
Under the language of Section 206(b) of the FPA, FERC is compelled to render a decision on the matter within 180 days of initiating the proceeding. Based on the filing date of the Constellation complaint, FERC would establish a refund effective date of November 22, 2024, in the circumstance that refunds are warranted.
Given the substantial increase in peak load forecasts for PJM, mostly attributable to the rise of AI and data centers, FERC is aiming to act in a manner responsive to its vested authority in maintaining grid reliability and customer affordability while enhancing regulatory certainty for developers and utilities. FERC also emphasized the importance of meeting load growth spurred by data center development as critical to domestic economic interests and accounting for national security concerns.
1 2025 PJM LONG-TERM LOAD FORECAST REPORT, PJM Resource Adequacy Planning Department (January 24, 2025). Available at: https://www.pjm.com/-/media/DotCom/library/reports-notices/load-forecast/2025-load-report.pdf.
2 RAPID EXPANSION: OPPORTUNITIES AND CHALLENGES FOR THE DATA CENTER SECTOR, JLL (Midyear 2024). Available at: https://www.us.jll.com/content/dam/jll-com/documents/pdf/research/americas/us/jll-us-data-center-report-h1-2024.pdf.
3 PJM GUIDANCE ON CO-LOCATED LOAD, PJM Interconnection, L.L.C. (March 22, 2024 and updated April 17, 2024). Available at: https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/pjm-guidance-on-co-located-load.pdf.
4 190 FERC ¶ 61,115, Federal Energy Regulatory Commission (February 20, 2025) (Show Cause order).
5 Id. at 4.
6 Id. at 36.
7 Id. at 39.
8 Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004).
9 Show Cause order at 41.
10 Id. at 45.
11 Id. at 54.
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