FERC Issues Anticipated Order on Data Center Co-Location in PJM Region

FERC defines "co-located load" as "end-use customer load that is physically connected to the facilities of an existing or planned [generator] on the [generator's] side of the Point of Interconnection." While the order applies to any co-location arrangement, as the Commission news release stated, its intent is to "facilitate service of AI-driven data centers and other large loads."  

The order finds PJM's existing rules unjust and unreasonable because they fail to provide clear guidelines for co-location arrangements.  

The Commission orders PJM to: (i) revise its generator interconnection procedures to include new terms and conditions for electric generators seeking to serve co-located loads; and (ii) revise its open access transmission tariff ("OATT") to include two new transmission services—Firm Contract Demand and Non-Firm Contract Demand. The new services would be designed specifically for co-location arrangements (plus a new interim service to allow co-located loads to take non-firm transmission service temporarily pending completion of network upgrades needed for full Network Integration Transmission Service).  

The new rules will require generators switching from traditional network service (under which PJM can use its output to meet systemwide demand) to co-location arrangements to bear the costs of any network upgrades necessary for PJM to maintain reliable service. Commissioner Rosner highlighted that the "major emphasis" of the new generator interconnection policies is large load customers building—and paying for—new generation. FERC billed the new transmission services as mutually beneficial, noting that allowing large loads to limit the network service they take (and pay for) based on their contracted-for demand will reduce network upgrades, lowering costs for all customers.  

In a concurrence, Commissioner Chang advocated for a minimum charge to ensure large loads pay for their reliance on the transmission system. PJM must file revised OATT provisions within 60 days, and FERC will hold a paper hearing consisting of three rounds of briefing to conclude in mid-April 2026, to determine the details of the new transmission services. 

The Commissioners also expressed serious concern that PJM's recent 2027/2028 capacity auction fell 6,600 MW short of its reliability requirement. The order directs PJM to update the Commission on the status of its Critical Issue Fast Path stakeholder process, which addresses broad issues facing the region, including resource adequacy and interconnection rules. FERC is also expected to tackle large load interconnection procedures more broadly than the PJM region in the new year.