On December 18, 2025, the Federal Energy Regulatory Commission (FERC)
At FERC’s monthly open meeting, the commissioners unanimously approved the Order, finding that PJM’s existing tariff does not adequately address the issue of co-locating large loads with data centers and electric generation. The Order was issued in FERC Docket Nos. EL24-49-000 et al., can be found at this link.
FERC’s Landmark Order to PJM: What Electric Utilities and Data Center Investors Need to Know About Data Center Co-Location
The Order directs PJM to create new transmission options for co-location customers seeking new pathways for connecting to the wholesale power grid, which FERC states will help data centers achieve interconnections more quickly without sacrificing reliability or unfairly burdening other power customers. This decision has significant implications for utilities, transmission owners and large energy consumers across the PJM footprint.
The Order comes at a time when FERC is separately considering hundreds of comments it received recently in response to Secretary of Energy Chris Wright’s advanced notice of proposed rulemaking urging FERC to develop standardized grid interconnection procedures in competitive wholesale power markets nationwide to help large data centers and other facilities with large electric demands that seek to interconnect directly at transmission levels to the power grid (effectively bypassing local electric distribution connections). FERC’s ultimate handling of that matter remains to be seen.
Why This Order Matters
The explosive growth of data centers and other large loads is straining grid infrastructure and challenging traditional utility planning. FERC’s order responds to mounting concerns about cost allocation, reliability and fairness in how these facilities access transmission service. The order aims to:
- Clarify rules for co-location arrangements (where large loads are physically connected to generators on the same site).
- Create new transmission service options that better reflect the actual grid usage of flexible, co-located loads.
- Protect existing customers from unfair cost shifts while enabling innovation and faster interconnection for large loads.
In November, 2024, a majority of FERC commissioners rejected a PJM proposal to increase the amount of electricity sold by a Pennsylvania nuclear power plant to a co-located data center. In February, FERC commissioners voted to conduct a review of co-locating data centers at power plans within PJM’s service territory. That review culminated with Thursday’s Order.
Key Takeaways for Utilities
- New Transmission Service Pathways
FERC directs PJM to offer three transmission service options for eligible customers serving co-located loads:
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- Network Integration Transmission Service (NITS): Traditional, firm service with full grid access, billed on gross demand.
- Firm Contract Demand Transmission Service: Allows loads to contract for a specific MW quantity, with grid planning and capacity procurement based only on that amount.
- Non-Firm Contract Demand Transmission Service: Provides as-available, interruptible service for loads willing to curtail during grid emergencies, with no capacity charges or planning obligations.
These new options enable data centers and other large loads to pay for transmission service that matches their actual usage and flexibility, rather than being forced into a one-size-fits-all model.
- Reform of Behind-the-Meter Generation (BTMG) Rules
FERC found PJM’s existing BTMG rules to be outdated and potentially unfair, especially for large loads. The order:
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- Directs PJM to set a new megawatt (MW) threshold for BTMG netting eligibility.
- Establishes a transition period and grandfathering for existing contracts.
- Requires large loads using BTMG to be fully accounted for in resource adequacy and transmission planning.
- Cost Allocation and Reliability Protections
The order emphasizes the principle that “costs must be allocated to those who cause them and benefit from them.” Co-located loads must pay for their fair share of transmission, regulation and black start services—even if they rarely draw energy from the grid. Penalties will apply if loads exceed their contracted demand.
- Jurisdictional Clarity
Especially given the consideration of broader rules in response to the ANOPR, FERC clarified in the Order the division of federal and state authority under its current view of cooperative federalism set forth in the Federal Power Act:
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- States retain exclusive control over retail sales, rate design and generator siting.
- FERC oversees generator interconnection to the transmission system and the terms of interstate transmission service.
- Utilities and load-serving entities must navigate both federal and state rules when structuring co-location arrangements.
- Accelerated Interconnection and Planning
To address delays in connecting new generation and load, PJM is directed to:
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- Clarify procedures for provisional interconnection service and surplus interconnection service.
- Expedite studies for new generation paired with large loads.
- Enhance transparency in load forecasting and planning for large additions.
What’s Next?
PJM must submit compliance filings within 30–60 days, revising its tariff and reporting on stakeholder initiatives to accelerate large load integration. A “paper hearing” will determine the final rates, terms and conditions for the new transmission services. Utilities should monitor these developments closely and prepare to engage in the stakeholder process.
Industry Implications
- Utilities: Will need to update interconnection and service agreements, adapt planning processes, and ensure cost recovery mechanisms are robust and fair.
- Transmission Owners: Must implement new metering, protection schemes and penalty structures for co-located loads.
- Large Load Customers (e.g., Data Centers): Gain new flexibility and faster pathways to grid connection but must be ready to pay for essential grid services and comply with curtailment protocols.
Bottom Line
FERC’s order is a pivotal step toward modernizing grid access for large, flexible loads. It attempts to balance innovation with reliability and cost fairness, offering utilities new tools to manage the evolving landscape of data center growth and electrification. It will be necessary to watch closely for PJM’s compliance filings and further guidance as the industry adapts to these changes.
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