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At an open meeting on June 18, 2026, the Federal Energy Regulatory Commission (FERC) issued show-cause orders under Section 206 of the Federal Power Act to the six FERC-jurisdictional RTOs/ISOs—PJM Interconnection, ISO New England, Midcontinent Independent System Operator, Southwest Power Pool, New York Independent System Operator and California Independent System Operator—along with their transmission owners (TOs), directing each region and the TOs to justify or revise tariff provisions governing how data centers and other large loads connect to and receive transmission service from the grid. These show-cause orders will impact several power markets across the country, including California.
Background
This set of orders traces back to October 2025, when the U.S. Department of Energy directed FERC to consider an Advance Notice of Proposed Rulemaking (ANOPR) proposing reforms to accelerate large-load interconnections. The ANOPR case, Docket No. RM26-4-000, focused on whether existing interconnection, transmission-service and cost-allocation frameworks are adequate to facilitate the increasing number of large-load interconnection requests.
The ANOPR reflected a growing concern that traditional processes were designed for incremental load growth, not for large-scale projects that may seek hundreds of megawatts of service on compressed timelines. Large loads may also present different operational characteristics that cannot be adequately addressed under existing structures such as concentrated demand, rapid ramping capability, flexibility to curtail under certain conditions, and colocated or behind-the-meter arrangements.
FERC’s June 18th Action
Rather than setting out a proposed rulemaking that would impose a single national standard for large-load interconnection, FERC preliminarily found that existing tariffs and policies in FERC-jurisdictional RTO/ISO regions may be unjust and unreasonable as applied to the interconnection of large and colocated loads. Over the coming months, each regional operator, together with relevant TOs, must either show that existing tariffs remain just and reasonable, or identify reforms that would address FERC’s concerns.
Each show-cause order is tailored to the applicable RTO/ISO, but regional operators must generally address the following categories of issues: (1) Developing efficient transmission service application and study processes, including consideration of alternative transmission technologies; (2) preventing cost shifting and requiring transmission cost transparency; (3) accommodating colocation arrangements and behind-the-meter generation; (4) providing new transmission services for flexible large loads; and (5) developing a process to study generating facilities serving electrically proximate large loads and large colocated loads.
Notably, the decision to proceed region by region, instead of establishing a national rule, sidesteps potential legal challenges regarding whether FERC is overstepping its authority under the Federal Power Act (FPA). Furthermore, this approach avoids the delay of a formal federal rulemaking process and allows RTOs/ISOs to incorporate regional differences. However, FERC’s approach does not reach transmission providers outside FERC-jurisdictional wholesale power, including much of the West and Southwest, regions that are rapidly becoming epicenters of data center development.
The Unique Position of the California Independent System Operator
Although each region has its own challenges, the California Independent System Operator (CAISO) faces unique circumstances. In the CAISO show-cause order, Docket No. EL26-71-000, FERC commented on the rising demand for interconnecting large load in the CAISO region which is being driven by multiple factors, including data center development, electric vehicle charging, and the electrification of industrial and agricultural processes. In fact, the California Energy Commission forecasts that the increase in load for data centers alone will increase by 1.8 GW by 2030 and 4.9 GW by 2040.
Furthermore, unlike other RTOs/ISOs, CAISO does not offer traditional Order No. 888 network integration transmission service or point-to-point transmission service, does not offer long-term firm transmission reservations, and does not have a formal transmission-service application process. Instead, CAISO generally provides daily transmission access through its market framework. At the same time, TOs play a leading role in physical load interconnection. As in show-cause orders FERC issued in other regions, the CAISO show-cause named not just CAISO but a long list of TOs, including investor-owned utilities, municipal entities, transmission companies and the Western Area Power Administration as respondents. Several of FERC’s concerns require the response of TOs.
Key FERC Concerns in the CAISO Show-Cause Order
- Large-load study process. FERC is concerned that the existing CAISO framework does not provide a clear, large-load-specific process for studying and analyzing the provision of transmission services to large loads. This concern is exacerbated by the division of responsibilities between CAISO and TOs, which FERC is concerned may result in incomplete studies, disputes over responsibility and timing, speculative or duplicative large-load requests, and inefficient transmission upgrades.
- Cost shifting and cost transparency. FERC stated that CAISO may lack adequate mechanisms to mitigate cost-shifting to transmission customers. In particular, FERC expressed concern that CAISO lacks both adequate transparency regarding which costs are attributable to large loads, as well as any cost recovery agreements to ensure that large loads are ultimately responsible for bearing the costs of providing or upgrading transmission services.
- Colocation and behind-the-meter generation. FERC asserted that CAISO’s existing tariff may not provide a sufficiently clear roadmap for how colocated or behind-the-meter arrangements should work when they involve large loads. The tariff may not adequately address how a colocated facility takes transmission service, pays for ancillary services, limits grid withdrawals, or avoids cost shifting. FERC views CAISO’s current framework as lacking the transparent, tariff-based rules needed to support large-load colocation models at scale.
- Flexible transmission service. FERC is concerned that CAISO’s current transmission-service framework is too limited because it does not offer transmission services for flexible large loads that engage in limited or conditional use of the grid. CAISO’s daily transmission service is treated as “new firm use” and FERC has asked CAISO to justify why its tariffs remain just and reasonable without flexible-service options, such as PJM-style non-firm transmission service or firm and non-firm contract-demand service.
- Electrically proximate generation and load. FERC raised concerns regarding “electrically proximate large loads,” which it defines as large loads close enough to the generator that their combined grid impact is effectively similar to being at the same substation. FERC preliminarily found that CAISO may lack tailored procedures or services for such arrangements, including study processes that account for generation serving nearby large load.
- Alternative transmission technologies. FERC also expects CAISO to address whether its study processes should require evaluation of grid-enhancing or alternative transmission technologies, such as dynamic line ratings, advanced conductors, and power-flow control technologies, before defaulting to more traditional network upgrades.
Looking Ahead
Interested stakeholders, including large-load developers, have a 21-day period from issuance (i.e., by July 9, 2026) in which to intervene.
Each RTO must then submit an informational report within 30 days (i.e., by July 18, 2026) explaining how it intends to ensure that adequate generation will be available to serve existing and new large loads. For CAISO, that report must address CAISO’s coordination with the California Public Utilities Commission and other relevant state processes, as well as ongoing initiatives to increase the pace of adding generation capacity in the CAISO region.
Finally, the RTOs and TOs must respond to the FERC show-cause order within 60 days (i.e., by August 17, 2026) and either demonstrate that their existing tariffs remain just and reasonable and not unduly discriminatory or preferential, or explain what tariff changes would remedy FERC’s concerns if the Commission ultimately were to find the existing tariffs unlawful under Section 206 of the FPA. FERC invited the RTOs and TOs to proceed through FPA Section 205 filings where appropriate, which would allow each region and TO to propose its own tariff revisions rather than wait for FERC to impose replacement tariffs under FPA Section 206. Given the breadth of the respondents named in the CAISO show-cause order, CAISO and its participating TOs may need to coordinate responses across the CAISO Tariff, TO tariffs and other impacted processes, rather than solely through a centralized RTO tariff amendment. FERC indicated that it may consider limited abeyance requests, not to exceed 90 days, if CAISO and the TOs are actively developing such filings but emphasized that it expects prompt action.
Conclusion
With its June 18 order, FERC has begun the process of working with RTOs/ISOs to develop a region-by-region solution of how to rapidly interconnect large load to the grid without sacrificing safety, reliability and consumer protection. For all CAISO stakeholders, including not only the TOs but also large-load developers and generators, the coming months will reveal the extent to which California must adapt its existing market and transmission planning structure in order to address FERC’s concerns.
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