Federal regulators are pressing Audubon-based PJM Interconnection to overhaul how it handles data centers and other massive electricity users, writes the staff from Akin.
A National Push
On June 18, the Federal Energy Regulatory Commission issued a show cause order to PJM and its transmission owners after preliminarily finding that the grid operator’s current tariff may be unjust and unreasonable.
FERC said PJM’s tariff does not clearly spell out how large power users should be studied, connected to the grid or charged for the transmission upgrades needed to serve them. PJM now has until August 17 to defend its existing rules or propose revisions.
The action was part of a broader national push. FERC issued identical show cause orders the same day to five other major grid operators, including MISO, ISO New England, NYISO, CAISO and the Southwest Power Pool.
FERC Chairman Laura Swett described the move as historic, saying the commission was pushing electric markets into a future defined by fair cost allocation and unprecedented transparency for ratepayers.
Who Pays for the Grid?
The order is especially relevant to data centers, which can consume as much electricity as small cities and are being proposed across Pennsylvania and the broader PJM territory. The regional grid operator coordinates electricity across 13 states and Washington, D.C.
At the center of FERC’s concerns is who pays when a large project requires new substations, transmission lines or other grid improvements. Regulators specifically flagged a pattern in which speculative projects trigger expensive grid upgrades and then scale back or never open, leaving other ratepayers responsible for costs they did not create.
FERC wants PJM to create clearer cost-recovery agreements requiring large customers to assume responsibility for upgrades built to serve them. It also called for a more transparent, searchable database showing proposed large power demands, necessary improvements and estimated costs.
Flexibility as a Fast Track
The commission is also asking PJM to develop service options for data centers and other large users willing to reduce electricity consumption during periods of grid stress.
Such arrangements could allow projects to connect more quickly without requiring the same level of immediate infrastructure expansion, an approach FERC said could help avoid costly and inefficient transmission buildout.
PJM must also submit an informational report explaining how it plans to ensure enough electricity is available for existing customers and new large loads.
What Comes Next
The order does not establish final regulations, and FERC officials acknowledged the response timeline is aggressive. However, the commission made clear the stakes: if PJM and other grid operators fail to adequately address the concerns identified, FERC said it will step in and dictate solutions itself.
The order adds another layer to the ongoing data center saga, as officials balance economic development against rising electric demand, grid reliability, and concerns over who ultimately pays for expansion.
Read more about what’s expected from PJM to ensure grid stability as demand for data centers ramps up in Akin.
