Overview
Data centers found a shortcut: park next to a generator and drink power without waiting years for grid upgrades. On Dec. 18, FERC doubled down—unanimously—ordering PJM to rewrite its tariff so co-located mega-load can’t stay “invisible” to planning, service definitions, and cost responsibility.
The immediate fight now shifts from whether co-location is allowed to how PJM will operationalize and price new contract-demand and non-firm pathways—especially for customers that claim they’ll only lean on the grid occasionally. The backdrop is deteriorating adequacy signals in PJM’s own markets, sharpening regulators’ core worry: if co-located load can dodge grid charges and studies while still depending on grid backstop, everyone else absorbs higher bills or higher blackout risk.
Key Indicators
People Involved
Organizations Involved
The federal regulator that sets and enforces wholesale power market and interstate transmission rules.
The largest U.S. grid operator, running markets and reliability planning across 13 states and D.C.
The utilities that own major transmission assets in PJM and fight over who pays for upgrades and services.
A major generator that helped trigger FERC’s PJM co-location proceeding via complaint.
The independent watchdog for PJM markets and reliability incentives.
A flagship example of Big Tech trying to secure massive power quickly through co-location.
A generator owner whose nuclear-adjacent data-center arrangement became a national test case.
Industry association representing advanced energy companies (e.g., storage, renewables, demand response, DERs).
Timeline
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Advanced Energy United backs FERC’s co-location order, urges broader flexibility and interconnection reforms
ReactionThe group said the order could improve certainty and affordability if paired with faster interconnection, demand response, and other flexibility measures—arguing co-location clarification alone won’t solve PJM’s reliability squeeze.
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Commissioners publish statements emphasizing unanimous 5–0 backing for PJM co-location overhaul
StatementsCommissioners’ remarks underscored urgency, consumer protection, and “speed-to-power” framing for AI-driven large loads as PJM moves into compliance and paper-hearing phases.
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FERC orders PJM to rewrite co-location tariff and create contract-demand services
OrderFERC found PJM’s tariff unjust and unreasonable and required new transmission service options plus BTMG reforms.
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PJM capacity prices hit a record as data-center demand outruns supply
Market SignalA record auction price reinforced the core fear: load is arriving faster than new capacity and wires.
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Stakeholders pile in—responses due on co-location proposals
FilingInterested parties filed reactions to PJM and transmission-owner positions, setting up FERC’s December decision.
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PJM and transmission owners respond to FERC’s 38-question challenge
FilingPJM convened stakeholder processes and filed responses outlining options and highlighting state-law constraints.
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FERC opens PJM show-cause proceeding on co-location
InvestigationFERC consolidated the record and demanded PJM justify its tariff or propose fixes for co-located load service.
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Post-conference comments lock the industry fight into the record
FilingStakeholders filed written views for the AD24-11 docket, shaping the later PJM show-cause proceeding.
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Constellation files a complaint: PJM rules are too fuzzy for co-location
LegalThe complaint argued PJM lacked clear tariff rules for certain co-located configurations, forcing ad hoc decisions.
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FERC blocks a high-profile Amazon-linked co-location interconnection amendment
OrderRegulators rejected an amended agreement tied to a nuclear-adjacent data center, citing reliability and cost concerns.
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FERC convenes technical conference on large co-located loads
HearingCommissioners pulled in grid operators, utilities, generators, and states to surface reliability and cost-shift risks.
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Utilities ask FERC for declaratory clarity on co-location
LegalA declaratory-order petition put co-location jurisdiction and service obligations directly in front of FERC.
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PJM updates the guidance—then it becomes evidence
PolicyThe updated guidance later became a lightning rod: practice existed, but tariff text didn’t fully match it.
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PJM publishes its first co-located load guidance
PolicyPJM issued guidance describing how co-located load should be treated and metered, foreshadowing a tariff fight.
Scenarios
PJM Complies Fast: Contract-Demand Service Becomes the New Normal for Co-Located Load
Discussed by: Utility-sector analysts, energy legal analysts, and RTO stakeholder groups tracking PJM’s compliance pathway
PJM files a compliance tariff that cleanly defines co-located load interconnection steps, rewrites behind-the-meter generation rules, and operationalizes the new menu of transmission services. FERC’s paper hearing settles the rate design for firm and non-firm contract-demand products, creating a “pay-for-what-you-actually-withdraw” model that keeps co-located projects alive while reducing cost-shift risk. If this happens, PJM becomes the template other regions borrow—or get forced to adopt.
Tariff War: Generators and Data-Center Developers Challenge the New Charges and Limits
Discussed by: Merchant generator coalitions, large-load developers, and rate-counsel offices watching cost impacts
A coalition argues the new services (and BTMG transition rules) either overcharge co-located load or function as a de facto ban on behind-the-meter configurations. Rehearing requests pile up; litigation follows; and PJM is left managing projects under interim rules that satisfy no one. The trigger is a compliance filing that sharply raises effective transmission or ancillary costs for co-located projects compared with the “shortcut” economics investors were underwriting.
National Spillover: FERC Turns PJM’s Case Into a U.S.-Wide Co-Location Rulebook
Discussed by: FERC watchers, RTOs outside PJM, and industry trade associations planning for precedent risk
FERC decides PJM can’t be the only region with a bespoke answer and launches broader action—either through additional show-cause proceedings in other regions or a generic rulemaking. The trigger is simple: copycat co-location proposals multiply, and disputes over “invisible load” and backup reliance show up across multiple RTOs. PJM’s contract-demand construct becomes the anchor concept—how to serve new load quickly without pretending the grid isn’t involved.
Historical Context
Net Metering and Distributed Solar Rate Reforms (U.S. states)
2013–2023What Happened
As rooftop solar grew, utilities argued that behind-the-meter customers still used the grid but paid less for it. States rewrote tariffs—introducing fixed charges, demand charges, or lower export credits—to reduce cost shifting while keeping adoption viable.
Outcome
Short term: Policy fights became intensely local and highly technical, with frequent rule changes.
Long term: Rate design shifted toward charging for capacity and grid availability, not just energy consumed.
Why It's Relevant
Co-located data centers are the industrial-scale version of the same fight: who pays for the grid you still rely on?
FERC Order No. 2003 (Standardized Generator Interconnection Rules)
2003–2005What Happened
After years of project-by-project disputes, FERC standardized interconnection procedures and agreements to reduce chaos, speed investment, and clarify cost responsibility for upgrades and reliability studies.
Outcome
Short term: Interconnection became more predictable, but queues still grew as demand surged.
Long term: Standardization became the baseline expectation for scaling new generation.
Why It's Relevant
Today’s co-location surge is forcing the same institutional move: from bespoke deals to standardized rules.
PJM Capacity Performance Reforms After the Polar Vortex
2014–2016What Happened
Severe winter stress exposed how market incentives failed to ensure performance when it mattered. PJM tightened obligations and penalties to keep resources reliable during emergencies.
Outcome
Short term: Generators faced higher compliance costs and stronger incentives to winterize and secure fuel.
Long term: PJM embedded “stress events” and performance risk into market design.
Why It's Relevant
FERC’s co-location move is another reliability-driven redesign: rules change when stress reveals hidden fragility.