FACT SHEET | FERC Directs Nation’s Largest Grid Operator to Create New Rules to Embrace Innovation and Protect Consumers

Item E-1, Docket Nos. EL25-49-000, et al. | News Release | Presentation

Today, FERC directed grid operator PJM to establish transparent rules to facilitate service of AI-driven data centers and other large loads co-located with generating facilities. These rules will safeguard grid reliability and protect consumers in the mid-Atlantic territory, which serves over 67 million Americans in 13 states and D.C.

The Commission in February 2025 ordered PJM and the PJM Transmission Owners to justify the current PJM tariff or propose changes to resolve these concerns. Today's order addresses PJM's response.

Road to Today's Action

On February 20, 2025, FERC initiated a show cause proceeding into whether the sections of PJM's tariff that govern co-location of generation with loads-including data centers and industrial facilities-are just, reasonable, and not unduly discriminatory or preferential. The show cause order raised concerns that PJM's tariff lacks clarity on rates, terms, and conditions that would apply to co-location arrangements.

Why This is Important

As technology leaps forward, clear and fair regulations must keep pace to support advancement, help prevent price volatility, and promote competition, ultimately benefiting consumers by keeping electricity costs manageable.

The Commission's Findings

• PJM's tariff is unjust and unreasonable due to a lack of clarity and consistency in the rates, terms, and conditions for generators who wish to serve co-located load and for the transmission customers who would take transmission service on behalf of these co-located loads.

• PJM's tariff is unreasonable because it lacks provisions for transmission services that reflect that Eligible Customers (transmission customers) may take transmission service on behalf of co-located loads that are able to limit their energy withdrawals from the transmission system. Without clear direction, entities are unable to determine what steps they must take to set up co-location arrangements.

• The tariff's existing Behind-the-Meter Generation (BTMG) rules are no longer just and reasonable.

• The order declines to address jurisdictional matters regarding the interconnection of retail loads served through a co-location arrangement.

Next Steps:

• PJM must revise its tariff to detail the terms and conditions for interconnection customers to follow when using generating facilities to serve co-located load.

• PJM must revise its tariff to require the Eligible Customer (transmission customer) serving the co-located load to choose from four transmission service options:

  1. Network Integration Transmission Service (NITS);

  2. A new Interim, Non-Firm Transmission Service that only transmission customers seeking NITS may request;

  3. A new Firm Contract Demand transmission service; or

  4. A new Non-Firm Contract Demand transmission service.

• PJM must revise its tariff to allow Eligible Customers seeking to take NITS on behalf of co-located load to take a new non-firm transmission service on behalf of that co-located load on an interim basis until all transmission network upgrades necessary to provide the requested NITS are complete.

• The Commission is proposing two new transmission services - a Firm Contract Demand transmission service and a Non-Firm Contract Demand transmission service - that an Eligible Customer may take on behalf of co-located load instead of taking NITS. Specific to the new transmission services, the Commission establishes a paper hearing to determine the just and reasonable rates, terms, and conditions that will apply. PJM's initial briefs on the terms of services are due by February 16, 2026.

• PJM must revise the BTMG rules, establish a transition period and grandfather certain existing contracts.

• To address concerns about reliability associated with co-location arrangements, the Commission requires PJM to submit an informational report, by January 19, 2026, regarding concerns about reliability associated with co-location arrangements, including the status of proposals considered in the Critical Issue Fast Path stakeholder process that are designed to expedite the addition of generating capacity to the PJM system, including-but not limited to-the status of the expedited interconnection process to enable shovel-ready generation projects to serve PJM more quickly, modifications to PJM's reliability backstop mechanism to improve PJM's ability to respond to acute resource adequacy shortfalls, and the development of enhanced load forecasting and demand flexibility measures to assist PJM in determining the amount of new capacity that is needed to maintain system reliability.