United States - AI Data Center Co-Location (193 FERC ¶ 61,217)

Overview

The Federal Energy Regulatory Commission (FERC) opened a show‑cause investigation in February 2025 and, on December 18, 2025, issued a final Co‑Location Order addressing the treatment of large loads — specifically AI‑driven data centers and other co‑located loads — that seek service at or adjacent to generating facilities in the PJM Interconnection region. The Commission concluded that the PJM Open Access Transmission Tariff (OATT) and related PJM governing documents lack sufficient, clear, and consistent rates, terms and conditions for co‑location arrangements and therefore found parts of the tariff unjust and unreasonable. The December order (the "Co‑Location Order") directs PJM to submit multiple compliance filings, to propose new transmission service options for co‑located loads, and to revise behind‑the‑meter generation (BTMG) rules to address reliability and cost‑allocation concerns. Primary FERC materials and the Commission meeting item are available via FERC (see e.g., ferc.gov and the meeting item at ferc.gov/media/e-1-el25-49-000-0).

Definitions

Key terms used in the order and this summary include: Eligible Customer (an entity eligible to take interstate transmission service under PJM rules), Network Integration Transmission Service (NITS), Firm and Non‑Firm Contract Demand transmission services, Interim Non‑Firm Transmission Service (an interim mechanism ordered by FERC), Behind‑the‑Meter Generation (BTMG), provisional interconnection service, surplus interconnection service, and interconnection-related expedited or shovel‑ready processes. The proceeding was instituted under Section 206 of the Federal Power Act (16 U.S.C. § 824e) and contemplates tariff filings under Sections 205 and 206 as appropriate. The underlying dockets include EL25‑49‑000 (show‑cause), AD24‑11‑000 (technical conference), and consolidated matters such as EL25‑20‑000 (Constellation complaint).

Governance and Institutional Framework

The Co‑Location Order applies to PJM Interconnection, L.L.C. (the region‑wide RTO serving 13 states and D.C.) and, where indicated, to PJM Transmission Owners. FERC exercised its jurisdiction over interstate transmission service and generator interconnection procedures under the Federal Power Act, using Section 206 to institute a show‑cause proceeding (with refund‑effective date mechanics noted in the Federal Register notice). FERC consolidated the record from prior proceedings and filings (including a Commissioner‑led technical conference and complaint dockets) into Docket No. EL25‑49‑000 for resolution. PJM is directed to engage its stakeholder processes in developing the required tariff changes and to file specified compliance materials with the Commission.

Key Focus Areas

• Tariff Finding and Direction: FERC found PJM’s tariff unclear and unjust and unreasonable as to co‑location arrangements and directed PJM and PJM Transmission Owners to propose specific tariff revisions and explain how the tariff can be made just and reasonable. See FERC materials: ferc.gov.
• New Transmission Service Options: PJM was ordered to revise its tariff so that an Eligible Customer serving a co‑located load must choose from four transmission service options: (1) Network Integration Transmission Service (NITS); (2) a new Interim, Non‑Firm Transmission Service (available on an interim basis for NITS customers while network upgrades are completed); (3) a Firm Contract Demand transmission service; or (4) a Non‑Firm Contract Demand transmission service. FERC instituted a paper hearing to establish just and reasonable rates, terms, and conditions for the Firm and Non‑Firm Contract Demand services. (FERC fact sheet: ferc.gov.)
• Interconnection and Provisional Service: PJM must modify interconnection procedures to allow use of provisional interconnection service, requests for interconnection service below nameplate capacity, expedited processes for certain "shovel‑ready" projects, and use of surplus interconnection service where appropriate — all intended to accelerate new generation and co‑locating loads while protecting system planning. (FERC fact sheet: ferc.gov.)
• Behind‑the‑Meter Generation (BTMG): FERC held that existing BTMG rules are no longer just and reasonable in light of co‑location growth; it directed PJM to adopt revised BTMG rules, implement a transition period (including a multi‑year transition and limited grandfathering), and apply a materiality threshold for BTMG to assist reliability and resource adequacy planning. (FERC fact sheet: ferc.gov.)
• Reliability Reporting and Stakeholder Processes: PJM is required to submit an informational report addressing reliability concerns associated with co‑location (including Critical Issue Fast Path stakeholder items, expedited interconnection processes, reliability backstop mechanisms, load forecasting, and demand flexibility) and to engage stakeholders in the development of the required tariff changes. (See FERC compliance schedule and fact sheet: ferc.gov.)
• Paper Hearing & Schedule: The Commission established a paper‑hearing record to set replacement rates for the new Contract Demand services and set deadlines for PJM’s briefs and for subsequent responses and replies. See the December 18, 2025 order (193 FERC ¶ 61,217) and meeting materials: ferc.gov.

Implementation Framework

FERC directed a sequence of compliance actions by PJM: (a) file tariff revisions specifying the four transmission service options for co‑located loads; (b) propose rules and a transition framework for BTMG, including materiality thresholds and limited grandfathering; (c) revise interconnection procedures to allow provisional and surplus interconnection services, requests below nameplate, and expedited processes for shovel‑ready projects; (d) submit an informational report addressing reliability concerns and stakeholder Critical Issue Fast Path proposals; and (e) participate in the paper hearing to establish just and reasonable rates, terms and conditions for newly mandated Firm and Non‑Firm Contract Demand services. The Commission set explicit filing and briefing deadlines as part of the order’s compliance schedule. The order contemplates the use of Section 206(b) refund mechanisms where appropriate and directs tariff filings under Sections 205 and 206.

Monitoring and Evaluation

Monitoring is to be accomplished through multiple mechanisms: PJM’s required informational report (focused on reliability, load forecasting, demand flexibility, and stakeholder proposals), the paper‑hearing record and briefs to determine just and reasonable replacement rates, and FERC oversight of the mandated compliance filings. Stakeholder engagement within PJM (including Critical Issue Fast Path items) is explicitly required as part of the evaluation and development of tariff revisions. FERC may use refund effective dates and subsequent review of compliance filings to evaluate whether proposed tariff provisions are just and reasonable. The Commission retains enforcement channels to address non‑compliance.

Penalties, Liability, and Appeals

The Co‑Location Order enforces compliance primarily by directing specific tariff changes and compliance filings, establishing a paper hearing to determine rates, and setting reporting and stakeholder‑process requirements. Under Section 206, FERC may establish refund effective dates and order refunds if it later finds tariff provisions to be unjust and unreasonable (the Federal Register notice instituting the Section 206 proceeding describes refund mechanics). The order itself does not impose civil monetary penalties as part of the tariff remedy, although FERC’s enforcement authority and staff retain the ability to pursue enforcement actions, civil penalties, or other remedies for violations of Commission rules and orders where warranted. Parties may seek rehearing and otherwise pursue administrative or judicial review in accordance with FERC practice and the Federal Power Act.

Relationship to Other Instruments

The Co‑Location Order builds on and consolidates records from related dockets and processes: the Commissioner‑led technical conference (Docket AD24‑11‑000), the Constellation complaint (Docket EL25‑20‑000), and the show‑cause proceeding (Docket EL25‑49‑000). The U.S. Department of Energy’s Section 403 directive and draft ANOPR (Oct. 23, 2025) on timely interconnection of large loads (RM26‑4) opened a parallel national rulemaking process and referenced FERC jurisdiction, indicating interplay between FERC’s PJM‑specific remedies and a potential broader federal rulemaking. The Commission clarified it was not comprehensively resolving all federal/state retail jurisdictional questions but reaffirmed jurisdiction over interconnection of generating facilities and interstate transmission service used by eligible customers to serve co‑located load.

International Alignment

The order is focused on PJM and U.S. federal regulatory jurisdiction. There is no direct international legal instrument referenced in the order. However, because the practical issues and solutions developed in PJM may be informative, the decision could influence interconnection and co‑location practices in other jurisdictions and feed into multijurisdictional policy discussions about grid planning for large, technology‑driven loads. No explicit international alignment or obligations are set forth in the order.

Implementation Timeline

Sources and References