FERC Orders PJM Rule Changes to Manage Data Center Power Demand, Protect Reliability

The Federal Energy Regulatory Commission on Dec. 18 directed PJM Interconnection to revise its market rules to establish clear and transparent requirements for serving artificial intelligence driven data centers and other large electricity users co-located with generating facilities. The federal regulator determined that existing tariff provisions governing these arrangements are unjust and unreasonable, creating uncertainty that could undermine grid reliability and expose consumers in the mid-Atlantic region to higher electricity costs.

In its order, the agency found that PJM’s tariff lacks clarity and consistency on the rates, terms, and conditions that apply to interconnection customers serving co-located loads, as well as transmission customers taking service on behalf of those loads. The regulator concluded that this ambiguity makes it difficult for market participants to understand how co-location arrangements should be structured, particularly when loads can limit or manage withdrawals from the transmission system. As a result, the tariff does not adequately reflect how transmission services should be applied to these evolving configurations.

To address these deficiencies, the authority directed PJM to revise its tariff to require transmission customers serving co-located loads to select from multiple transmission service options. These include existing network transmission service as well as new firm and non-firm contract demand services. PJM must also establish an interim non-firm option that allows customers seeking network service to operate until all required transmission upgrades are completed. In addition, the regulator ordered PJM to update its behind-the-meter generation rules, establish a transition period, and preserve continuity for certain existing agreements to reduce disruption for current arrangements.

The action follows a February 20, 2025, show cause proceeding initiated by the agency to examine whether PJM’s co-location tariff provisions are just, reasonable, and not unduly discriminatory or preferential. That earlier action raised concerns that the tariff framework had not kept pace with the rapid growth of large electricity loads, including data centers and industrial facilities increasingly seeking co-location with generation.

Beyond tariff revisions, the regulator directed PJM to submit a report by January 19, 2026, outlining progress on accelerating new generation, strengthening reliability backstops, and improving load forecasting and demand flexibility to better anticipate capacity needs across the region and support future system planning.