FERC Launches Review of Data Center Co-Location Issues in PJM

The Federal Energy Regulatory Commission on Feb. 20 issued an order initiating a review of challenges related to co-locating large loads, such as energy-intensive data centers, at generating facilities in the PJM region. Due to the high volume of proceedings regarding co-location in the region, the review will initially focus on PJM, the nation’s largest grid operator. The proceeding will assess whether PJM’s tariff should establish rules that bring clarity, while maintaining grid reliability and ensuring fair costs for consumers.

With data centers proliferating around the country, large tech companies have turned to co-location configurations to access large amounts of electricity. Co-location introduces new challenges for reliability that grid operators like PJM must address.

In the order, the commission concluded that PJM’s tariff did not adequately clarify the rates, terms, and conditions of service pertaining to co-location facilities. Without this information, generators and load may struggle to determine the necessary steps for establishing co-location arrangements in different configurations in an acceptable manner.

The order initiates a show cause proceeding involving PJM and its transmission owners. Further, the order consolidates records from two pending proceedings that share common issues: FERC’s November 2024 technical conference on co-locating large electric loads and Constellation Energy’s complaint against PJM citing lack of clear rules for generators to follow when seeking to provide colocated load facilities. FERC directed PJM to justify the tariff or modifications that could be made to address issues raised by the commission within 30 days of the order.

Several state regulators have taken action to address the growing electricity demand from data centers and provide guidance for utilities. In Georgia, for example, regulators have approved Georgia Power Company’s request to revise its rules of service, to ensure that costs involving data center co-location are borne by the data centers and not utility customers. In Oregon, the Public Utilities Commission has approved new charges as part of PacifiCorp’s general rate case to ensure that under- and over-forecasting by very large new customers, like data centers, does not cause cost increases for other customers.