FERC Orders Action on Co-Location Issues Related to Data Centers Running AI

Earlier today, at the February 20, 2025 Federal Energy Regulatory Commission (FERC) Open Meeting, FERC Commissioners voted unanimously to launch a review of issues associated with the co-location of large loads at generating facilities at PJM Interconnection, L.L.C. (PJM). The review will look at whether the PJM tariff needs to establish rules to provide clarity on co-location while ensuring grid reliability and fair costs to consumers.

FERC says that its inquiry is initially focused on PJM, the nation’s largest grid operator, because of the number of proceedings arising at PJM from co-location of generators with large load customers such as data centers. At the November 2024 FERC technical conference, PJM filed a statement with FERC indicating that nearly 8.5 gigawatts of proposed large co-located loads have requested studies in the PJM market.

Co-locating new generation and data centers is attractive to technology companies because of the potential to provide data centers with committed energy supplies, delivered over dedicated transmission lines. Proponents argue that co-location minimizes reliability concerns and avoids shifting costs to other end-use energy consumers.

FERC announced at the Open Meeting that it will institute a show cause proceeding involving PJM and the PJM Transmission Owners and combine the records of two pending proceedings — FERC’s November 2024 technical conference on large load co-location and a November 2024 complaint filed against PJM regarding the lack of PJM rules for interconnected generating resources in the provision of service to behind-the-meter data center loads.

FERC stated that PJM’s tariff does not appear to sufficiently address the rates, terms, and conditions of service that apply to co-location arrangements and directs PJM and the PJM Transmission Owners to, within 30 days, tell FERC why the PJM tariff remains just and reasonable, or alternatively, what changes to the PJM tariff would remedy FERC’s concerns. According to FERC, the absence of such information may leave generators and load unable to determine the steps and appropriate way to set up co-location arrangements of various configurations.

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