Transmission owners operating in Virginia’s so-called “Data Center Alley” are pressing the Federal Energy Regulatory Commission to ensure colocated data centers pay their fair share of grid costs.
The group of power providers — including major utilities like American Electric Power, Dominion Energy, and Exelon — argued in a filing last week that colocated loads “should be treated as load in front of the meter and designated as network load” to ensure that large data centers and others aren’t getting “free ridership.”
The filing responded to a show cause order from FERC that directed them to address the need for tariff changes governing colocation arrangements. Exelon, Dominion, AEP, and other signatories rejected the idea that colocation necessitates a new kind of service, given that data centers aren’t actually “isolated” from the grid, if the generation they’ve contracted with is connected to the wider system.
Such an arrangement “continues to use services provided by the grid and…continues to rely on the grid connection for the generator to operate,” the filing said.
The fact that a data center might not be a constant load on the system, they added, doesn’t reduce the capital investment, operation and maintenance costs of ensuring the system is available. “All load, including colocated load, is used to plan the transmission system,” the filing adds. “Any attempt to isolate or piecemeal wholesale transmission services to quantify costs would be discriminatory because it would disregard the interconnected nature of the transmission system.”
The “islanded” alternative — where neither a load nor an accompanying generation use the transmission or distribution system — is extremely rare, and isn’t at issue in the proceeding, the operators said. (Some hyperscalers, for their part, argue they want to be “grid-tied,” for stability purposes.)
The center of US load growth
PJM, like other parts of the country, is forecasting massive load growth, in large part due to the artificial intelligence boom and the growing energy needs of data centers. That growth has made the forecasting process increasingly complex, and in places like Loudoun County, Virginia, known as “Data Center Alley,” some stakeholders are projecting growth rates of over 300%.
According to PJM’s forecasts of peak load across the RTO, summer loads are expected to increase by 3.1% each year in the next decade, and winter loads by 3.8%.
Colocation, while far from a new concept, has emerged as a potential way for hyperscalers and others to get faster access to electricity, and potentially to circumvent lengthy interconnection queues. It’s an approach that President Donald Trump has touted widely, and for which he’s said his administration would give “rapid approvals.”
But several high-profile colocation proceedings, now consolidated in the FERC docket, have highlighted the challenges to the approach.
Late last year, FERC rejected a proposal for Amazon Web Services to purchase electricity “behind the meter” from Pennsylvania’s Susquehanna nuclear plant. As part of that deal, Talen Energy sought to increase the capacity of the plant from 300 megawatts to 480 MW, though AEP and Exelon argued that setup would let AWS off the hook for transmission system costs. That case is still pending.
The ongoing FERC proceeding also involves a complaint filed in November by Constellation Energy, which argued PJM’s current tariff lacks rules for “fully isolated” colocated loads, and alleges that utilities are exploiting the gap in regulation to block competition — and “thereby delaying by several years and significantly increasing costs to serve data centers.”
A proposed definition
For their part, PJM’s transmission owners say the region’s existing rate design already covers colocated load.
Under a traditional “network service” approach (which the owners strongly endorse as their preferred option for colocated loads), data centers would be treated as “load in front of the meter,” and required to be served by a network customer. They’d pay standard network transmission charges based on load ratio share.
That service, the group argues, should be used unless a “point-to-point” transmission service is agreed to, meaning an arrangement in which customers pay to reserve capacity on a transmission line and receive priority access to have their generation moved over the line. The transmission owners reject the potential of a brand new category of service, or what the filing designates “a workaround” for colocated loads.
They point to specific examples to illustrate the cost of such workarounds. A one-gigawatt colocated load in Commonwealth Edison territory, for example, would avoid around $253 million a year in transmission charges that residential customers would otherwise have to cover, the filing said.
But they also acknowledge that FERC may have an interest in “providing further clarity.” They therefore suggest adding a definition of colocated load to the PJM tariff, defining it as load that has “contractual arrangements to be served by an adjacent generation resource that is physically interconnected to and synchronized with the transmission or distribution grid.”
That load, the proposed definition continues, is either network load or is being served by point-to-point transmission service. “Such adjacent generation resources shall not meet the definition of behind the meter generation,” the definition adds, and must have separate metering for load consumption and generator output.
