The Federal Energy Regulatory Commission acted today on the advanced notice of proposed rulemaking that Energy Secretary Chris Wright filed last fall, directing the commission to expedite the process for data center loads seeking to connect to the transmission grid.
In October, Wright suggested that the commission assert this authority over large load interconnections, adopt standardized rules for interconnection studies, and require large loads to cover all network upgrade costs.
In a unanimous, bipartisan vote, the five commissioners agreed that current tariffs are generally lagging behind the surge of data center load seeking to interconnect. But they declined to assert federal jurisdiction over reforming the process, and instead issued show-cause orders that require each of the regional grid operators (minus ERCOT) to justify or revise their tariffs.
It’s a move that recognizes reform efforts already in regions including SPP and PJM, to address issues like co-location and flexibility.
The RTO filings, due in 60 days, should address reforms including study processes, cost transparency, co-location, flexible load rules, and generation studies. Notably, the commission took care to avoid creating additional uncertainty in the market: These are “prospective reforms,” FERC chair Laura Swett emphasized, and won’t disrupt existing large-load deals that are being negotiated between developers, utilities, and grid operators.
In choosing not to issue a proposed rulemaking, as suggested by Secretary Wright, FERC puts the process on a potentially much faster track. Issuing a rule is a grueling process with an uncertain timeline, and would almost inevitably result in legal challenges over FERC’s jurisdiction. By instead issuing show-cause orders, the commission is effectively putting pressure on the grid operators to move more quickly on efforts that in some cases are already underway.
While FERC didn’t go as far as Secretary Wright had suggested, its approach wasn’t unexpected. As former FERC commissioner Allison Clements explained on an episode of Catalyst last year “the agency has been really skittish about requiring standardized anything across the board.” FERC was therefore unlikely to “get that specific” in its ruling, she added.
The docket drew more than 3,500 pages of commentary from across the energy and AI ecosystems last fall. The federal jurisdiction question was one of the most debated, leaving major AI players divided on whether FERC should preempt state-regulated interconnection processes. While some, like OpenAI, sought a “national interest” designation for very large loads, giving the biggest planned projects access to a federally mandated fast lane, others were wary of federal mandates. The Data Center Coalition, in its filings at the time, urged FERC to take “a measured approach that recognizes the historic balance of federal and state roles.”
The big questions
Central to today’s orders is the focus on ensuring the cost of connecting these massive loads to the grid doesn’t find its way onto consumer energy bills — a key political issue amid rising electricity costs, increasing local opposition to data centers, and concern about how to make sure residential ratepayers aren’t paying for the infrastructure needed to power the AI boom.
Today’s orders require “cost recovery agreements” designed to make sure data center projects pay for the infrastructure built to support them — whether or not they ultimately come online as planned. That’s to ensure other wholesale customers aren’t left with the bill. But the commissioners said it will be up to the states “to ensure that there is no cost shifting among retail customers.”
(The commission is open to “other creative, regionally-specific ideas to protect consumers,” Commissioner David Rosner noted.)
The orders also require RTOs to consider grid enhancing technologies as tools for getting large loads online more quickly. Leveraging solutions like dynamic line rating will not only speed up interconnection for data centers, but is “a commonsense step towards saving all consumers money,” Rosner said.
When it comes to data center flexibility, perhaps the most-anticipated subject in the docket, FERC requires grid operators to accommodate large loads either through co-location with generation, or through curtailment during peak times on the grid. Wright’s proposal argued curtailable large loads should be able to jump to the front of the interconnection queue, and speed through study procedures in as little as 60 days.
Comments in the docket showed general enthusiasm for fast-tracking flexible loads, but the commission declined to impose accelerated interconnection requirements, again leaving it to the RTOs to iron out the details.
