A planned 100-mile, $960-million transmission project in PJM has found itself in the middle of the debate over data center grid investments and who pays for them.
The Mid-Atlantic Reliability Line, which would run from Pennsylvania to Virginia and cross through parts of Maryland and West Virginia, was selected through the electricity market’s 2022 Regional Transmission Expansion Plan process, which is used to evaluate long-term reliability needs and market efficiency.
Projects selected in that process, PJM said, were needed to ensure reliability as load grows, especially in Dominion and FirstEnergy territories. Costs would be shared across all customers in the region, according to the region’s standard cost allocation approach, with an additional share apportioned to the utility zone expected to receive the most benefit from the new line.
At the time, the energy demands of AI hadn’t yet become a defining political issue. OpenAI’s ChatGPT hadn’t been released when PJM published its 2022 plan, and the wave of hyperscaler buildout and massive AI-driven load forecasts hadn’t yet begun.
In the years since, however, the energy landscape has changed dramatically. Data center growth has accelerated; grid constraints have sharpened; and rising electricity costs have become a top political issue nationwide. And in March, hyperscalers had gathered in the Oval Office to sign the president’s “ratepayer protection pledge,” in which they promised to foot the bill for the energy infrastructure required to support their projects, shielding consumers from higher rates.
By the time NextEra, the MARL developer, set out to obtain siting approvals for the project in 2025, local opposition to data centers had become a significant challenge. When MARL hit the dockets, it quickly became a case study for the question of whether, in the wake of the ratepayer protection pledge, the way PJM allocated costs in the past is at odds with the Trump administration’s aims.
“I think transmission developers were all taken aback that suddenly people are looking at this,” said Jon Gordon, a senior director at Advanced Energy United. In the past, infrastructure to support the concentration of data centers in Virginia’s “Data Center Alley” was socialized across the entire region, he added, “and nobody said a word, because nobody really understood it.”
Today, however, as consumer electricity costs rise alongside new data center demand, there’s an acute awareness: “Everything is going to be scrutinized, and it’s good and it’s bad,” Gordon said. “We’re trying to protect consumers from costs that they shouldn’t have to pay, but it’s making it that much harder to build the new infrastructure that we desperately need to get out of this mess.”
States push back
In Pennsylvania, where NextEra filed in March, the state’s Office of the Consumer Advocate urged the PUC to decline to approve the project, due to concern that its primary function would be to “serve AI data center electricity demand in other states and resolve the transmission problems caused by out-of-state AI data centers.” The state’s ratepayers could end up disproportionately bearing the costs, they added, even though they may not receive “any benefit at all” from the project.
In its filing, the advocate presented MARL as a public policy benchmark, asking the commission to study whether the cost allocations of the project align with the White House objective of making data centers pay their own way, as outlined in the March pledge.
State legislators also got involved. Republican state Rep. Charity Grimm Krupa asked the Pennsylvania PUC to allow for a full investigation into the project’s impact on ratepayers, rather than deferring to PJM’s 2022 decision that there was a reliability-based need for the project and that it should be built.
And in Maryland, where NextEra’s MARL proceeding is just picking up, that state’s ratepayer advocate also published a report in March calling for greater regulatory scrutiny of transmission planning in PJM, and for data centers to pay for the transmission needed to serve them.
“PJM’s method of allocating transmission costs has Maryland customers paying a substantial share of the regional transmission projects needed to serve out-of-state load growth,” the Maryland advocate wrote. “Absent changes in forecasted demand or PJM processes, the PJM grid will require massive transmission expansion projects that will cost electricity customers billions of dollars.”
PJM’s current way of ratebasing transmission projects made sense in the past, when all parts of the region were growing at a roughly even rate, explained Cathy Kunkel, an energy consultant at the Institute for Energy Economics and Financial Analysis, and therefore costs ultimately even out. “That becomes very much not the case when you have one class of customers in one particular location, like data centers in Northern Virginia, that are driving a tremendous transmission buildout,” she added. An IEEFA estimate found that in West Virginia, the state that would host the largest portion of the MARL project, ratepayers would be responsible for around $570 million of the project over 40 years.
Even beyond MARL, in several states, ratepayer advocates are pushing for the data center industry to essentially put its money where its mouth is in enforcing the ratepayer protection pledge, even though the White House commitment itself has no enforcement mechanism. Doing so in PJM, however, requires a change to how the region assigns costs.
In Kunkel’s view, the most likely change would be for PJM to assign the majority of the cost to Dominion, the utility serving Virginia’s Data Center Alley, where the proposed line ends, and let Dominion sort out assigning costs to data centers.
Redesigning the region’s cost allocation processes is no small feat, particularly given the myriad other processes that PJM is undertaking as it races to get data centers online. And there’s some urgency: NextEra is pushing to get the line in service by the end of 2029. However, Kunkel added, the question of how to pay for it, especially in light of how the ratepayer protection pledge has shaken up the industry, could well make that impossible.
Challenging changes
The data center boom has added a whole new layer of complexity to the already tricky work of building transmission, according to Evan Vaughan, executive director of MAREC Action, a nonprofit representing clean energy and storage interests in PJM.
“When it comes to transmission planning, the rise of new large loads does create a challenge in terms of planning efficiency,” he explained.
Already, PJM assigns network upgrade costs to the developers looking to connect new generation to the grid. But duplicating that process for new transmission would be an experiment.
The risk, Vaughan said, is that if the ratepayer protection pledge isn’t integrated with robust, proactive planning frameworks (like FERC Order 1920) it will result in an inefficient, fractured, and ultimately more expensive build-out of the transmission grid. Data centers, if forced to bring their own generation and simultaneously pay for their own network upgrades and transmission build outs, wouldn’t have much incentive to move away from existing data center hotspots, causing further congestion and increasingly expensive network upgrades, he added.
Meanwhile, as Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, explained in a recent interview with Harvard Climate Brief, utilities are likely opposed to changing how transmission is paid for.
“Once you reopen transmission cost allocation, it’s a big food fight,” Peskoe said. “Industrial customers want to pay less, residential consumer advocates want stronger protections, and utilities would rather not relitigate who pays for what.”
And then there’s the utility revenue problem: assigning big transmission costs to specific customers can prevent utilities from earning the same return on the project. “At [the] billion-dollar scale, that’s a significant hit to profit opportunities,” he added.
This leaves PJM in a bit of a Catch-22 with regards to building new transmission, Vaughan explained. “Transmission buildout is going to be challenging just because of the aversion to investment right now, because [electricity] bills are high,” he said. But assigning costs wholly to data centers risks causing even more delays, given the lack of regulatory clarity, right when the country needs more grid infrastructure than ever.
