Data Center Power Connection Proposals Seek Balance

As regional electric grid operator PJM and state regulators continue to grapple with questions about how to quickly add more power generation to serve rapidly increasing demand from AI data center operators without increasing existing customers’ bills, several new proposals are being floated.

A proposal was recently submitted to PJM by the governors of Pennsylvania, Maryland, New Jersey, and Virginia, developed in conjunction with the Data Center Coalition, that would give priority to data center projects that bring their own generation sources to the grid. Additionally, the Pennsylvania Public Utility Commission recently unveiled its proposed model tariff that would guide utilities on how large-load customers should connect to the grid and share costs equitably.

PJM, which manages the electric grid for 13 Mid-Atlantic states including Pennsylvania, has been struggling to bring new generation sources online quickly to meet rising demand, much of it from data center operators. This has led to a tightening supply of electricity and spikes in prices, and caused sharp increases in electric bills for residential and other commercial customers.

At the same time, the number of hyperscale data center projects being proposed is rising rapidly throughout the PJM footprint, and these centers require massive amounts of constantly available power. Discussions are being held through the region about how best to pay for the upgrades to power infrastructure and new generation sources needed to meet this need without putting the burden on existing utility customers.

PJM is working on a plan to manage data center connections, which it hopes to submit to the Federal Energy Regulatory Commission for approval by the end of the year. The proposal from the governors encourages PJM to give priority to data centers that provide their power sources and connect them to the grid by offering a fast-track process for expedited interconnection timelines.

The proposed PUC model tariff will be published in the Pa. Bulletin, opening a 30-day comment period before PUC will consider changes and final action. To find out how to comment, visit the PUC website.

The tentative model tariff order defines what is considered a large-load customer and aligns the state’s approach with emerging practices in other states. It also strengthens protections for existing customers by requiring contributions toward construction of grid upgrades that will benefit the project developer, and requiring collateral and minimum contract terms to ensure that the project will pay for the amount of energy it is seeking to add.

In addition, it encourages faster, easier interconnections by utility companies and provides incentives for large-load customers willing to accept interruptions in service during peak demand events.

Rapid changes are needed in order to ensure the continued reliability of the regional electric grid, while also encouraging economic development from the addition of data centers in the state and keeping residential electric bills affordable. These proposals will help shape the future of the grid and how much customers pay for electricity.