FERC Orders PJM to Develop Data Center Connection Rules

As Mid-Atlantic regional electric grid operator PJM Interconnection continues to struggle to develop rules for how data centers co-located with power plants should be connected to the grid, federal regulators have stepped in to provide direction.

The Federal Energy Regulatory Commission recently issued an order to PJM to quickly develop the rules, and also provided several new pathways that data center operators and other large load customers can take when seeking to connect to the grid.

The ruling provides AI data center operators with assurances about co-location as the regional grid operator and state regulators develop rules while the demand for electricity to power data centers continues to outstrip supply. A number of data center operators have struck deals to “co-locate” near operating power plants and directly take their generating capacity, keeping it off the grid.

This has raised alarms about how much these large load customers should contribute to upgrade the electric grid to support more capacity, whether adequate electricity will be available for residential and commercial customers, and how costs can be equitably shared to keep bills affordable.

FERC Commissioner David Rosner noted that because it has become difficult and expensive to build new grid infrastructure, a business-as-usual approach “will not suffice to meet growing demand while also keeping prices reasonable.”

The FERC order will “break the logjam” by directing PJM to establish new pathways for co-location, as well as load flexibility that will “enable co-located loads to reduce how much they lean on the grid, while ensuring that they pay their fair share,” he continued. As a result, PJM can reduce constructing unnecessary upgrades, reduce strain on the grid, and keep bills affordable.

The FERC order offers several new pathways that data center operators must be able to take to reduce straining the grid, while at the same time paying for the grid power that they will be using. It also requires PJM to institute a rule to prevent an existing power generator from “leaving the grid” by channeling its power to a data center unless it pays for upgrades to allow the same amount of power to come from another generator.

The ruling comes as PJM continues to work on rules to be submitted to FERC to modernize its procedures, and as the most recent capacity auction resulted in a record price being paid to secure guarantees for firm generating capacity for future years due to rapidly rising demand, much of it from data centers.