Some of the biggest questions—and opportunities—facing the electric power sector in 2025 revolve around data centers and how to power them. The U.S. Department of Energy projects that the share of the nation’s electricity consumed by data centers will skyrocket from 4.4% in 2023 to 12% in 2028. With endemic delays affecting the growth of the nation’s generation, interconnection, and transmission capacities, many data center developers are considering “co-locating” generators behind-the-meter to power their facilities. Yet those plans have raised significant questions regarding how co-location arrangements will be regulated at the federal and state levels. This week, we expect the Federal Energy Regulatory Commission (“FERC”) to begin to weigh in, as proceedings concerning co-location get underway.
Today—Monday, March 24—PJM Interconnection, L.L.C. (“PJM”) is expected to file in FERC Docket No. El25-49-000 a road map for how customers may develop and operate co-located large loads and electric generating facilities in the nation’s largest RTO. We expect this filing to provide the first glimpse at how FERC may require all of the nation’s FERC-jurisdictional transmission providers to adapt to the data-center age, and to send important signals to a range of interested parties—transmission providers, data center developers, generators, and investors—as to the possibilities for (and regulatory and financial burdens that will affect) co-located facilities across the country.
The PJM filing is in response to FERC’s February 20, 2025 order consolidating two proceedings: Docket No. AD24-11-000, a technical conference docket arising out of FERC’s general investigation into co-location, and Docket No. El25-20-000, a complaint proceeding in which Constellation Energy Generation, LLC (“Constellation”) alleges that PJM’s existing tariff provisions do not adequately address the interconnection of co-located facilities. In its February 20 Order, FERC required PJM to “show cause” as to (a) why PJM’s tariff does adequately address co-located facilities or (b) how the tariff may be amended to remedy the concerns identified by Constellation.
FERC’s decision to consolidate these two proceedings (rather than open a general rulemaking docket) effectively puts PJM in the driver’s seat for developing rules for co-location arrangements that may become a blueprint nation-wide. A FERC determination that PJM’s current tariff is unjust and unreasonable in its treatment of such arrangements could cast a shadow over other transmission providers’ existing tariffs and invite similar legal challenges in other regions. If FERC does not conduct a general rulemaking, any tariff revisions made by PJM to address co-location (if approved by FERC) will likely serve as the starting point for revisions in other RTOs.
FERC’s directive to PJM reveals an openness to ideas on how to address and facilitate co-location. It asks PJM to address 38 questions related to state versus federal jurisdiction; the extent to which co-located facilities will rely on the transmission system (and the costs they impose on other parties); the types of transmission services and ancillary services that co-located facilities will need (or should be made) to take; how co-located generators can participate in capacity markets; the propriety of re-purposing generation units paid for by ratepayers as co-located facilities; and other topics.
PJM’s March 24 filing will be the beginning of what we expect to be a lengthy tariff revision process, one in which industry stakeholders and the public will have the opportunity to comment. (Comments on PJM’s filing will be due in late April.) Our team will continue to follow this proceeding and post updates as it progresses.
