PJM Ordered to Reform Tariff for Co-Located Generation and Load b

On 18 December 2025, the Federal Vitality Regulatory Fee (FERC) issued a long-awaited order discovering that PJM Interconnection, L.L.C.’s (PJM) tariff is unjust and unreasonable because it pertains to co-located load preparations and directing PJM to ascertain clear, nondiscriminatory guidelines for co-location preparations between massive electrical energy customers—comparable to information facilities—and technology amenities.¹ PJM, which operates the nation’s largest electrical energy grid throughout 13 states and the District of Columbia, has struggled to plan for and handle the numerous will increase in energy demand from information facilities. This order could show to be a pivotal growth for information facilities: It doubtlessly opens new pathways in PJM for integrating massive hundreds with co-located technology. By directing PJM to make clear interconnection procedures and create new transmission companies, FERC is enabling cost-effective venture configurations that may speed up growth timelines, preserve grid reliability, and assist progressive enterprise fashions for each information facilities and technology builders.

In regulatory parlance, a co-located load is {an electrical} configuration the place an end-use (retail) buyer load is bodily linked to the amenities of an present or deliberate technology facility.² Importantly, the load connects to the generator’s facet of the interconnection to the PJM-operated transmission system; the load doesn’t essentially join on to the FERC-regulated electrical grid.³ 

Scope of FERC Jurisdiction

FERC’s order first addresses a threshold dispute about whether or not its authority beneath the Federal Energy Act (FPA) extends to PJM’s therapy of co situated technology and huge hundreds. A number of events argued that elements of co location—significantly the place retail load is served behind the meter or the place hyperscale information facilities contract instantly with mills—fall exterior FERC’s jurisdiction and ought to be left to regulation by the state commissions. FERC rejected these contentions, discovering that:

• FERC retains unique jurisdiction to supervise the interconnection of producing amenities to the interstate transmission system, together with the mills which are used to serve co-located load. In keeping with FERC, a generator’s interconnection to the interstate transmission system doesn’t fall exterior of its jurisdiction merely as a result of there’s a co-located load behind the generator’s level of interconnection.
• FERC has unique authority to control the procedures and agreements that apply to the interconnection of a generator that may make wholesale gross sales, each the place the generator interconnects on to the interstate transmission system and the place a generator interconnects to dual-use distribution amenities.⁴
• Co situated preparations essentially contain transmission service, which FERC completely regulates.

Accordingly, even whereas the retail element of a co situated load is topic to state regulation, the wholesale and transmission parts—together with price allocation, reliability, and nondiscriminatory entry—are issues for FERC to control. For these causes, FERC discovered that it has authority beneath the FPA to direct PJM to revise its tariff to ascertain clear, uniform guidelines for co situated technology and cargo with out infringing on states’ authority. 

Directed Tariff Adjustments

Interconnection Reform

By 20 January 2026, PJM should file revised technology interconnection procedures to make sure that it’s clear to each new and present (generator) interconnection clients the best way to interconnect in a co-location association.⁵ Particularly, PJM should revise its tariff to clarify how interconnection clients could make use of provisional interconnection service, the power to request interconnection service under nameplate capability, the potential to speed up the interconnection course of beneath sure circumstances, and surplus interconnection service to interconnect new producing amenities in search of to serve a co-located load. PJM should additionally make clear the procedures for research to find out any modifications to interconnection amenities or community upgrades PJM deems obligatory to take care of reliability when an interconnection buyer seeks to change its service degree to serve a co-located load. Considerably, the interconnection buyer is to bear the total price of such modifications and specify a producing facility could not withdraw capability to serve a co situated load till all required upgrades are in service to guard present clients. 

Tariff Readability

FERC discovered PJM’s tariff to be unjust and unreasonable as a result of it lacks clear charges, phrases, and situations of service for co-location preparations. In keeping with the order, the dearth of enough readability and consistency with respect to the charges, phrases, and situations of service that apply to co-location preparations has created uncertainty that has resulted in disparate therapy amongst technology interconnection clients. 

PJM should submit by 17 February 2026, a compliance submitting setting forth particular phrases and situations that an interconnection buyer in PJM in search of to serve co-located load should observe to effectuate a co-location association.⁶ An interconnection buyer utilizing its producing facility to serve a co-located load should take sure actions to designate the “Eligible Buyer” that may take transmission companies on behalf of the load. These necessities will make sure that relevant transmission and ancillary companies costs shall be assigned to accountable events. 

Three New Transmission Providers

FERC disagreed with the view {that a} co-located load ought to solely be allowed to take Community Integration Transmission Service (NITS),⁷ and it directed PJM to create three new transmission service choices to facilitate co-location preparations and that replicate a co-located load’s skill to restrict withdrawals from the transmission system, as follows: 

Interim NITS 

Recognizing a key driver in co-location seems to be service delays within the conventional, front-of-meter interconnection, FERC directed PJM to file by 17 February 2025, a compliance submitting to change its tariff to create an interim community integration transmission product. Interim NITS is a brief, non-firm transmission service topic to curtailment accessible to clients in search of NITS till the utility locations into service community upgrades required for NITS. Clients taking interim NITS on behalf of a co-located load conform to load curtailments upfront of system emergency situations. This service permits interconnection earlier than community upgrades are full, then transitions to full NITS as soon as upgrades are in service. Clients taking Interim NITS pay the NITS price and relevant ancillary and blackstart service costs however won’t be charged for a technology capability (useful resource adequacy) product. This transmission service might not be mixed with the brand new Agency Contract Demand transmission service or Non-Agency Contract Demand transmission service.

Agency Contract Demand Transmission Service

Beneath the brand new Agency Contract Demand transmission service, clients may have the suitable to request transmission service on behalf of a co-located load as much as a specified megawatt (MW) amount, i.e., the contract demand, for a minimal time period of 1 yr. The Agency Contract Demand transmission service may have the identical reservation and curtailment precedence as present agency transmission service on the degree of the contract demand. Clients taking Agency Contract Demand transmission service shall be charged primarily based on its contract demand no matter utilization. Nonetheless, not like NITS clients, clients taking Agency Contract Demand transmission service on behalf of a co-located load can’t withdraw vitality past the contract demand degree. FERC directed PJM to use a penalty price if a buyer taking transmission service on behalf of a co-located load withdraws vitality from the PJM system in extra of its contract demand, for instance, as a result of a particular safety scheme failure. The suitable penalty cost and different phrases of service have been set for a paper listening to, with briefing to start in February 2026.

Non-Agency Contract Demand Transmission Service 

This can be a new, versatile, non-firm service primarily based on an outlined demand degree. Reservations beneath this service could be accessible solely when there’s accessible transmission capability and shall be accessible for phrases starting from one hour to at least one month, just like present non-firm transmission service choices within the tariff. Non-Agency Contract Demand transmission service should be accessible throughout regular operations and curtailed throughout emergency operations. This service is appropriate for co-located clients in search of to withdraw vitality from the transmission system occasionally when transmission capability is accessible and never wanted by agency clients, for instance, throughout an anticipated outage of the co-located generator. Much like Agency Contract Demand transmission service, clients should pay a penalty price for unreserved use of the transmission system. As with Agency Contract Demand transmission service, phrases of service are set for a paper listening to. 

Clients can select to take Agency Contract Demand transmission service or Non-Agency Contract Demand transmission service on behalf of a co-located load as an alternative of taking NITS. The brand new Agency Contract Demand and Non-Agency Contract Demand transmission companies won’t require a co-located load to change into a community load, and they’re going to function everlasting options to present transmission companies. Nonetheless, FERC directed PJM to restrict a buyer’s skill to “toggle” between Non-Agency Contract Demand and Agency Contract Demand transmission companies. 

Paper Listening to

FERC established a paper listening to to find out charges, phrases, and situations of the brand new transmission companies. Listening to contributors are requested to handle 11 points protecting acceptable price buildings, price allocation methodologies, and situations and limitations on the brand new agency and non-firm service. 

Behind-the-Meter Era (BTMG)

Resulting from modified circumstances, FERC held that PJM’s BTMG guidelines are not simply and cheap, discovering that hundreds with BTMG are usually not totally accounted for in useful resource adequacy planning and that netting BTMG towards load shifts prices to different clients.⁸ In keeping with FERC, massive BTMG might masks true transmission utilization and reliability and planning impacts, in addition to undermine PJM’s skill to plan for capability and transmission adequacy. Nonetheless, recognizing that not all BTMG hundreds pose important reliability dangers, FERC directed PJM to suggest a brand new MW threshold for the quantity of load clients could web utilizing BTMG and to take care of present guidelines for purchasers under the brand new MW materiality threshold. Accordingly, beneath the brand new guidelines, BTMG clients over the MW threshold will not be capable of web out load with out being studied for impacts on reliability. As an alternative, they are going to be required to observe new necessities that deal with BTMG as a part of PJM’s useful resource adequacy and transmission planning framework, which is able to embrace full price duty for reliability upgrades and an obligation to take service beneath the brand new transmission classes. FERC directed PJM to ascertain a transition interval for retail BTMG at present utilizing PJM’s present BTMG guidelines, together with a grandfathering of sure contracts, to keep away from sudden disruption and supply regulatory certainty whereas new guidelines are being carried out. PJM should revise its BTMG guidelines and file them with FERC by 18 February 2026. The transition design shall be proposed by PJM in its compliance submitting. 

PJM Important Challenge Quick Path (CIFP) on Giant Load Additions

FERC directed PJM to file by 20 January 2026, an in depth informational report on the standing of the proposals thought of within the CIFP stakeholder course of, together with the standing of PJM’s proposed expedited interconnection course of for giant hundreds and the event of enhanced load forecasting. The informational report should particularly establish initiatives that might assist the expedited addition of recent technology capability to serve massive hundreds, like information facilities, whereas assembly PJM’s near-term useful resource adequacy wants.

By mandating tariff reforms for co-located technology and cargo, FERC is essentially reshaping how massive vitality customers—particularly information facilities—can combine into the grid and the way technology builders can take part within the PJM market. Knowledge heart builders will profit from higher regulatory readability, decreasing venture danger and enabling broader portfolio of options for energy procurement. Era facility builders might acquire new alternatives to companion with massive hundreds, optimize asset utilization, and entry streamlined interconnection pathways. Stakeholders ought to intently monitor PJM’s stakeholder course of and compliance filings, which is able to have an effect on how information facilities and different massive customers safe energy provides, in addition to how new technology capability might be developed to fulfill the quickly altering wants of the grid and huge clients.