US Energy Regulator Directs PJM to Clarify Grid Rules for Co-Located AI Data Centers
The U.S. Federal Energy Regulatory Commission has ordered PJM Interconnection to revise its tariff rules for large electricity users co-located with power generation amid rising demand for AI data centers.
The FERC order, issued on Thursday, applies across PJM’s mid-Atlantic footprint, which spans 13 states and Washington, D.C., and serves more than 67 million people. The region has seen a sharp rise in proposals for large data centers tied to artificial intelligence workloads, many seeking to draw power directly from nearby generation rather than fully relying on the transmission grid.
FERC said PJM’s current tariff is “unjust and unreasonable” because it lacks clear and consistent rates, terms, and conditions for customers serving co-located load, leaving developers and transmission customers uncertain about how such arrangements are permitted.
The commission first opened the proceeding in February 2025, when it ordered PJM to justify or revise sections of its tariff governing co-location of generation with large loads, including data centers and industrial facilities. Thursday’s order addresses PJM’s response to that show-cause directive.
Under the ruling, PJM must revise its tariff to detail how interconnection customers may use generating facilities to serve co-located load and require transmission customers serving those loads to choose from four transmission service options, including the existing Network Integration Transmission Service and several newly proposed alternatives.
FERC also directed PJM to revise its behind-the-meter generation rules, establish a transition period and grandfather certain existing contracts. The commission declined to rule on jurisdictional issues related to the interconnection of retail loads served through co-location arrangements.
To address reliability concerns tied to rapid load growth, FERC ordered PJM to submit an informational report by Jan. 19, 2026, on efforts to accelerate new generation additions, improve load forecasting and demand flexibility, and modify its reliability backstop mechanisms.
“This action is intended to release bottlenecks for large-load investments while maintaining just and reasonable rates,” FERC Chairman Laura Swett said in a statement accompanying the order.
The ruling comes as regulators and grid operators nationwide grapple with how to integrate fast-growing AI data center demand without shifting costs onto other customers or undermining system reliability.
