FERC Rejects Core of PJM’s Data Center Connection Plan

The Federal Energy Regulatory Commission (FERC) has rejected the central piece of a plan by PJM Interconnection, the largest grid operator in the United States, to speed the connection of data centers and other large electricity consumers to its 13-state grid. The order, issued on October 9, targets PJM’s proposed Interim Resource Adequacy Service (IRAS), which would have let new large loads connect without first lining up matching new generating capacity, in exchange for agreeing to be curtailed ahead of a grid emergency.

FERC also turned down PJM’s accompanying “bring your own new capacity” provisions. The commission found that IRAS reached into territory reserved for state regulators: some of its provisions placed obligations directly on new large customers, dictated which retail customers would be curtailed first, and built a compensation structure that functioned, in FERC’s view, as a de facto retail rate-setting mechanism. “States have a crucial role to play in this challenge,” the commission wrote in its order, adding that it “strongly encourage[s] states to continue their important work on this issue.”

What survived the ruling

Not everything in PJM’s filing was discarded. FERC accepted the grid operator’s proposed definition of a “large load” and its plan for a large-load registry, which would track a facility’s location, its ramp-up schedule, how much capacity it has already secured and other operating details. PJM spokesman Jeffrey Shields said the company is reviewing the order and intends to refile in a way that meets FERC’s requirements while “honoring the concept that existing electricity customers should not be unfairly burdened” and respecting the role FERC has assigned to states. PJM has given no timeline for a revised filing.

A concurring commissioner pushes further

Commissioner David Rosner supported the outcome but wrote separately to flag a risk in how PJM had structured the rejected plan. Excluding IRAS-connected loads from the demand curve used in PJM’s capacity auction, he argued, could distort the market, since the PJM region “has more than enough capacity while the region sheds thousands of megawatts.” Rosner said that if curtailment becomes necessary during a grid emergency, non-critical data centers should be shed before ordinary households and businesses — but that states, not PJM alone, should set those curtailment priorities, and only after voluntary demand-response options are exhausted.

Why grid operators are racing to solve this

PJM’s push for a fast-track connection product reflects the scale of the queue building up behind it: AI and cloud data centers, several in the gigawatt range, have been requesting interconnection faster than new power plants can be built or permitted, a dynamic also visible in other US markets, including the gas-fired capacity Black Hills Corp. is building for a Google data center in Wyoming and the 1.6 GW of linear generators AEP has agreed to buy from Mainspring. In July, PJM’s capacity price for the 2026-27 delivery year hit the regulatory price cap of $325 per MW-day, and the market operator has separately flagged a 6.8-gigawatt capacity shortfall for the 2028-2029 delivery year. The US Department of Energy pressed PJM on ratepayer protections for large loads just a day before the IRAS ruling, and this was not FERC’s first pushback on the issue: about five weeks earlier, the commission had already rejected key elements of PJM’s proposed backstop capacity-procurement auction. Some generators have instead gone directly to data-center developers for long-term supply deals, including Vistra’s federally backed plan to uprate two Pennsylvania and Ohio nuclear plants and Black Hills’ $1.8 billion gas and microgrid deal with Google.

Market reaction points to higher prices for longer

Analysts at Jefferies said the ruling likely keeps PJM capacity prices elevated for longer, a dynamic that favors independent power producers with existing generation already in the market — naming Constellation Energy, NRG Energy, Talen Energy and Vistra. Jefferies added that a revised version of PJM’s large-load framework could resurface, more likely driven by individual states than by the RTO itself, with Ohio and Pennsylvania — both hosting heavy data-center build-out — seen as the states most likely to act first.

Sources

• Ethan Howland, “FERC rejects PJM’s plan for connecting data centers, says it intrudes on state authority,” Utility Dive, October 12, 2026 — utilitydive.com (order summary, quotes, Jefferies market analysis).
• Federal Energy Regulatory Commission, order on PJM’s large-load interconnection filing, eLibrary accession no. 20261009-3055, issued October 9, 2026 — ferc.gov (official order; rejection of IRAS and BYONC, approval of large-load definition and registry).

Illustrative image. Photo: NOIRLab/NSF/AURA/T. Slovinský, CC BY 4.0, via Wikimedia Commons — source