The Federal Energy Regulatory Commission is expected Thursday to give clearer guidelines for “co-locating” power plants with data centers — the giant warehouses of servers and microchips powering artificial intelligence.
In November 2024, FERC shot down a request from regional grid operator PJM Interconnection to allow an Amazon data center in Pennsylvania to increase the power load it would take from the adjacent Susquehanna nuclear plant. The agency ordered PJM to propose ways for big power plants to supply adjacent data centers without threatening grid reliability or adding to consumer costs.
PJM’s response led to months of debate inside the agency, and has been a focus of FERC chairs under President Donald Trump. Thursday’s rollout of either a proposed rule or directions for PJM will come less than two months after Trump appointed Laura Swett to lead the commission. Energy Secretary Chris Wright has also proposed that FERC consider a streamlined process for connecting data centers and large factories to the grid.
Technology companies argue co-location allows them to more quickly power data centers supporting AI tools while saving utilities money and time on longer-distance transmission infrastructure. Trump has also pushed the AI industry to build its own generation or sign on with a power producer, instead of taking a gigawatt or more off a regional grid.
“Billions already of excess capacity costs have been attributed to the data centers in the PJM territory,” said Maryland state Sen. Katie Fry Hester (D), a member of the PJM State Legislators Coalition.
Efforts inside the commission to issue a follow-up order in the spring fizzled. While then-Chair Mark Christie’s rhetoric emphasized consumer protection as a cornerstone of a potential co-location rule, David Rosner — the commission’s senior Democrat — has stressed that the agency needs to enable swift infrastructure construction to protect America’s global leadership in AI.
Advisory firm Capstone projects that FERC will issue an order paving the way for behind-the-meter load arrangements, where a co-located facility would pay for power under a scheme separate from the traditional regulated rate system applied to most consumers. That could hand a win to nuclear and natural gas plants seeking contracts to deliver power to data centers.
But Hester cautioned about such behind-the-meter arrangements if they’re located at an existing power plant. “That is the equivalent to basically taking that generation source out of the grid,” Hester said.
The Amazon expansion plan in Pennsylvania faced criticism for drawing power away from an existing plant without adequate cost and reliability assurances for other consumers.
But Hester added that some co-locating could help PJM’s resource adequacy problems.
“If you can get a data center to come and to bring new generation or new storage, then they can actually be a huge asset to the grid and build in that extra capacity that we need,” she said.
But the legal durability of any new FERC co-location rule could be in jeopardy from the gate.
Swett’s previous law firm, Vinson & Elkins, had Talen Energy as a client, and she personally represented Invenergy. Both companies are independent power producers involved in the PJM proceeding.
While Swett said she is participating in the docket, she has not confirmed whether she received an ethics waiver.
Industry hopes
Independent power companies are pressing for a federal endorsement of co-locating with data centers.
“The opportunity to serve this critically important load creates a long-term commercial pathway to relicensing, continuing to operate our fleet, evaluating the opportunity to up-rate and having the fleet to build a new fleet of reactors upon,” Mason Emnett, senior vice president of public policy at Constellation Energy, said at a 2024 conference.
Emnett added that his company’s planned restart of a reactor at Three Mile Island was made possible by a long-term contract with Microsoft.
Constellation and other power providers asked the commissioners to proceed by appointing a “settlement judge” to conduct conferences with PJM, transmission owners and others rather than directly issue a proposed rule itself.
“The Commission should direct parties to this settlement process to identify an acceptable replacement rate that reasonably establishes the services, if any, used by co-located loads, and allocates any costs to such loads (or the generator serving them) consistent with cost causation principles,” the power providers wrote in comments to the commission.
For their part, data center developers like Google maintain that they will pay their “fair share” for co-location. What exactly that entails is the subject of strong debate.
In filings to the commission, the Data Center Coalition industry group urged the agency to keep options open and flexible.
“Rather than applying a one-size-fits-all label, the Commission should instead require PJM to adopt a criteria-based framework that evaluates co-located load based on specific, fact-driven indicators — such as the nature of grid reliance, services taken, and metering configuration,” the coalition wrote.
The group rejected a push from some to treat all co-located facilities like normal grid load and to be charged in front of the meter and urged for forecasting reform.
Estimates for growth in data center demand could be inflated by as much as 25 percent, according to market analysts. The Data Center Coalition urged the commission to require data center developers to “demonstrate indicators of commercial viability” to help increase forecast confidence.
