The Federal Energy Regulatory Commission said Thursday it would not meet Energy Secretary Chris Wright’s April 30 deadline to initiate a rulemaking aimed at accelerating data center connections to U.S. power grids.
“By taking this decisive step today, we’re reaffirming our commitment to meaningful progress and demonstrating that we are fully engaged in delivering real solutions to this historic issue facing our country,” said FERC Chair Laura Swett.
The commission pledged to take action on Wright’s rulemaking proposal by June, a move that Deputy Energy Secretary and former FERC Chair James Danly commended.
“I expect that the Commission will act quickly and decisively to improve interconnection processes, support the co-location of load and generation, and accelerate the addition of new generation to ensure that supply is built alongside demand — delivering affordable, reliable, and secure energy for all Americans,” Danly said in a statement.
Nationwide electricity forecasts are skyrocketing, driven by the popularity of AI models that need power-hungry server farms to operate. Traditionally, state regulators have handled how such facilities interconnect to the grid while FERC oversees interstate transmission of electricity. But Wright and the White House are asking the commission to develop national standards.
Commissioners on Thursday also strongly criticized PJM Interconnection, the nation’s largest grid operator.
PJM faces political pressure from the Trump administration and bipartisan governors in the East to hold an emergency auction for power supply to serve data centers, as utilities and other power industry players raise concerns about its feasibility. Last week, PJM released a plan for just that: a one-time “reliability backstop procurement” to serve the AI industry’s voracious appetite for electricity.
But Swett said PJM’s plan for an auction next year “does not fit” what the governors and the White House pushed for in January. While the governors asked PJM to conduct a backstop auction to get new capacity and prevent a shortfall in electricity supply by September 2026, PJM is eyeing March 2027.
“I personally am a bit perplexed,” Swett said. “We are in a make-it-or-break-it year for the market. We expect that the board and stakeholders will do the right thing on this topic.”
Co-location and interconnection, revisited
In an order, the commission also sent PJM back to the drawing board on developing a framework for co-locating power plants with data centers and other large loads.
In December, FERC issued a landmark order outlining guidelines for how the grid operator should build a responsible system. Co-location supporters argue it cuts down on complex transmission and distribution wires, but some worry it would give the co-located customer priority over others on the grid.
PJM has submitted two compliance filings in response to FERC’s December order, but the commission was not wholly satisfied with the first filing.
The commission found, among other things, that PJM did not properly adopt FERC’s definition of “co-located load.” PJM was trying to use ownership of facilities, rather than the commission’s physical-location test, to decide which side of the line a co-located customer sat on and what transmission service obligations would follow.
FERC partially accepted and partially rejected PJM’s compliance filing for FERC Order 2023. The order directs grid operators to reform their queue in which proposed power plants are connected to the electrical grid.
PJM’s queue has a yearslong backlog, and the grid operator temporarily closed it to new entrants in 2022.
“Connecting new generation to the grid is the primary pathway to get prices down,” Democratic Commissioner David Rosner said. “We have some more changes that PJM needs to undertake to fully comply with Order 2023. In my opinion, these are very long past due, but they’re going to make the interconnection faster and more predictable.”
Republican FERC Commissioner David LaCerte expressed deep frustration with PJM during the April meeting.
“The situation is dire. It’s growingly dire,” LaCerte said. “I wouldn’t be surprised if there’s serious conversation about one or more major utilities or transmission companies talking about maybe joining a different RTO or going it alone.”
Demand response
Over the reservations of both Democratic commissioners, FERC also ordered a close to a five-year-old docket that sought to expand the use of demand response mechanisms on the nation’s grid.
In 2021, FERC opened a docket to consider eliminating state-level “opt-outs” for demand response resources. Demand response measures generally require certain consumers, like data centers, to use less power when the grid is stressed.
To avoid data center moratoriums amid rising power costs, states and tech companies are increasingly pursuing demand response agreements. While legislative efforts and voluntary contracts are emerging in several states, some experts argue that stronger regulatory incentives and faster grid access are essential to transform these flexible power strategies into a standard industry practice.
Swett acknowledged that demand response can have “great value” but argued the docket was a “zombie” that might encroach on state jurisdiction if acted upon.
“In my opinion, the record supports a conclusion that the state opt-out reduces market efficiency and could cause wholesale rates to increase,” former Chair Richard Glick, who initiated the notice of inquiry under the Biden administration, told POLITICO’s E&E News. “But I understand that this NOI has been pending for several years and Chairman Swett is seeking to clear out matters that have been pending for some time.”
Rosner dissented. He said his vote was less on the merits of closing the particular docket and more to encourage the continued exploration of demand response frameworks.
Fellow Democrat Judy Chang concurred in the closure.
“Demand-side resources must play a role going forward,” Chang said. “Maybe this is the year for load flexibility in demand-side resources. I strongly encourage all customers, including data centers, to work with their state regulators and market operators and design practical programs that will bring more demand-side resources into the market.”
