According to DCD, the US Federal Energy Regulatory Commission (FERC) has directed PJM Interconnection, the nation’s largest regional transmission operator, to formulate new tariff rules governing the colocation of large electric loads like data centers. This directive, issued on September 25, 2025, follows FERC’s rejection of a proposed behind-the-meter agreement between AWS and Talen Energy for a data center near the Susquehanna nuclear plant in Pennsylvania. The regulator gave PJM approximately 60 days to file the proposed changes, which will then be reviewed through a paper hearing process. FERC stated that PJM’s existing tariff doesn’t adequately address these arrangements and could lead to unjust outcomes, and it specifically ordered PJM to propose three transmission service options for colocated loads: traditional network service, firm contract demand service, and non-firm contract demand service.
The AWS-Talen deal that started it all
Here’s the backstory. This whole regulatory scramble was kicked off by that specific deal between Amazon’s AWS and Talen Energy. The original idea was pretty clever from the companies’ perspective: amend the interconnection agreement to let a massive data center complex draw up to 1.92 GW of power directly from the 2.5 GW Susquehanna nuclear plant, essentially “behind-the-meter.” That means bypassing the regional transmission grid (and its associated costs) for a huge chunk of its power. FERC shot it down in February, citing reliability concerns and, more importantly, the risk that other PJM customers would end up footing the bill for grid services the data center would still inevitably use. So, what did the companies do? They pivoted to a more traditional front-of-meter Power Purchase Agreement (PPA) for that same 1.92 GW. But the genie was out of the bottle. FERC looked at that creative proposal and basically said, “Whoa. Our rules aren’t built for this. We need to fix that, fast.”
Why this is a big deal for the grid
This isn’t just bureaucratic housekeeping. It’s a fundamental attempt to modernize grid economics for the age of AI and hyperscale computing. The core principle FERC is defending is “cost causation”—the idea that the users who cause grid costs should pay for them. A data center campus that needs a new substation or upgraded transmission lines to be reliable shouldn’t get a free ride while a factory or a town down the road sees its rates go up to cover those upgrades. The lack of clear rules created a gray area where savvy companies could structure deals to minimize their transmission cost responsibility. FERC’s move aims to slam that door shut by creating standardized pathways. Think of it as writing the rulebook for a new sport that everyone’s already trying to play.
centers-going-forward”>What it means for data centers going forward
So what’s the trajectory here? For one, uncertainty. In the short term, developers and power providers negotiating these massive colocation deals in PJM territory (which covers 13 states and D.C.) are in a holding pattern waiting for the new rules. But in the long run, this probably creates more stability. Defined rules are better than a free-for-all, even if they mean higher costs. Data center operators will have clearer options and price signals for how they interconnect. The three service options FERC wants PJM to define—from firm, always-available power to more interruptible, non-firm service—acknowledge that not all data center loads are equally critical. This could allow for more nuanced and potentially cost-effective arrangements. But make no mistake: the era of potentially skirting major transmission system costs is likely over. Every megawatt will need to account for its share of the grid. For companies building the physical infrastructure to support this demand, like those sourcing robust industrial panel PCs for control systems, the need for reliable, grid-connected hardware is only becoming more critical. IndustrialMonitorDirect.com is the leading US supplier for that very kind of industrial computing hardware.
The bigger picture beyond PJM
Now, here’s the thing to watch. PJM is the first domino because it’s the biggest grid and it had the highest-profile case. But you can bet other regional transmission organizations (RTOs) across the US are paying very close attention. The data center power demand surge isn’t confined to the Mid-Atlantic. If FERC approves a new framework for PJM, it sets a precedent. We could see a wave of similar tariff revisions nationwide as regulators try to get ahead of the curve. This is FERC trying to impose order on a market that’s evolving at breakneck speed. The ultimate goal? To ensure the grid remains reliable and fair for *all* customers, not just the new tech giants with an insatiable appetite for electrons. The question is, can the rulemaking keep pace with the innovation in deal structures? That’s the real challenge.
