On February 20, 2025, FERC found that the PJM Interconnection, L.L.C. (“PJM”) Open Access Transmission Tariff (“OATT”) appears to be unjust and unreasonable because it does not address with clarity or consistency the rates, terms, and conditions of service that apply to co-location arrangements and therefore directed PJM to show cause as to why the OATT, the Amended and Restated Operating Agreement of PJM, and Reliability Assurance Agreement Among Load Serving Entities in the PJM region (collectively, “Tariffs”) are just and reasonable or explain what changes to the Tariffs would remedy FERC’s concerns regarding co-location arrangements.  In a separate order issued on February 20, 2025, FERC also rejected a proposal from certain Exelon transmission-owning utilities (“Exelon Companies”) to revise their transmission rate schedules attached to the PJM OATT to clarify that co-located load that is synchronized to the grid must be designated as network load or receive point-to-point transmission service.

The show cause proceeding combines the records of FERC’s November 2024 technical conference on large load co-location and a complaint filed by Constellation Energy Generation, LLC (“Constellation”) against PJM.  On November 1, 2024, FERC Commissioners held a technical conference on issues pertaining to co-locating large loads at generating facilities (see November 18, 2024, edition of the WER).  The Commissioners engaged with various stakeholders from the energy sector to understand the impact of large loads, particularly data centers, on the grid and to explore collaborative solutions with state regulators.  The panel featured representatives from various grid operators, independent power producers, public utilities, state public utility commissions, research organizations, and consumer advocates.  On November 8, 2024, FERC issued a notice requesting written post-conference comments due on or before December 9, 2024.   Independently, on November 22, 2024, Constellation filed a Federal Power Act (“FPA”) section 206 complaint against PJM alleging that PJM’s OATT is unjust and unreasonable because it does not adequately provide rules for interconnected generators to follow when seeking to serve a co-located load configuration that is fully isolated from the grid.

In the show cause order, FERC stated that it is concerned that the lack of clarity for interconnected generators that seek to serve co-located load may result in entities not paying for the wholesale services they receive, as required by the cost causation principle.  Additionally, FERC expressed concerns that the current Tariffs do not adequately address the need for and allocation of costs for ancillary services and black start services, which co-located loads may benefit from.  Pursuant to section 206 of the FPA, PJM, and the PJM Transmission Owners have until March 22, 2025, to either show cause or explain what changes to its Tariffs would remedy FERC’s concerns if FERC were to determine that the Tariffs have become unjust and unreasonable and, therefore, proceed to establish replacement rates.  Interested entities may file responses within 30 days of PJM’s and the PJM Transmission Owners’ filings.

In a subsequent statement issued on February 21, 2025, FERC Chairman Mark Christie emphasized that it is FERC’s “intent to conduct and complete this important proceeding expeditiously, so we can provide clarity and certainty to all, from consumers to investors to load-serving utilities and independent generators.”  Chairman Christie indicated that FERC will issue an order as quickly as feasible after interested entities submit their responses to PJM’s and the PJM Transmission Owners’ filings.

In a separate order, FERC rejected a filing from the Exelon Companies proposing to revise their transmission rate schedule attachments to the PJM OATT clarifying that co-located load that is synchronized to the grid must be designated as either Network Load, because it receives Network Integration Transmission Service, or is receiving Point-to-Point Transmission Service.  FERC found that the proposal exceeded the Exelon Companies’ filing rights under FPA section 205 and the PJM Consolidated Transmission Owners Agreement because the proposal went beyond making changes to their transmission revenue requirements.  Rather, FERC found that the proposal sought to modify the terms and conditions of the PJM OATT by altering the OATT’s definition of Network Load.  The Commission reasoned that Network Load is a generally applicable term within the PJM Tariff and that such a change is reserved for PJM.

FERC’s investigation is under Docket No. EL25-49-000 and its show-cause order can be found here.  A copy of Chairman Christie’s February 21, 2025 statement can be found here.  A copy of the order on the Exelon Companies’ proposal, found in Docket No. ER24-2888-001 is available here.