FERC's Co-Location Order Ends the Guesswork for Data Centers Next to Power Plants in PJM

Few questions in US power regulation have been argued as hard over the past two years as this one: when a data center is built next to a power plant and takes electricity directly from it, what does it owe the grid? On December 18, 2025, the Federal Energy Regulatory Commission gave PJM Interconnection its answer. In Docket EL25-49, the Commission found PJM's tariff unjust and unreasonable because it lacks clarity and consistency on the rates, terms and conditions that apply to generators serving co-located load and to customers taking transmission service on behalf of such load.

It directed PJM to write new rules. The order is the end of a process that began with the Commission's February 2025 show cause order, which raised concerns that PJM's tariff was unclear on co-location and asked PJM and its transmission owners to justify the existing rules or propose changes. PJM's rules did not account for transmission services in which a customer manages energy withdrawals for co-located load. PJM's summary of the order, presented to stakeholders on January 9, lists them.

The first is network integration transmission service, the standard service most load takes, with an interim, non-firm version available until required network upgrades are complete. The order also deals with cost shifting, the issue that animated opposition from utilities and consumer advocates. According to PJM's summary, interconnection customers seeking to serve co-located load must pay the full costs of any facilities needed to maintain reliability for existing customers, and those facilities must be in service before the co-located arrangement proceeds.

The Commission's press release adds a second directive that may matter as much as the co-location rules. PJM's 2027/2028 capacity auction, published the day before the order, cleared 6,623 MW short of the reliability requirement, with nearly 5,100 MW of the increase in forecast peak attributed to data centers. The co-location fight began in earnest with arrangements at existing nuclear plants. The compliance filings will determine how much the order changes in practice.