Tag: data centers

The Pressure to Build Data Centers—and the Growing Pushback: A Historical Perspective

Frederick M. Lowther ●

Whether it is the front page of the local newspaper or the cover of a national magazine (or just routine conversation), it is difficult to escape the fact that there has been relentless pressure to build more and more data centers, in large part to support the boom in development of Artificial Intelligence (“AI”). The pressure to build, of course, comes primarily from the firms committed to developing AI. The pushback comes from various quarters: people and institutions concerned with environmental impacts of the data centers together with people and institutions (including state and local governments) who fear the long-term consequences of the “AI Revolution.”

In speaking recently on the topic of AI data center development, I have been asked several times to put the tensions in historical perspective. In my more than half a century of private law practice, I have seen these same tensions occur in circumstances where major innovations are being proposed. It is worth recounting some of those circumstances as lessons in how the “for v. against” dynamic played out. The results were far from uniform, which calls for caution in predicting how the data center / AI debate will evolve. While some will react to the historical examples as “out of left field” and “fundamentally different” given the substance and sheer magnitude of the AI issue, it is nonetheless useful to look back on history and assess whether the lessons are instructive.

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FERC Issues Order Clarifying Data Center and Large Load Interconnection Procedures in PJM

Mark R. Haskell, Brett A. Snyder, Lamiya N. Rahman, and Emily S. Childress ●

The Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an order on December 18, 2025, creating a framework for how large co-located loads, such as data centers, can connect to the grid in a timely, efficient, and fair manner.[1] In February 2025, the Commission initiated Docket No. EL25-49-000, a show cause proceeding under section 206 of the Federal Power Act (“FPA”), directing PJM Interconnection, L.L.C. (“PJM”) and PJM transmission owners to show cause as to why PJM’s governing documents addressing service arrangements between and among generators and co-located load remain just and reasonable and not unduly discriminatory or preferential.

The Commission’s Order—finding that PJM’s current tariff is unjust and unreasonable—directs PJM to implement revisions to clarify what steps entities must take to effectuate co-located load arrangements, to establish three new transmission services, and to create new behind-the-meter generation rules. The Order also seeks additional briefing on the appropriate rates, terms, and conditions of the new transmission service offerings. 

First, several key terms are important to understand in the context of the Commission’s Order. The Order defines “Co-Located Load” to mean a “configuration that refers to end-use customer load that is physically connected to the facilities of an existing or planned Customer Facility on the Interconnection Customer’s side of the Point of Interconnection to the PJM Transmission System.”[2] A “Co-Location Arrangement” refers to both the Co-Located Load and the associated generator. Other capitalized terms used throughout the Order are defined in PJM’s tariff.[3]

FERC v. States: Who Has Jurisdiction? 

Regulating large loads, such as data centers, requires involvement from local, state, and federal entities. FERC’s jurisdiction is limited; it can only regulate matters that Congress authorizes. Under the FPA, states have authority over any matters not expressly conveyed to the Commission.[4] The Order addresses the jurisdictional divide in the specific context of Co-Located Load, noting that FERC has authority to oversee the terms and conditions of generator interconnection to any Commission-jurisdictional distribution facility or transmission facility, and to ensure that rates for transmission service in interstate commerce are just and reasonable.[5] Concurrently, states retain exclusive jurisdiction over the specific terms of retail sales, generator siting, the generation mix, and transmission in intrastate commerce.[6]

Why PJM’s Tariff Is Not Just and Reasonable

The Commission ultimately found that PJM’s current tariff is not just and reasonable, and the Order focused on three key reasons for this: (1) a lack of consistency and clarity regarding serving Co-Located Load, (2) failure to properly allocate costs to the entities that cause the costs to be incurred and reap the resulting benefits, and (3) outdated behind-the-meter generation (“BTMG”) rules that do not account for large loads on the scale of data centers. 

To read the full client alert, please visit our website. 

[1] PJM Interconnection, L.L.C., 193 FERC ¶ 61,217 (2025) [hereinafter PJM Order].

[2] Id. at P 1 n.3. The Commission directed PJM to incorporate this definition into its tariff. Id. at P 164. 

[3] See PJM Governing Documents, Open Access Transmission Tariff, available at agreements.pjm.com/oatt/3898.

[4] Nat’l Ass’n of Regul. Util. Comm’rs v. FERC, 964 F.3d 1177, 1187 (D.C. Cir. 2020) (citing N. Nat. Gas Co. v. State Corp. Comm’n of the State of Kan., 372 U.S. 84, 91-93 (1963)).

[5] PJM Order at PP 171-174.

[6] Id. at PP 167-170.