FERC rejects key elements of PJM’s large load interconnection proposal

Solmar Insights

The Federal Energy Regulatory Commission (FERC) has largely rejected PJM Interconnection’s proposal to facilitate rapid grid connections for new large loads, including data centers, across its service territory. FERC’s decision, issued on October 9, 2026, blocks proposed interim service concepts and curtailment rules, raising questions for developers and energy buyers seeking capacity in PJM’s 13-state region.

FERC ruling and proposal specifics

PJM’s proposal, including the Interim Resource Adequacy Service (IRAS) framework, aimed to allow large energy consumers, such as hyperscale data centers, to interconnect without matching new generation, provided the loads could be curtailed under certain circumstances. FERC’s order rejected the IRAS package, stating the rules encroached on state jurisdiction over retail services and appeared discriminatory against large loads due to curtailment obligations and compensation methods.

While FERC did approve PJM’s plan for a large load registry and formal definitions of large loads, the core mechanism that would have streamlined interconnection was stopped. This affects how future power-hungry projects, including major data centers in regions like Loudoun County, Virginia, enter PJM’s highly competitive queue.

PJM’s documentation and communication with stakeholders emphasized the need to balance reliability for existing customers against the influx of new, energy-intensive facilities. The operator is now reviewing the order to find alternatives that comply with FERC’s guidance and state responsibilities.

State jurisdiction and retail customer impact

FERC’s primary issue with PJM’s proposal centers on state authority over retail customers, who would have borne obligations or curtailments under the IRAS framework. The order cited specific concerns that the proposal would have placed new requirements on entities classed as retail, not wholesale, customers, making parts of the plan out of federal jurisdiction.

Further, FERC flagged the risk of discrimination against certain load types, as the proposal targeted large loads for curtailment and specific cost treatments. The commission’s language suggested that any protocol influencing which retail customers are curtailed, or which ones are compensated, must be rooted in state oversight.

This limitation is significant for states within PJM, such as Virginia and Pennsylvania, where data center construction and large electrification projects are growing, since state-level rules will increasingly govern how and when such projects gain grid access and at what operational risk.

Implications for capacity markets and generators

Equity analysts at Jefferies noted that, by rejecting the interim service concept, FERC’s ruling could keep capacity prices higher for longer in PJM markets. Existing independent power producers such as Constellation Energy, NRG Energy, Talen Energy, and Vistra are seen as beneficiaries, given that the influx of new large loads is less likely to dilute capacity prices or displace established generation resources in the near term.

The additional uncertainty in PJM’s interconnection and market rules may delay or alter plans for new gigawatt-scale purchases by data centers or other large power users. Buyers seeking near-term access to grid services will now have to navigate a more protracted process through PJM’s traditional interconnection queue, which remains congested and slow-moving in many nodes with high commercial demand.

With backstop procurement auction rules also previously rejected, the region faces continued complexity in both awarding new capacity contracts and accommodating large power users, who may need to seek bilateral arrangements or alternative procurement mechanisms governed by state-level policy.

Next steps for PJM stakeholders

PJM has publicly stated it is reviewing the commission’s order with attention to the division of responsibility between federal and state authority. The grid operator reiterated the need to avoid burdening existing customers with costs or diminished reliability as energy-intensive new users seek interconnection.

Developers and operators planning large loads in the PJM footprint should anticipate additional uncertainty and potential delays. Any new interconnection frameworks or tariffs PJM proposes in response will need to explicitly respect state jurisdiction and avoid discriminatory provisions to achieve FERC approval.

For now, market participants should expect status quo conditions in capacity markets and interconnection timelines. Large users may have to factor in higher costs and extended project schedules when contracting for power supply or developing new data center campuses in the region.

Reporting via the original publisher