FERC Commissioner LaCerte went further, warning that the situation in PJM is “dire” and raising the possibility of utilities exiting the RTO structure entirely

Decision Lens

FERC entered April 2026 under explicit political pressure to move fast on data center interconnection — and left the month having missed a federal deadline, rejected PJM’s co-location definition, partially blocked its capacity auction plan, and closed the demand response docket. The contradiction: urgency signals from the White House and bipartisan governors are not translating into regulatory velocity. For Global Heads of Data Center Energy, the three levers most relevant to near-term capacity — co-location approvals, queue reform, and demand flexibility — are all in motion simultaneously but without confirmed resolution timelines before late 2026 at the earliest.

90-Second Brief

Today, fERC declined to meet the April 30 deadline set by Energy Secretary Chris Wright to initiate a rulemaking on data center grid connections, committing instead to act by June 2026. In the same session, the commission rejected PJM’s approach to defining co-located load, sending it back for a revised compliance filing. FERC also closed a five-year-old demand response docket, shifting responsibility for demand flexibility programs back to states and market operators. The combined effect is a regulatory calendar that remains unresolved heading into the second half of 2026.

What’s Actually Happening

The April FERC meeting was substantively active but procedurally inconclusive. On interconnection, the commission did not initiate a rulemaking by the political deadline — instead pledging June action — while Deputy Energy Secretary James Danly publicly endorsed the expectation that FERC would move quickly to improve interconnection processes and support co-location of load and generation.

On co-location, FERC’s dispute with PJM goes deeper than process. PJM used an ownership-based test to define which customers qualify as co-located load and what transmission obligations follow; FERC’s December 2025 order requires a physical-location standard. The distinction is not semantic — it determines whether a data center co-located with a generator can bypass standard transmission tariffs, and PJM’s interpretation would have narrowed eligibility in ways that disadvantage operators who lease rather than own generation facilities.

On PJM’s emergency capacity auction, FERC Chair Swett said PJM’s proposed March 2027 timeline for a reliability backstop procurement does not meet the governors’ original request for action to prevent a supply shortfall by September 2026. FERC Commissioner LaCerte went further, warning that the situation in PJM is “dire” and raising the possibility of utilities exiting the RTO structure entirely.

Why It Matters for Global Heads of Data Center Energy?

Three parallel uncertainties now affect procurement strategy in the PJM footprint simultaneously. First, the co-location definition dispute means any data center operator building or negotiating a behind-the-fence generation arrangement in PJM cannot yet rely on a stable transmission tariff framework. Until PJM refiles and FERC accepts, the economics of co-location deals in this market carry regulatory basis risk that is difficult to quantify and harder to contract around.

Second, the delayed emergency capacity auction matters for near-term reliability exposure. If PJM does not resolve adequate capacity before the 2026–2027 winter, operators in the region face potential curtailment exposure or elevated energy prices during stress events — a direct risk to uptime commitments and energy cost forecasts.

Third, the closure of the demand response docket redirects flexibility programs to state-level negotiation. For operators with facilities across multiple PJM states, this fragments the demand response landscape: each state will move at its own pace, with inconsistent program designs, opt-in requirements, and payment structures. Building a portfolio-wide demand response strategy now requires individual state engagement rather than reliance on a uniform federal framework.

The Forward View

If FERC acts in June as pledged, the shape of the rulemaking will determine whether national interconnection standards create a faster path for data center loads or primarily accelerate generation-side queue reform. These are not the same outcome. A generation-focused rulemaking reduces basis risk for PPAs but does not directly shorten the timeline for load interconnection at new sites.

On co-location, PJM’s next compliance filing will either align with FERC’s physical-location standard or trigger another rejection cycle — each round adding months. Operators planning co-location arrangements in PJM in 2027 or 2028 should model a range of tariff outcomes until that filing is accepted.

The RTO stability question raised by Commissioner LaCerte is a longer-horizon risk but not a peripheral one. If a major utility exits PJM, the transmission tariff and capacity market structure across the mid-Atlantic and Midwest would face material disruption. This is not a probability assessment that can be made today, but it warrants tracking at the board briefing level.

What We’re Uncertain About?

  • June rulemaking scope: FERC has committed to act by June but has not specified whether the rulemaking will address load interconnection directly, generation queue reform, co-location standards, or some combination. The operational impact on data center site timelines depends entirely on scope, which is unconfirmed. Resolution requires reviewing the final Notice of Proposed Rulemaking when issued.

  • PJM co-location refiling outcome: PJM must revise its compliance filing to meet the physical-location test for co-located load. Whether PJM’s next filing satisfies FERC — or triggers another partial rejection — is not determinable from the public record. Monitoring the next PJM board filing cycle is the earliest indicator.

  • Demand response program timelines at the state level: FERC’s closure of the federal docket does not create any state-level programs — it merely removes federal impetus. Which states will act, at what pace, and with what payment structures for data center demand flexibility is entirely open. No confirmed timeline from any state appears in the public record reviewed here.

  • PJM capacity auction resolution: Whether PJM moves its reliability backstop procurement forward from March 2027, or whether political pressure forces an accelerated timeline, remains unresolved. The September 2026 reliability window cited by governors is the near-term marker to watch.

One Question to Bring to Your Team

Given that FERC’s June rulemaking scope is unconfirmed and PJM’s co-location framework remains legally unsettled, which of our planned 2027–2028 co-location arrangements in the PJM footprint are currently underwritten on tariff assumptions that a physical-location standard would materially change — and do our current agreements include regulatory risk clauses that cover this scenario?

Sources

  • Eenews — FERC presses on with closely watched data center rulemaking (Link)

Tags