In short
AI data centers are large loads that need to plug into the interstate transmission grid, and the federal rules for doing that are changing right now. The Federal Energy Regulatory Commission oversees the interconnection queue for power plants, but it has never directly regulated how loads connect. A Department of Energy directive in October 2025 pushed FERC to write a first large load interconnection rule, and FERC plans to finalize it by June 2026. At the same time, grid operators like PJM and SPP have already adopted their own large load tariffs, and FERC issued a major order in December 2025 that reshapes how co located data centers can access transmission service. The queue is severely congested, with over 2,000 GW of projects waiting to connect, and median wait times have stretched beyond four years. For anyone developing or financing an AI data center, understanding the cluster study process, the coming federal rule, and the new co location pathways is now as important as land and power procurement.
What federal law governs grid interconnection today?
FERC has exclusive jurisdiction over the transmission of electric energy in interstate commerce and wholesale power sales, while states keep authority over retail sales and local distribution. 16 U.S.C. § 824. Federal interconnection rules have been built through a series of major orders.
Order 888 (1996) required open access
To end discrimination, Order No. 888 required every public utility that owns or controls interstate transmission to file an Open Access Transmission Tariff. That tariff must offer point to point and network integration service on equal terms to everyone. It also required functional unbundling of wholesale generation and transmission services, meaning utilities must take transmission service under the same open access tariff as their competitors and state separate rates for each service, but stopped short of requiring corporate divestiture. Order No. 888
Order 2003 (2003) created a standard procedure for large generators
FERC adopted uniform Large Generator Interconnection Procedures and a standard interconnection agreement for any generating facility larger than 20 MW. This gave developers one predictable set of steps to follow. FERC Order No. 2003
Order 845 (2018) added flexibility
Order 845 gave generators three new tools. A project can request interconnection at a capacity lower than its full nameplate rating. Transmission providers must offer provisional interconnection service, which lets a generator start delivering power before the full study is complete. They must also offer surplus interconnection service, so a new generator can use an existing interconnection point that has spare capacity. Order No. 845
Order 2023 (2023) replaced the queue with a cluster study
This is the most important recent reform. The old process was serial. Projects entered a first come first served line. A developer could park a speculative project at the front for years with little money at risk, blocking every project behind it.
Order No. 2023 replaced that system with a first ready first served cluster process. All interconnection requests that arrive during a 45 day window are treated as one group, or cluster, and studied together. The transmission provider must complete the initial cluster study within 150 calendar days, or pay a penalty of $1,000 per business day. Order No. 2023, Law firm analysis
To deter speculative projects, FERC raised the financial requirements. A developer must pay a nonrefundable $5,000 application fee. The study deposit depends on project size. For a 20 to 80 MW project it is $35,000 plus $1,000 per MW. For 80 to 200 MW it is $150,000. For over 200 MW it is $250,000. On top of that, a commercial readiness deposit equal to twice the study deposit is due when the project enters the cluster. As the project moves through restudy and the facilities study, additional deposits are required. By the time the developer signs the interconnection agreement, the total commercial readiness deposit equals 20 percent of the estimated network upgrade costs. Law firm analysis
Withdrawal penalties escalate in the same way. In the initial cluster phase, the penalty is the greater of the study deposit or twice the study costs. It rises to 5 percent of network upgrade costs at restudy, 10 percent at the facilities study, and 20 percent after the interconnection agreement is signed. There is a safety valve. If the estimated network upgrade costs jump by 25 percent or more in the most recent cluster study report, or more than 100 percent in the individual facilities study, the withdrawal penalty is waived. Law firm analysis, Law firm analysis, Law firm analysis
Why the interconnection queue is so slow
Even with the reforms, the queue is enormous. At the end of 2025, more than 2,060 GW of total generation and storage capacity was actively seeking interconnection across the United States. Only about 13 percent of all capacity that submitted requests from 2000 through 2019 had reached commercial operation by the end of 2024. Lawrence Berkeley National Lab
The median time from interconnection request to commercial operation has doubled. It was under two years for projects built from 2000 to 2007. For projects built between 2018 and 2024, it is over four years. LBNL
In PJM, the nation’s largest grid operator, the timeline is worse. The total wait from application to commercial operation has risen from under two years in 2008 to over eight years in 2025. RMI analysis
AI data centers feel this delay in two ways. The AI data center itself may need a new line or transformer, which often enters a generator interconnection study path. But the larger problem is that the AI data center depends on new power plants being built to serve it, and those plants are stuck in the same queue. That is why the push for a large load interconnection process is so urgent.
The new focus on large loads like AI data centers
FERC’s jurisdiction has always covered how generators connect. How a new load connects (a factory, a hospital, an AI data center) has been a state matter. State public utility commissions retain jurisdiction over retail load interconnections regardless of size and have authority over integrated resource planning and retail service decisions, under the Federal Power Act and state law. NARUC Initial Comments, RM26-4, NARUC guide on state PUC authority
AI data centers break that mold. They are enormous, often hundreds of megawatts. They want to connect directly to the high voltage transmission grid, sometimes right next to a power plant, bypassing the local distribution system entirely. That blurs the line between a load and a generator for interconnection purposes.
The queue crisis and the wave of AI data center demand prompted a federal response. On October 23, 2025, the Secretary of Energy used a rarely invoked authority under Section 403 of the Department of Energy Organization Act. He directed FERC to open a rulemaking on large load interconnection and attached an Advance Notice of Proposed Rulemaking with 14 guiding principles. DOE Section 403 Directive
FERC opened Docket RM26-4 and took public comment. On April 16, 2026, FERC announced it would take action by June 2026. FERC news release
What the ANOPR proposes?
The ANOPR defines a large load as any load with a capacity of greater than 20 MW, matching the long standing generator threshold in Order 2003. It also covers hybrid facilities where generation and load are co located and the load exceeds 20 MW. DOE Section 403 Directive The 14 principles include
- Reforms that apply only to new loads over 20 MW that interconnect at the transmission level
- Co located generation and load must be studied together
- Standardized study deposits, readiness requirements, and withdrawal penalties for large loads, similar to what Order 2023 did for generators
- Expedited study for curtailable loads that agree to be interrupted when the grid is stressed, possibly as fast as 60 days
- Large loads responsible for 100 percent of the network upgrade costs they cause
- Interconnection customers get the right to build the needed upgrades themselves
- System protection facilities must block unauthorized power flows
The DOE also laid out four legal theories for FERC jurisdiction over large load interconnection. First, large load interconnection is an essential part of the open access transmission service FERC already oversees under Order No. 888. Second, it directly affects wholesale electricity rates. Third, asserting jurisdiction does not intrude on state authority over retail sales. Fourth, any other view would go against the core purpose of the Federal Power Act. DOE Section 403 Directive
The pushback
State regulators strongly objected. The National Association of Regulatory Utility Commissioners argued that load interconnection is a retail matter that belongs to the states, and urged FERC to ensure its rulemaking does not compromise grid reliability. NARUC initial comments The analysis also noted that any final rule asserting federal authority over loads will face scrutiny under the major questions doctrine, a principle that says agencies cannot decide issues of vast economic and political significance unless Congress clearly gave them that power. Law firm analysis
Co location, AI data centers next to power plants
Co location means building an AI data center right next to a power plant and connecting it to that plant rather than through the full transmission network. The AI data center can take power behind the meter, on the plant’s own wires before the power reaches the grid, or front of the meter, using the grid but with a direct line. Co location can cut interconnection delays because the AI data center uses generation that is already there or being built nearby.
It also raises hard questions. If a large load draws directly from a generator that would otherwise sell into the wholesale market, that removes power that was available to everyone else and can shift transmission and capacity costs to other ratepayers.
The Amazon Talen deal
In 2024, Amazon proposed to take up to 960 MW from the Susquehanna nuclear plant in Pennsylvania behind the meter, without using PJM’s transmission system. A majority of FERC commissioners rejected that plan in November 2024. In June 2025, Amazon and Talen Energy restructured the deal as a front of the meter retail arrangement, a 17 year $18 billion power purchase agreement for up to 1,920 MW from the 2.5 GW plant, sold into the grid. Amazon also announced $20 billion in Pennsylvania AI data center investment. Talen Energy IR, CNBC
The Microsoft Constellation deal
Microsoft signed a 20 year power purchase agreement for the output of the restarted Three Mile Island Unit 1, called the Crane Clean Energy Center. The reactor will provide 835 MW after a $1.6 billion restart, backed by a $1 billion federal loan. The power is sold to Microsoft under a power purchase agreement and delivered to the grid. Constellation Energy, CNBC, Power Engineering
FERC’s December 2025 PJM co location order
On December 18, 2025, FERC issued a unanimous order finding that PJM’s existing tariff was unjust and unreasonable for co located loads. The order required PJM to offer four transmission service options for co located loads, three of them new alongside the existing Network Integration Transmission Service.
- Network Integration Transmission Service, the traditional firm service billed on total gross demand.
- Interim Non-Firm Transmission Service, a temporary non-firm service available only to customers seeking Network Integration Transmission Service until the necessary network upgrades are complete.
- Firm Contract Demand Transmission Service, which lets a load contract for a specific MW quantity and be planned based only on that amount.
- Non Firm Contract Demand Transmission Service, an interruptible service with no capacity charges.
PJM must also set a new MW threshold for behind the meter generation netting, establish a transition period with grandfathering protections, and account for large behind the meter loads in resource adequacy and transmission planning. FERC fact sheet, Law firm analysis
Commissioner Rosner’s concurrence captured the approach. If a new large load wants to connect directly to a power plant and operate in a way that lowers grid costs, we should let it. If the current rules don’t let this work in a way that’s fair for everyone, we must change those rules. Rosner concurrence
The specific rates, terms, and conditions for the new services are still being set. A paper hearing on those terms was ongoing as of May 2026.
How PJM and SPP are adapting now
PJM
PJM serves 67 million people across 13 states and the District of Columbia. It is the epicenter of AI data center growth. PJM forecasts that its summer peak demand will climb by about 70 GW over the next 15 years, driven primarily by data centers. PJM PJM AI data center demand is expected to grow by up to ~30 GW between 2025 and 2030. PJM
PJM’s interconnection queue reflects that pressure. Its first cluster cycle under Order 2023, with a 540 day study window, processed over 100 GW of applications, studied 40 GW, and delivered draft interconnection agreements for 17 GW. Even so, the full timeline from application to operation remains about eight years. Columbia University Center on Global Energy Policy
Beyond the co location order, PJM proposed an Expedited Interconnection Track in February 2026. It is for generation projects over 500 MW that are sponsored by a PJM state and can reach commercial operation within three years. The track is capped at 10 projects per year. Developers pay 100 percent of network upgrade costs, a nonrefundable study deposit of $500,000, and a readiness deposit of $15,000 per MW. PJM Inside Lines
PJM’s capacity auction prices have hit the FERC cap of $333.44 per MW day, with total capacity costs reaching $16.4 billion in December 2025. PJM That is a direct signal that the grid is running short of resources to meet the demand that data centers are creating.
SPP
The Southwest Power Pool approved its High Impact Large Load tariff, effective January 15, 2026. A HILL is a new or increased commercial or industrial load of 50 MW or more when connecting above 69 kV, or 10 MW or more at or below 69 kV. FERC Order 194 FERC ¶ 61,031
SPP also launched HILLGA, the High Impact Large Load Generation Assessment process. It is an expedited interconnection path for dedicated generation that serves a HILL. The generator output is capped at the forecasted hourly load of the paired AI data center, and the system impact study is completed within 90 calendar days. FERC Order 194 FERC ¶ 61,031
SPP filed a Conditional High Impact Large Load Service tariff in February 2026. CHILLS would provide seven years of non firm transmission service as a bridge for loads that are ready to energize before full network upgrades are complete. FERC issued a deficiency letter on the filing on March 30, 2026. FERC deficiency letter
In ERCOT (Texas), which operates outside FERC’s interstate jurisdiction, the queue is also surging. ERCOT received 198 GW of large load interconnection requests in the first quarter of 2026 alone, with 86 GW under review, roughly equal to its current peak load. Ascend Analytics
What to expect from the June 2026 federal rule?
FERC has committed to action by June 2026. The April 2026 order said the agency will address the problems discussed in the ANOPR, but did not specify the exact form, a final rule, a Notice of Proposed Rulemaking, or something else. FERC news release
Several open questions will shape the outcome.
The 20 MW threshold drew heavy fire in comments. Many argued it is too low, catching ordinary commercial industrial customers rather than just mega loads. Proposals for a higher threshold ranged from 30 MW to 300 MW. The final rule may raise the number. Law firm analysis, Docket analysis, Energy analysis
The ANOPR floated an expedited 60 day study track for curtailable loads. That would be powerful for flexible data centers, but the technical details and the dispatch obligations are still hotly debated.
Deposit amounts and penalty structures must be calibrated to keep speculators out without making it too expensive for real projects.
Finally, any final rule asserting federal authority over load interconnection will almost certainly face a legal challenge. Commenters have flagged the major questions doctrine, and FERC has committed to address the ANOPR issues in a legally durable manner. NEPOOL memo, FERC order
Developers should watch for the final rule but understand that even after it comes out, the details will be implemented through individual RTO and utility tariffs. That process will take months or years.
Key takeaways
- FERC controls the interstate transmission grid, and it is rewriting the rules for large loads like AI data centers. A final federal rule is expected by June 2026.
- Order No. 2023 changed the generator interconnection queue from first come to first ready, with higher financial commitments and escalating withdrawal penalties. AI data centers are not directly in the generator queue for their load, but the power plants they depend on are, so developers must plan for cluster timelines and those costs.
- Co location with power plants is a viable path. The December 2025 PJM order created new transmission service options for co located loads, and the Amazon Talen and Microsoft Constellation deals show that workable structures are possible, but the precise rates and terms are still being hammered out.
- The DOE’s 2025 directive and Docket RM26-4 will produce the first dedicated federal framework for large load interconnection. Developers should engage with the docket and model how the ANOPR principles, like 100 percent cost responsibility and curtailable load expedited tracks, would affect their projects.
- Regional grid operators are moving ahead on their own. SPP already has a large load tariff and a dedicated generation assessment process. PJM is building an expedited generation track and new load service options. ERCOT is seeing staggering queue volumes.
- Legal challenges are likely. The traditional state role over retail load distribution and the major questions doctrine create uncertainty. A project that can proceed under existing state rules may have a more certain near term path.
- For a developer today, the most important steps are to engage early with the transmission provider, evaluate whether a co location or bring your own generation strategy fits, and budget for the substantial readiness deposits and upgrade costs that the new rules require.
Frequently asked questions
Q:What is the FERC interconnection queue?
A:It is the line, now a cluster group, of all projects that have formally asked a transmission provider to study how they can connect to the grid. Order No. 2023 requires transmission providers to study all requests in a batch, called a cluster, within a firm 150 day deadline. Order No. 2023
Q:How does Order 2023 affect an AI data center?
A:The order itself governs generator interconnection, not load. But the AI data center’s power source, whether it is a new on site plant or a dedicated solar farm, goes through the cluster study process. Under Order 2023, generators face study deposits, readiness requirements, and a multi year timeline. Law firm analysis
Q:What is the difference between a generator and a load in interconnection?
A:A generator puts power onto the grid. A load takes power off the grid. Historically, FERC regulated generator interconnection, and states regulated how large loads get served. The pending RM26-4 rule would bridge that gap for very large loads like AI data centers. FERC Docket RM26-4
Q:What does the December 2025 PJM co location order do?
A:It found that PJM’s old tariff treated co located loads unfairly. It directed PJM to create three new transmission service types for co located loads, including firm service based on a contract quantity and non firm interruptible service. It also required rules for behind the meter generation netting and a transition period. FERC fact sheet, FERC order
Q:When will the final federal large load interconnection rule be out?
A:FERC committed to taking action by June 2026. FERC news release
Q:Can an AI data center connect directly to a power plant without using the grid?
A:Yes, it can, but the rules are tight. A behind the meter connection that bypasses the grid entirely is possible, but it has drawn scrutiny when the load is large. The Amazon Susquehanna behind the meter plan was rejected in 2024. FERC has directed PJM to create new transmission service options for co located loads that can limit their energy withdrawals from the grid. FERC news
Q:What is a HILL in SPP, and who does it apply to?
A:A High Impact Large Load is a new or increased commercial or industrial load of 50 MW or more when connecting above 69 kV, or 10 MW or more at or below 69 kV. SPP’s HILL tariff imposes enhanced study and operational requirements on these loads. FERC Order 194 FERC ¶ 61,031
Q:Why are PJM capacity prices soaring, and how does that affect data centers?
A:The capacity auction price hit the FERC cap of $333.44 per MW day in December 2025. The main driver is that demand, including AI data center load, is growing faster than new supply can be built and interconnected. Higher capacity costs raise the total power bill for AI data centers that take firm service from the grid. RMI, PJM Market Monitor, PJM
Q:Does FERC jurisdiction cover all AI data centers, or only those in certain markets?
A:FERC regulates only the transmission and wholesale sales in interstate commerce. In places like ERCOT in Texas, which is not interconnected to other states, FERC does not oversee the transmission grid. Many other regions, including PJM, SPP, MISO, and ISO New England, fall under FERC’s transmission and wholesale authority. 16 U.S.C. § 824
Q:What financial commitments does a project need under Order 2023?
A:A generator developer pays a $5,000 application fee and a study deposit that scales with project size, from $35,000 plus $1,000 per MW for small projects up to $250,000 for large ones over 200 MW. Readiness deposits grow through each phase, reaching 20 percent of network upgrade costs by the time the interconnection agreement is signed. Withdrawal penalties equal the greater of the customer’s study deposit or a tiered amount that increases at each phase of the interconnection process. Law firm analysis
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Junde Liu, JD, LL.M. (Taxation) candidate at UF Law. Originally published on Compute Law Blog. This article is general information and does not constitute legal advice. Reading it does not create an attorney client relationship. The reader should not act on the basis of any content here without first consulting a licensed attorney in the relevant state. Last reviewed for accuracy May 23, 2026.