PJM Proposes Shifting Data Center Grid Costs to States as FERC Presses All US Grid Operators on Large-Load Tariffs
Federal regulators and grid operators are forcing a reckoning over who pays for the power infrastructure that tech's data center buildout demands.
PJM Interconnection, which serves 67 million customers across 13 states and Washington, D.C., settled on a plan in early August (2026-08-05) to address data center cost allocation by pushing the problem to individual states rather than resolving it centrally — a response to pressure that has been building since FERC voted unanimously on June 18 (2026-06-18) to order all six regional grid operators under its jurisdiction to justify or rewrite their large-load tariff structures.6,2
The June 18 orders, issued under Section 206 of the Federal Power Act, directed every RTO and ISO to show cause why their current cost-allocation rules for large electricity users should stand. FERC staff framed the move as addressing "the pressing need in the RTO/ISO regions," with the orders collectively covering more than 200 million Americans across more than 30 states and the District of Columbia — roughly two-thirds of all electricity load served under commission-jurisdictional tariffs.2
The urgency is grounded in arithmetic. PJM's own capacity auction, conducted on July 15 (2026-07-15), came up 6.8 gigawatts short of what the grid needs for the year starting June 2028 — the third consecutive year the market failed to procure enough future supply commitments. The auction secured 138,318 MW of unforced capacity, against a forecasted peak that left a 6,831 MW gap even after FRR regions contributed an additional 10,864 MW. Data center demand is the primary driver of that shortfall.4
PJM's state-level cost-allocation plan is politically convenient but operationally messy. By deferring to each of its 13 member states to sort out how data centers are charged for the grid infrastructure they require, PJM avoids picking a fight with tech companies in a single, unified tariff proceeding. The tradeoff is a patchwork of state-by-state rules that could create arbitrage opportunities, slow interconnection, and complicate the regional planning that grid reliability depends on.6
Transmission costs are already a flashpoint. They now account for roughly 15% of a residential electricity bill, according to testimony cited in proceedings before FERC. That figure is driving state-level action well beyond data center disputes. Maryland, acting under the Utility RELIEF Act signed by Governor Wes Moore and effective July 1 (2026-07-01), filed a complaint the week of June 29 (2026-06-29) asking FERC to strip the 0.5% return-on-equity adder that Exelon, FirstEnergy, and a NextEra Energy subsidiary earn simply for being voluntary PJM members.3
That extra 0.5% — a small percentage on paper — aggregates into meaningful ratepayer exposure across a transmission network of PJM's scale. In Connecticut alone, the analogous RTO adder added nearly $4.5 million to ratepayer bills in 2024, out of $17 million across New England's CL&P and UI service territories. Maryland's complaint is the latest in a pattern; Jefferies equity analysts said in a client note dated Monday, July 6 (2026-07-06), that the complaint would likely succeed based on precedent set in California and Ohio.3
FERC Chairman Laura Swett is simultaneously pushing a separate workstream: the commission created a task force on grid-enhancing technologies on July 22 (2026-07-22), with Swett signaling the agency is considering incentives for tools like dynamic line ratings that could expand effective transmission capacity without new construction. The implicit logic is that squeezing more capacity out of existing wires reduces the magnitude of the cost-allocation fight, even if it doesn't resolve it.5
Tech companies have grown more fluent in regulatory strategy. Brad Simmons, cited in May 2026 (2026-05-28) reporting, noted that FERC's approach to data center interconnection has "a direct impact on our infrastructure build-out," a sign that hyperscalers are tracking tariff proceedings as closely as they track permitting timelines. The coalition of interests now engaged at FERC — grid operators, states, transmission owners, and large technology companies — has made cost allocation one of the denser regulatory disputes the commission has handled in years.1
The more immediate question for market participants is whether FERC will treat the June 18 show-cause orders as the beginning of a genuine tariff rewrite or as a procedural step that ends in minor modifications. The gap between those outcomes is wide: a real tariff revision could shift billions of dollars in costs among customer classes; a cosmetic adjustment leaves the status quo intact and invites further state-level complaints of the kind Maryland just filed. Jefferies flagged that complaints targeting the RTO adder have cleared precedent hurdles before. With three consecutive capacity shortfalls logged at PJM and FERC's own investigation now formally open, the next critical filing deadlines in those Section 206 proceedings will tell traders whether regulators are prepared to force structural change or absorb the political pressure and move on.4,2,3