FERC Launches Region-Specific Reform Initiative for Large-Load Interconnection and Co-Location

On June 18, 2026, the Federal Energy Regulatory Commission (FERC or the Commission) issued six show cause orders directing each Regional Transmission Organization and Independent System Operator (RTO/ISO) under its jurisdiction to justify or revise its tariff provisions governing large-load interconnection and co-location arrangements.[1] The orders represent the Commission’s most comprehensive effort to date to establish a regulatory framework for connecting data centers and other large loads while protecting grid reliability and existing customers from cost shifts.

Since then, the Commission approach has drawn praise from many—from Capitol Hill to the National Association of Regulatory Utility Commissioners FERC’s approach has been applauded for respecting regional differences and has put the onus on the RTO/ISOs. Press reported Sen. Angus King (I-Maine) saying “I love it,”[2] while Sen.  Kevin Cramer (R-N.D.), a former state utility regulator, said the action had “correctly treated each region as its own jurisdiction rather than a national [one] size fits all system.”[3] As Johannes Pfeifenberger, a principal with the Brattle Group, put it: The policies FERC is promoting “will greatly speed up interconnections while reducing the need for costly grid upgrades. The cost transparency provisions and cost allocation agreements … also will ensure that the new loads pay for the full incremental costs they add to protect existing ratepayers.”[4]

FERC’s action comes as Democratic and Republican legislators inch toward a possible permitting reform overhaul. Rather than pursue a uniform nationwide framework through the Department of Energy’s October 2025 Advance Notice of Proposed Rulemaking (ANOPR),[5] FERC adopted a region-specific approach. This “bottom-up” path was taken in order to respect the regional variety and avoid federal-state jurisdictional disputes; it will also lead to quicker solutions than a traditional rulemaking.

No more “sleepy agency,” said Chairman Laura Swett, who is leading the Commission in an aggressive effort to assert more power over our transmission grid, while taking care to avoid the pitfalls of overreach.

Next week should see a major substantive response from the RTO/ISOs. Starting with a July 20 deadline, FERC directed each RTO/ISO to either demonstrate that its existing tariff remains just and reasonable or propose revisions addressing deficiencies identified by the Commission. Although the orders recognize differences among regional markets, they collectively establish a common policy framework that is likely to shape the future of large-load interconnection across the country. The pace FERC set is accelerated as further substantial responses showing why RTO/ISO processes are just and reasonable come due this August.

The orders also continue a policy direction first articulated by Chairman Laura Swett shortly after assuming leadership of the Commission. During her first Commission meeting in November 2025, Chairman Swett identified the timely and reliable integration of data centers and other large loads as one of FERC’s highest priorities.[6] The June 18 orders translate that policy objective into concrete regulatory action.

Regional Framework

Each order is tailored to the circumstances of the applicable RTO/ISO. Rather than prescribing identical tariff language, the Commission identified categories in which it preliminarily found existing tariffs unjust and unreasonable and then directed each RTO/ISO to explain why revisions are unnecessary or to propose reforms addressing those deficiencies.

The Commission’s regional approach is particularly evident in the PJM Interconnection and Southwest Power Pool (SPP) orders.[7] In PJM, FERC did not require additional reforms addressing co-location arrangements because those issues remain under consideration in the Commission’s ongoing PJM co-location proceeding and separate co-location order.[8] Likewise, because SPP recently adopted its High Impact Large Load Generator Assessment (HILLGA) and Conditional High Impact Large Load Service frameworks, the Commission excluded several topics that it concluded had already been addressed through those proceedings.[9] The remaining RTOs/ISOs were directed to respond to the Commission’s full set of proposed reforms, subject to regional variations reflecting their existing tariff structures.

Although the orders differ in scope, they generally focus on five categories of reform.

Categories of Reform

Transmission Service to Eligible Customers on Behalf of Large Loads

FERC preliminarily found that existing tariffs do not provide sufficient direction for studying and providing transmission service to eligible customers serving large loads. The Commission concluded that greater clarity and consistency are needed in both the application process and the operational requirements governing these facilities.

Among other issues, the Commission directed each RTO/ISO to consider:

• Adopting a standardized definition of large load: FERC suggests that a reasonable definition of large load would include “a new, commercial or industrial customer, located at a single site behind one or more points of interconnection, and that has a peak load of 50 MW or greater, interconnects to the transmission system at a voltage level of greater than 69 kV, and is not part of a co-location arrangement”[10];
• Establishing application procedures and readiness requirements, including application fees, minimum information requirements, and study processes capable of accounting for the unique operational characteristics of large loads;
• Evaluating whether flexible operating characteristics—including the ability to curtail load under specified conditions—should be incorporated into the study process and potentially reduce required transmission upgrades;
• Integrating the use of grid-enhancing technologies where appropriate to accommodate new large loads; and
• Implementing operational requirements such as telemetry, forecasting, and remote disconnection capabilities necessary to maintain system reliability.

The Commission also encouraged each RTO/ISO to develop standardized, pro forma provisions to ensure these operational requirements are uniformly incorporated into transmission service agreements.

Preventing Cost Shifting and Requiring Transparency

The Commission also preliminarily found that existing tariffs do not adequately protect other transmission customers from bearing the costs associated with serving new large loads. To address those concerns, FERC directed each RTO/ISO to consider reforms that improve both transparency and cost recovery.

First, the Commission emphasized the need for more accessible information regarding network upgrades required to accommodate large loads. It suggested easily accessible, searchable platforms that would allow customers and stakeholders to better understand anticipated upgrade costs.

Second, FERC proposed standardized cost recovery agreements among the RTO/ISO, the applicable transmission owner, and the eligible customer receiving transmission service on behalf of a large load. Those agreements would require customers to bear a minimum level of financial responsibility if the projected load ultimately fails to materialize, thereby reducing the risk that existing transmission customers subsidize speculative development.

Co-location Arrangements and Behind the Meter Generation

FERC preliminarily found that most tariffs fail to establish clear rules governing generation facilities serving co-located load.

The Commission proposed using the same definition of “co-located load” adopted in the PJM Co-Location Order: “a configuration that refers to end-use customer load that is physically connected to the facilities of an existing or planned generating facility on the generator interconnection customer’s side of the point of interconnection to the RTO/ISO’s transmission system.”[11]

The Commission further identified several principles that should guide future tariff revisions. Most notably, customers that benefit from transmission and ancillary services should pay for those services regardless of whether they are physically co-located with generation. At the same time, study processes should recognize the operational relationship between co-located generation and load rather than treat them as entirely independent facilities. FERC also encouraged RTOs/ISOs to clarify how ancillary service charges should apply in these arrangements.

New Transmission Services for Flexible Large Loads

The Commission preliminarily found that existing transmission service constructs may not adequately account for large loads that are willing and able to limit their use of the transmission system under certain conditions. FERC recognized that not all large loads use the grid in the same way. Some may be capable of reducing, limiting, or interrupting withdrawals in response to system conditions or price signals. If those operational characteristics are recognized in the study process and in the transmission service ultimately provided, FERC suggests that the RTO/ISOs may be able to interconnect large loads more quickly and facilitate load flexibility. Among the concepts identified for consideration are:

• Interim non-firm network transmission service while network upgrades are being constructed; and
• Permanent firm and non-firm contract demand transmission services up to a specified MW contract level.

Generating Facilities Servicing Electrically Proximate Large Loads and Large Co-located Loads

The Commission preliminarily found that the existing generator interconnection processes in most RTO/ISOs do not adequately account for generating facilities that are developed specifically to serve electrically proximate large loads or large co-located loads.

The orders proposed a standardized definition of “electrically proximate large load,” which is a large load “that is sufficiently electrically close to the interconnection customer’s requested point of interconnection, such that the impact on the transmission system of the combination of the generating facility and the load, with the exception of the transmission facilities between the two, will be effectively the same as if they were located at the same substation.”[12] According to FERC, studying generation and load together may “speed up the interconnection process” and “shorten energization timelines.”[13]

Accordingly, the Commission directed each RTO/ISO to consider a tailored generator interconnection process, with SPP’s HILLGA framework identified as one example of a potentially appropriate approach.[14] The Commission also requested proposals addressing how these generating facilities should participate in organized wholesale markets and satisfy applicable resource adequacy requirements.

Key Deadlines

The Commission established an expedited procedural schedule intended to move these proceedings quickly toward region-specific tariff reforms.

• Within 21 days of issuance (July 9, 2026): Interested parties may file notices of intervention or motions to intervene.
• Within 30 days (July 20, 2026): Each RTO/ISO and its transmission owners must submit an informational report describing how the region intends to ensure that sufficient generation will be available to serve both existing customers and anticipated large-load growth.
• Within 45 days (August 3, 2026): An RTO/ISO may request that all or part of its proceeding be held in abeyance for up to 90 days.
• Within 60 days (August 17, 2026): Each RTO/ISO must either (1) demonstrate why its existing tariff remains just and reasonable or (2) propose tariff revisions addressing the deficiencies identified in the Commission’s order.
• Thirty days after a filing: Interested parties may submit comments responding to either a show cause filing or proposed tariff revisions.

The Commission also emphasized that these proceedings are intended to operate prospectively. Any tariff revisions should include reasonable implementation periods and effective dates that avoid disrupting existing commercial arrangements or projects already under development.

Getting Involved

The June 18 orders represent another significant step in the Commission’s evolving approach to accommodating rapidly growing electricity demand from data centers and other large loads. The proceedings underscore several themes that have emerged repeatedly in the Commission’s recent large-load initiatives. FERC continues to prioritize accelerating service to new large loads while preserving system reliability, increasing transparency around network upgrade costs, and ensuring that existing transmission customers do not subsidize speculative load growth. At the same time, the Commission appears increasingly willing to recognize operational flexibility—including interruptible demand, co-location arrangements, and paired generation and load—as tools that may facilitate faster interconnection without compromising reliability.

Although the orders apply directly only to Commission-jurisdictional RTOs and ISOs, their implications may extend beyond organized markets. The Commission left the Department of Energy’s October 2025 ANOPR docket open, suggesting that broader rulemaking remains possible. Chairman Swett also encouraged states to pursue policies consistent with the principles reflected in the orders and invited public utilities outside organized markets to consider filing comparable tariff revisions under section 205 of the Federal Power Act.

Stakeholders—including transmission providers, developers, large-load customers, generators, and state regulators—should closely monitor these proceedings. The Commission’s decisions on the forthcoming tariff filings are likely to shape the regulatory framework governing large-load interconnection for years to come.

[1] PJM Interconnection, L.L.C., Docket No. ER26-67-000; Sw. Power Pool, Inc., Docket No. ER26-68-000; N.Y. Independent Sys. Operator, Docket No. EL26-69-000; Midcontinent Independent Sys. Operator, Inc., Docket No. ER26-70-000; Cal. Independent Sys. Operator Corp., ER26-71-000; ISO New England Inc., ER26-72-000.

[2] Josh Siegel, ‘Love it’: Lawmakers cheer FERC action on data centers, Politico (June 18,2026), https://subscriber.politicopro.com/article/2026/06/love-it-lawmakers-cheer-ferc-action-on-data-centers-00969015

[3] Kelsey Tamborrino & Joel Kirkland, ‘Not the old sleepy agency’: Energy regulator dives into fight over data center connections, Politico Pro (June 18,2026), https://www.politico.com/news/2026/06/18/ferc-regulato-fight-data-center-connections-00968621 (alteration in original).

[4] Peter Behr, Data Center Risks: Who Gets the Hot Potato? FERC’s Actions on Data Center Grid Connections Elevate Economic, Political Consequences, RTO Insider (June 29, 2026), https://www.rtoinsider.com/135440-data-center-risks-who-gets-the-hot-potato/.

[5] Interconnection of Large Loads to the Interstate Transmission System, Advance Notice of Proposed Rulemaking, Docket No. RM26-4-000 (Oct. 23, 2025); Letter from Chris Wright, Sec’y, U.S. Dep’t. of Energy, Docket No. RM26-4-000 (Oct. 23, 2025), https://www.energy.gov/sites/default/files/2025-10/403%20Large%20Loads%20Letter.pdf

[6] Terence Healey et al., FERC’s First Meeting Under New Leadership: Key Takeaways and Signals for 2026, Sidley Energy & Infrastructure Pulse (Dec. 2, 2025), https://energyinfrastructurepulse.sidley.com/2025/12/02/fercs-first-meeting-under-new-leadership-key-takeaways-and-signals-for-2026/.

[7] See PJM Interconnection, L.L.C., 195 FERC ¶ 61,211 (2026); Sw. Power Pool, Inc., 195 FERC ¶ 61,213 (2026).

[8] See PJM Interconnection, L.L.C., 195 FERC ¶ 61,209 (2026).

[9] See Sw. Power Pool, Inc., 194 FERC P 61,031 (2026); Sw. Power Pool, Inc., 195 FERC P 61,196 (2026).

[10] See, e.g., PJM Interconnection, L.L.C., 195 FERC ¶ 61,211, at P 58 (2026).

[11] See, e.g., ISO New England Inc., 195 FERC ¶ 61,215, at P 85 (2026); PJM Interconnection, L.L.C., 193 FERC ¶ 61,217 (2025).

[12] See, e.g., ISO New England Inc., 195 FERC ¶ 61,215, at P 110.

[13] See, e.g., ISO New England Inc., 195 FERC ¶ 61,215, at P 104.

[14] See Sw. Power Pool, Inc., 194 FERC ¶ 61,031 (2026).

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.