Large Load Reform: How Prepared Are U.S. Grid Operators for the AI Era?

Review of Reform Criteria

Faster Studies and Alternative Transmission Technologies

The first of FERC’s reform objectives would improve how grid operators evaluate requests from large electricity customers. Existing study processes were largely designed around traditional generator interconnections and gradual, more diffuse increases in electricity demand. Today’s large load customers often require hundreds of megawatts, or even gigawatts, of capacity, creating planning challenges that differ substantially from those of previous decades.

Accordingly, FERC is encouraging operators to develop more efficient study processes, while requiring them to consider alternative transmission technologies that may provide service more quickly or at lower cost than conventional network upgrades.

Some progress has been made, but disparities remain. SPP’s HILL and HILLGA frameworks show that dedicated study pathways for large loads are both technically and administratively feasible. Elsewhere, however, at least two of the six operators continue relying on generic study procedures that cannot handle today’s scale of demand growth. The disparity between operators demonstrates that FERC’s expectations are achievable but far from universally implemented.

Cost-Shift Prevention and Transparency

FERC’s second reform objective responds to perhaps the most contentious element of the ongoing data center buildout: cost-shifting.

As data centers proliferate and their electricity demand grows, retail power prices have climbed nationwide. Wholesale electricity prices have risen as much as 267 percent in areas surrounding data centers. The costs of interconnecting large loads are even more significant for ratepayers. Data centers’ demand for power requires significant investment in new infrastructure, including power plants, transmission lines, substations, and distribution lines. Utilities socialize these costs among ratepayers even if ratepayers do not use the new infrastructure themselves, raising their bills further.

FERC’s six orders consequently direct operators to demonstrate how these costs are identified and allocated and to establish tariffs to prevent their shift to ratepayers.

Cost-shifting and transparency are the criterion where operators fall furthest short. Only PJM, whose cost-causation rules were already targeted by FERC, and SPP, which allocates costs more transparently, might meet FERC’s standards. In all other markets, consumers see varying degrees of electricity rate transparency, but none of those markets have established tariffs designed to prevent cost-shifting.

Co-location and Behind-the-Meter Generation

FERC’s third reform objective addresses one of the fastest-evolving aspects of large-load development: co-location and behind-the-meter generation.

Developers increasingly pair data centers with dedicated on-site or proximately located generation resources to improve reliability, shorten development timelines, and reduce project dependence on congested transmission systems. Semi Analysis recently forecasted that more than 40 gigawatts (GW) of data centers would be built to use behind-the-meter power generation. Much of that is likely to be gas-powered. Power sector research firm Halcyon has identified 28 GW of natural gas plants under development behind the meter for powering data centers. While many of these plants may not reach final stages, or will seek grid integration over time, they show the power sector should be prepared for diverse arrangements for powering data centers.

FERC is therefore seeking clearer tariff provisions governing these arrangements before they become commonplace. Tariff readiness varies substantially. PJM and SPP have already begun implementing tariff pathways addressing co-located resources, while all other operators continue to rely on ad hoc approaches or lack comprehensive frameworks altogether. As investment in dedicated power supplies for data centers accelerates, regulatory clarity in this area will become increasingly important.

New Services for Flexible Loads

The fourth reform category reflects changes in how regulators view electricity demand itself.

Historically, grid operators have assumed that customers will consume power and rely on transmission infrastructure as needed. Many modern facilities and data centers, however, can modulate their load at will, temporarily reducing consumption, shifting computational workloads, or responding to grid conditions when incentivized.

FERC seeks greater use of transmission service technologies that recognize this flexibility. Rather than treating all large loads identically, approaches such as conditional firm service and interruptible load arrangements allow customers willing to accept operational constraints to connect sooner or at lower cost. Only a handful of operators have meaningfully integrated these technologies. SPP’s CHILLS framework and PJM’s developing non-firm service offerings provide a model that other operators may soon emulate, but comparable offerings currently remain limited elsewhere.

Studying Generation to Serve Proximate Large Loads and Large, Co-located Loads

FERC’s last priority is ensuring that RTOs and ISOs conduct expedited study processes, identifying whether co-located or proximate generation could serve large loads.

These studies let operators evaluate co-located or proximate generation quickly and reliably as a route to interconnecting large loads. Using existing electricity infrastructure would avoid the otherwise long timelines for interconnection and potentially unnecessary infrastructure buildout.

Through this criterion, FERC sets the expectation that proximate and co-located generation for large loads has a specialized, short-circuited study process. SPP fulfills this aim through HILLGA, which studies proximate and co-located generation for large load interconnection. PJM, MISO, and CAISO all share incomplete or inconsistent study pathways for co-located and proximate generation. ISO-NE and NYISO do not yet have specific generation study procedures that fulfill this requirement.

General Analysis

Discrepancies among grid operators’ tariffs indicate significant readiness gaps. Based on precedent, such as FERC’s December 2025 order to PJM (the results of which are visible in the matrix above), the commission is likely to act where it believes operators currently fall short of its guidelines. On a conservative reading of the status quo, only 20 percent of the criteria meet the guidelines; of 30 matrix boxes, only 6 are plausibly sufficient. Furthermore, none of the six grid operators are likely to receive a clear pass through the five reforms.

Given the spectrum of large load readiness across grid operators and reform areas, significant policy actions are likely to emerge after the initial 60-day period following the show cause orders.

FERC’s orders are unlikely to induce a wave of uniform compliance, but rather a multiyear, piecemeal modernization of large load interconnection practices. While the commission’s overarching objective is to accelerate and standardize the interconnection of large loads, its orders reflect broader concerns surrounding electricity affordability, transmission planning, and the allocation of infrastructure costs. Cost-shift prevention and transparency are likely to remain salient issues as regulators seek to balance rapid economic development with the protection of existing ratepayers.

Conclusion

FERC’s June 2026 show-cause orders represent the commission’s most significant effort to modernize large load interconnection policy to date. Importantly, they expose a fragmented regulatory landscape in which grid operators have adopted markedly different approaches to managing large electricity customers. SPP’s relative success in meeting FERC’s objectives shows they are achievable under the existing regulatory framework; the matrix suggests, however, that most operators will need to implement significant reforms before reaching comparable levels of large load readiness.

Nevertheless, FERC’s jurisdiction should not be overstated. Its regional market interventions, particularly those concerning cost-shifting, may not produce the desired results. While top-down reforms may improve rate transparency, FERC is not the final arbiter of retail electricity rates. The commission can require RTOs and ISOs to adopt more transparent tariff provisions and strengthen wholesale market rules governing large load interconnections, but its authority extends no further. Nor do RTOs and ISOs themselves determine how utilities recover the costs of new infrastructure from customers, decisions that remain under the purview of utilities and state public utility commissions.

The significance of these proceedings extends beyond the specific tariff revisions that may emerge over the coming months. The orders acknowledge that the regulatory framework governing large load interconnections has not kept pace with the magnitude of electricity demand driven by AI and other emerging industries. The success of these reforms will depend not only on FERC’s ability to modernize wholesale interconnection policy, but also on effective coordination among grid operators, utilities, state regulators, and large load developers to accommodate new demand efficiently, transparently, and sustainably.

Joseph Majkut is the director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Alexander Garcia, Chelsey Gilchrist, and Malik Jaffal are interns with the Energy Security and Climate Change Program at CSIS.