FERC Lets Data Centers Plug Directly Into Power Plants: A Blueprint for Bypassing the Grid
TL;DR
The Federal Energy Regulatory Commission issued a unanimous order on December 18, 2025, directing PJM—the nation's largest grid operator—to create new rules allowing data centers to connect directly to power plants. The ruling establishes three new transmission service options that could slash interconnection timelines from years to months, with compliance deadlines hitting in January and February 2026.
What Happened
Federal regulators just handed tech companies a way around the grid bottleneck.
On December 18, 2025, FERC issued a pivotal order directing PJM Interconnection to develop clear rules for "co-locating" data centers at power plants. The unanimous decision allows AI facilities to effectively plug directly into nuclear and gas-fired generators, bypassing traditional grid interconnection queues that currently stretch 5-7 years in many regions.
The order stems from a February 2025 show cause proceeding where FERC found PJM's existing tariff "unjust and unreasonable" because it lacked proper terms for generators serving loads physically connected on the generator side of the interconnection point.
Commissioner Rosner put it plainly in his concurrence: "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."
The ruling arrives after FERC rejected an expanded Amazon-Talen deal in November 2024 that would have increased power sales from Pennsylvania's Susquehanna nuclear plant to a co-located data center. That rejection triggered the regulatory review that culminated in this order.
Why It Matters
PJM serves 67 million Americans across 13 states and Washington, D.C.—and contains "Data Center Alley" in Northern Virginia, the world's largest data center market. The region faces staggering demand growth: the Dominion zone alone expects over 10,500 MW of new peak demand by 2034.
For data center operators, this ruling changes the math on site selection. Instead of waiting years for grid interconnection studies and transmission upgrades, operators can now negotiate directly with power plant owners for co-location arrangements with defined transmission service options.
The decision represents a "major victory" for companies owning gas-fired and nuclear plants in PJM, including Constellation Energy, Public Service Enterprise Group, and Vistra. These generators can now monetize excess capacity or build new facilities specifically designed for data center co-location.
The ruling could also become a template for other grid regions. Energy Secretary Chris Wright made an October request to FERC to ensure data centers and large manufacturers get power "as quickly as possible"—this order may serve as the blueprint for that broader initiative.
What about existing customers? FERC explicitly addressed cost-shifting concerns by protecting existing customers from unfair allocation while enabling faster interconnection for large loads.
Technical Details
Three New Transmission Service Options
FERC directed PJM to create three transmission services reflecting that co-located loads limit their grid withdrawals:
1. Firm Contract Demand Transmission Service A data center contracts for a specific MW quantity from the grid—say, 100 MW—while drawing remaining power from the co-located generator. PJM plans transmission and procures capacity based only on that contracted amount, not the facility's total load.
2. Non-Firm Contract Demand Transmission Service For facilities willing to curtail during grid emergencies, this option provides as-available, interruptible service with no capacity charges or planning obligations. Ideal for data centers that only need grid backup during scheduled generator maintenance.
3. Network Integration Transmission Service (NITS) Traditional firm service with full grid access, billed on gross demand. Remains available for facilities preferring conventional arrangements.
Behind-the-Meter Generation Reform
FERC found PJM's existing behind-the-meter generation (BTMG) rules "outdated and potentially unfair" for large loads. The order requires PJM to:
- Propose a MW threshold for load that can be netted using BTM generation
- Provide a three-year transition period for current BTM customers, expiring December 18, 2028
- Include grandfathering provisions for certain existing contracts
Demand Context
FTI Consulting projects 60-90 GW of incremental data center demand by 2030 with rapid GenAI adoption. In PJM specifically:
| Zone | Projected New Peak Demand by 2034 |
|---|---|
| Dominion (Virginia) | 10,500+ MW |
| PPL (Pennsylvania) | 1,800+ MW |
What's Next
January 20, 2026: PJM must file tariff revisions addressing new generating facilities serving co-located load, plus an informational report on stakeholder proposals.
February 16, 2026: PJM must submit tariff amendments establishing the three new transmission service options.
December 18, 2028: Three-year transition period expires for existing BTM customers.
Expect other grid operators to watch PJM's implementation closely. MISO, SPP, and ERCOT face similar data center demand pressures, and this ruling may establish precedent for handling co-location requests nationwide.
Major deals already in motion—like Microsoft's $1.6 billion agreement with Constellation Energy to restart Three Mile Island—now have a clearer regulatory framework. Amazon and Talen are also planning small modular reactors in Pennsylvania under this new paradigm.
Introl Angle
Co-located data centers at power plants require specialized infrastructure deployment and operations expertise—from switchgear installation to cooling systems designed for generator-adjacent sites. Introl's network of 550 field engineers support these complex builds across 257 locations. Learn more about our coverage area.
Published: December 29, 2025