The Federal Energy Regulatory Commission (FERC) has issued an order denying a revised Interconnection Service Agreement (ISA) proposal that would have allowed expanded co-located load at an Amazon Web Services (AWS) data center connected to Talen Energy’s Susquehanna Nuclear plant in northeast Pennsylvania.
FERC voted 2 to 1 on the decision, with commissioners Mark Christie and Lindsay See voting to deny the proposed amended ISA. FERC Chairman Willie Phillips had the dissenting vote. Commissioners Rosner and Chang did not participate.
The proposal between PJM Interconnection, PPL Electric Utilities and Talen Energy would have increased co-located load capacity at Susquehanna from 300 MW to 480 MW. The existing ISA allows for 300 MW of co-located load at Susquehanna, and development of the first phases of the Amazon Web Services (AWS) data center campus can proceed using those 300 MW while Talen continues to pursue approval of the amended ISA.
In early June, PJM requested FERC’s approval for the amended ISA “without a material impact on the Transmission System.” According to a declaration attached to Exelon and AEP’s protest, the data center could have avoided transmission costs of up to $140 million per year, shifting these costs to PJM customers.
Opponents of the proposed ISA changes have argued the proposed changes to the ISA would raise unresolved questions. Earlier this year, Exelon and American Electric Power (AEP) protested the proposal with FERC, saying it raised unresolved questions and could result in unfair cost burdens on ratepayers and negatively impact market operations and reliability.
Most notably, Exelon and AEP argued the AWS data center could derive benefits from the transmission system without paying for them. Under the ISA as proposed, the parties said the co-located data center would not be classified as “network load” and therefore would not be required to pay PJM transmission fees.
Citing previous unplanned outages at the Susquehanna station that led to unintended power withdrawals from the PJM system, such as one from November 2023, Exelon and AEP questioned how such a withdrawal of power would be properly metered and accurately billed if or when it does occur.
Exelon and AEP also argued that given the increasing development of data centers, the implications of this case are important. They claimed if this co-located load was permitted to avoid significant costs, other generators and large consumers might pursue similar arrangements.
Essentially, FERC agreed with these concerns. The Commission ruled that PJM did not provide enough justification for the proposed changes to the ISA. To approve a non-standard agreement that deviates from usual transmission protocols, PJM needed to demonstrate that the changes were essential due to specific reliability issues, unique legal needs or other extraordinary factors.
FERC’s ruling argued that PJM’s amendments relied heavily on a general guidance document, raising questions about whether these changes would apply broadly rather than to this specific case.
Commissioner Christie’s statement on the ruling reads in-part: “Co-location arrangements of the type presented here present an array of complicated, nuanced and multifaceted issues, which collectively could have huge ramifications for both grid reliability and consumer costs.
“Were we to approve this proposal at this time, as the dissent advocates, we would be setting a precedent that would be used to justify identical or similar arrangements in future cases,” he added.
Talen said it believes FERC erred and it is evaluating its options for the plant in northeast Pennsylvania, with a focus on commercial solutions. Additionally, Talen argued FERC’s decision will have a “chilling effect” on economic development in states such as Pennsylvania, Ohio and New Jersey.
Several competitive power producers like Constellation Energy, Vistra and Calpine are supportive of co-location.
“The 2 to 1 ruling rejecting Talen’s ISA, by a fraction of the commission, is not the final word from FERC on co-location,” said Constellation Energy President and CEO Joe Dominguez during the company’s third-quarter earnings call Monday.
Dominguez called the ruling “very narrow” and said FERC commissioners understand the larger critical importance of providing additional guidance on the topic.
“Co-location in competitive markets remains one of the best ways for the U.S. to quickly build large data centers that are necessary to lead on AI,” he said.
The issue of large loads co-locating with power generation facilities has been much discussed. Large loads like data centers are seeking new arrangements for procuring energy amid power constraints and delays in getting a typical grid connection in some markets.
On Friday, the same day FERC rejected the amended ISA, the commission led a technical conference to discuss the co-location of large loads at generating facilities and all the issues that come with it: Load growth, resource adequacy, grid reliability impacts and the fair distribution of costs.
According to the International Energy Agency (IEA), electricity consumption from data centers, artificial intelligence (AI) and the cryptocurrency sector could double by 2026. Data centers project to be significant drivers of growth in electricity demand in many regions.
According to a study released by EPRI, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used.
