Power & Pipes

On June 18, 2026, the Federal Energy Regulatory Commission (FERC) directed each of the six regional grid operators it regulates (the Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs)) and their member transmission owners to justify or reform the terms of their tariffs related to interconnections for data center and other large energy users (Show Cause Orders).

The Show Cause Orders follow the US Department of Energy’s October 23, 2025 advance notice of proposed rulemaking instructing FERC to issue regulations to enable the “timely, orderly, and non-discriminatory” interconnection of large loads to the transmission system and FERC’s subsequent order initiating a rulemaking into large load interconnection (see our prior blog post). Although FERC initiated a rulemaking proceeding in response to the Department of Energy action, after considering hundreds of public comments, the Commission opted for the targeted Show Cause Orders, finding that traditional rulemaking would be too inefficient.

The Show Cause Orders identify flaws in ISO/RTO tariffs pertaining to large load interconnection that might render the tariffs unjust or unreasonable. For now, FERC is allowing the ISOs/RTOs to develop tailored approaches to address those gaps and to provide solutions for expeditiously interconnecting energy-intensive technologies, such as AI and data centers. However, FERC did not rule out more direct action if it finds the responses to the Show Cause Orders are insufficient.

Key Takeaways

Each of the Show Cause Orders includes some or all the below categories of tariff reforms regarding large load transmission:

• Clarifying study procedures for transmission service to eligible customers on behalf of large loads, such that tariffs define large load; have tailored study procedures to reflect operational characteristics, deter speculative requests, assess whether alternative transmission system upgrades can be used; account for unique operational requirements; and memorialize unique terms in the pro forma transmission service agreement.
• Preventing cost shifts of transmission system upgrades, such as by increasing transparency in assigning network upgrades and requiring cost recovery agreements to ensure that large loads pay their share of interconnection costs even if the load does not materialize.
• Clarifying requirements for generation co-located with large loads, such as to address the rates, terms, and conditions for such interconnection customers and to reflect that large loads might be willing and able to limit use of the transmission system.
• Providing new transmission service options for flexible large loads, to reflect that certain customers may be willing to limit withdraws of the transmission system such that certain transmission system upgrades are not necessary, such as by providing new transmission services like firm or non-firm contract demand service or interim Network Integration Transmission Service (NITS).
• Providing generator interconnection services for either electrically proximate large loads or co-located loads, to reflect that a generator interconnection customer may limit its impact on the transmission system by committing to limiting its output to match an electrical proximate large load or through protection systems to limit what it can inject to the transmission system, thereby reducing interconnection costs.

FERC’s use of individualized show cause orders addressed reforms on an individual basis within each order, recognizing the varying levels of prior engagement for each ISO/RTO. For example, both SPP and PJM were recognized within their respective orders for their prior work in adopting new large load procedures and rules.

Importantly, these orders only apply to the ISOs/RTOs and do not change the FERC pro forma Open Access Transmission Tariff (OATT). As indicated in separate remarks by the Commissioners, FERC has not foreclosed the possibility of future rulemaking regarding large load interconnections, either to provide direction to transmission providers outside ISO/RTO regions or to order more direct action from ISOs/RTOs if their responses are insufficient or untimely.

Show Cause Order Directives

Transmission Service to Eligible Customers for Large Loads

FERC expressed concerns over unclear tariff provisions regarding how the ISOs/RTOs will study transmission service for large loads, which exhibit different load profiles and operational characteristics as compared to traditional load and which could lead to disputes over study timelines, delays, and requisite network upgrades. FERC was also concerned that existing procedures would not deter speculative or duplicative requests. In each Order except for SPP, FERC identifies four specific areas where tariffs lacked clarity and consistency for transmission service to eligible customers on behalf of large loads:

• Defining large load as a separate category of load. FERC suggests defining large load as having a peak load of 50 MW or greater, interconnecting at a voltage level greater than 69 kV, and not being part of a co-location agreement. This proposed definition aligns with SPP’s already accepted tariff revision.
• Providing an application process and requirements for large load transmission service and a study process considering the unique operational challenges of providing large load transmission service. Interconnection should consider unique operational characteristics of large load, as well as a willingness and ability to limit energy withdrawals and should evaluate whether alternative transmission technologies can be used instead of more time- and cost-intensive transmission system upgrades. Studies should be completed within 60 to 90 days.
• Providing ongoing operational requirements to ensure reliable operation of the transmission system given the unique operational impacts of large loads. The tariffs do not require transmission customers to provide hourly forecasts and telemetry data, among other things—nor do the tariffs require transmission owners to install equipment necessary for the ISO/RTO to monitor large load impact or allow the ISO/RTO to disconnect the large load remotely if necessary to maintain reliability.
• Providing for pro forma provisions in transmission service agreements to memorialize operational terms for large load interconnections. FERC is concerned that without such terms in transmission service agreements, the ISOs/RTOs will be unable to enforce requirements on transmission customers.

Cost Shifting Risk

In all six orders, FERC raises two concerns regarding the risk of cost shifting between transmission customers: greater transparency and methods to ensure cost recovery.

First, FERC raises a concern about the lack of transparency regarding the assignment of network upgrades and their associated costs. FERC suggests that ISOs/RTOs make this information available in a consolidated, searchable manner.

Second, FERC raises a concern about the lack of a pro forma cost recovery agreement between each ISO/RTO, the relevant transmission owner, and large load eligible customers. The cost recovery agreement would help ensure that large load customers bear the risk and are responsible for costs incurred to provide transmission service, including the cost of network upgrades. So, for example, where a large load requires significant transmission system upgrades but the load does not materialize as expected, costs would be shifted to existing customers. Cost recovery agreements would mitigate those impacts.

FERC noted that bilateral agreements between transmission owners and the large load customer are being used to address these concerns, and asked whether these agreements, which are subject to FERC’s jurisdiction, should be used as a substitute for agreements with the eligible customer serving the large load.

Co-Location Arrangements and Load with BTM Generation

Five of the orders highlight the lack of tariff provisions that address the rates, terms, and conditions that apply to generators serving co-located load. FERC suggested that it would be reasonable to define co-located load as “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’s/ISO’s transmission system.”

FERC had further concern that the tariffs do not address transmission services that reflect a large load that can and is willing to limit its energy withdrawals. Customers should be able to choose transmission service that aligns with its use of the transmission system. Relatedly, in an ongoing co-location proceeding involving PJM, FERC found that PJM had to allow interconnection customers with co-located load to request interconnection below the generating facilities maximum output, to accelerate interconnection, and to request provisional or surplus interconnection service. Further, the lack of clarity in services might not require large loads to pay for certain ancillary services despite receiving a benefit from such services.

PJM’s order does not include this section because FERC is separately addressing PJM in a specific pending proceeding. PJM’s co-location order is referenced within the Show Cause orders to provide support for FERC’s findings and recommendations regarding co-location provisions.

New Transmission Service for Flexible Large Loads

Each order finds that the ISOs/RTOs lack transmission service options specifically crafted for flexible large loads. FERC requests that each ISO/RTO explain whether its tariff remains just and reasonable without the new transmission services that FERC last year directed PJM to provide to large loads, with regional variation as appropriate.

Presently, the tariffs provide for NITS and firm and non-firm Point-to-Point Transmission Service. However, large loads might have co-located generation or be willing and able to limit transmission system usage such that some transmission upgrades could be avoided. FERC in an ongoing PJM proceeding previously directed PJM to provide new types of transmission service, such as firm and non-firm contract demand service where PJM is obliged to provide up to a fixed amount of demand on either a firm or non-firm basis, and a new interim NITS.

Specifically, FERC proposed the following two adjustments, modeled on the service that it already directed PJM to provide:

• An interim non-firm NITS while network upgrades are being constructed.
• Firm and non-firm contract demand transmission services (transmission service up to a specified MW quantity, i.e., the contract level, on a firm or non-firm basis).

Serving Nearby Large Loads and Co-Located Loads

Five of the six orders find the ISOs/RTOs tariffs to be unjust and unreasonable due to a lack of provisions allowing interconnection customers to seek generator interconnection services for either electrically proximate large loads or co-located loads. FERC requests explanation on whether the tariffs can remain just and reasonable without provisions that:

• Create a new generator interconnection study process and new interim generator interconnection service that reflect an interconnection customer’s commitment to limit a generating facility’s output to match the hourly forecast of an electrically proximate large load or large co-located load
• Allow a new generator and new large load to interconnect behind an existing generator’s point of interconnection using the existing generator’s interconnection service, with controls/protection (including possible special protection schemes) to ensure net injection does not exceed the existing interconnection agreement
• Create a new service allowing a new generator and new co-located large load to interconnect behind a new point of interconnection with controls/protection (including possible special protection schemes) to ensure zero injection to the transmission system

The Show Cause Order for SPP does not include this directive because its existing large load interconnection procedures “reasonably provides a flexible, expedited, and separate serial interconnection process that will facilitate the prompt interconnection of generating facilities that are limited to serving a [large load] in the same local area.”

Next Steps

FERC set several key deadlines within the six orders, including the following:

• 30 days to submit an informational report on generation adequacy for existing and new large loads
• 45 days to request full or partial abeyance on the Section 206 proceedings
• 60 days to submit justification of current tariffs or file tariff changes addressing the identified issues

The Orders also “strongly encourage[s]” RTOs/ISOs to respond by submitting tariff revision proposals under FPA Section 205.

For transmission owners operating within an ISO/RTO, the Show Cause Orders signal that FERC expects the ISOs/RTOs to take the lead in addressing large load interconnection issues through Section 205 tariff filings. Although the orders stop short of prescribing specific tariff language, they make clear that FERC views the existing treatment of large loads as insufficiently developed for the scale and urgency of current demand growth, particularly from data centers. The aggressive timeline for responses further underscores that FERC is treating this as an immediate reliability and grid access issue. Several Commissioners also suggested that FERC may take a more prescriptive approach if ISOs/RTOs do not move quickly to propose meaningful tariff reforms.

FERC has not yet imposed comparable requirements for transmission providers outside ISO/RTO regions, or made findings regarding the adequacy of their tariffs. However, the Show Cause Orders should not be read as limited to organized markets, especially as the pace of large load development activity outside of ISO/RTO regions continues to accelerate. Instead, non-ISO/RTO transmission providers should anticipate that FERC may initiate additional reforms and should closely monitor the six Show Cause proceedings[JK1.1], both to understand how the ISOs/RTOs propose to respond and to assess which approaches FERC ultimately finds sufficient.