EconomicsRegulatory PolicyHardware & Semiconductors
FERC Preliminarily Declares Data-Center Grid Tariffs ‘Unjust and Unreasonable’
FERC's show-cause orders make the answer due August 17.
FERC has preliminarily declared all six US grid operators' large-load tariffs unjust and unreasonable, and the net-versus-gross metering rules due in filings on August 17, 2026 decide whether hyperscalers fund the grid the AI buildout needs or spread the cost across manufacturers and households.
- On June 18, 2026 FERC issued Section 206 show-cause orders to all six grid operators, dockets EL26-67 through EL26-72, a preliminary finding, not a final tariff change; responses are due August 17, 2026, with resource-adequacy reports due July 20, 2026.
- The fulcrum is net-versus-gross load: the grid must be firmed for a campus's full gross draw regardless, so billing on net socializes the reserve cost while billing on gross assigns it to the load that causes it.
- PJM's capacity price rose a preliminary, cumulative ~1,038% across two consecutive auctions, to the $329.17 cap; December 2025's auction cleared at its cap and, for the first time, short of the reliability requirement.
- The incidence is documented: Belden Brick's capacity-charge line rose from about $1,600 to about $12,000 a month within a roughly 90% total power-cost increase, and Maryland's ratepayer advocate says PJM cost spreading bills Marylanders roughly $1.6 billion over a decade for mostly Virginia data centers.
- The demand behind it is structural, not a blip: LBNL, the IEA and EPRI converge on data centers reaching roughly 6.7% to 12% of US electricity by 2028-2030, and the netting-threshold rule doubles as the federal-versus-state jurisdictional line.
Nothing Changed Yet. The Burden Did, on All Six Operators at Once
On June 18, 2026 the Federal Energy Regulatory Commission, The Federal Energy Regulatory Commission, the federal agency that oversees wholesale electricity markets and interstate transmission., the agency that oversees wholesale power markets, issued show-cause orders to all six US regional grid operators at once, preliminarily finding their large-load interconnection tariffs unjust and unreasonable. The orders do not change any tariff yet; they flip the burden onto the operators to defend or fix their rules on a 60-day clock. Read together with the capacity prices already flowing into bills, the proceeding is less about connection speed than about cost allocation: who funds the grid the AI buildout needs. That through-line is an analytical judgment, not a claim the Commission has made.
- The Orders. Six The Federal Power Act provision that lets FERC act on its own initiative when it finds an existing rate or rule unjust and unreasonable. show-cause orders, one per operator, in dockets EL26-67 (PJM), EL26-68 (SPP), EL26-69 (NYISO), EL26-70 (MISO), EL26-71 (CAISO) and EL26-72 (ISO-NE); together the six serve roughly 200 million Americans and about two-thirds of FERC-jurisdictional load across more than 30 states plus the District of Columbia.
- Who Counts as Large. The orders define a large load as roughly 50 MW or more of peak demand interconnecting above 69 kV at a single site, and not co-located behind an existing generator.
- What FERC Directed. Operators must address gross-versus-net demand-charge rules, cost-causation alignment, a minimum financial contribution from large loads with credit support (letters of credit, surety bonds or cash), Cost Recovery Agreements, contracts that pre-commit a large load to pay for the upgrades it causes, and public actual-versus-estimate load reporting.
- The Clock. Interventions were due July 9, 2026; resource-adequacy reports are due July 20, 2026; the show-cause responses, where each operator proposes its answer, are due August 17, 2026.
- The Trigger. Energy Secretary Chris Wright directed the review on October 23, 2025 under Section 403 of the DOE Organization Act, ordering a rulemaking on retail loads above 20 MW; FERC had never before exercised authority over retail-load interconnection, which is where the state-versus-federal seam opens.
The Orders Rewrote No Tariff; the August Filings Will
Nothing final, and everything consequential. The orders preliminarily find that all six operators' tariffs fail to ensure large loads pay the costs they cause, and they direct each operator to show cause or propose reforms across a specific list: how demand charges are studied and billed on gross versus net load, how cost causation is applied, whether large loads must make a minimum financial contribution backed by credit support, whether Cost Recovery Agreements should pre-commit them to fund upgrades, and how actual load compares to the estimates used in planning. Because the finding is preliminary, no tariff has been struck down or rewritten. The responses due August 17, 2026 are where the actual rules get written.
The pressure behind the orders is already in the bills. PJM's capacity price, the amount paid to generators for being available, went from $28.92 per megawatt-day for 2024/25 to $269.92 for 2025/26 and then to $329.17, the FERC-approved cap, for 2026/27, a cumulative increase of roughly 1,038 percent across two consecutive auctions. December 2025's auction cleared at its $333.44 cap and, for the first time, short of the reliability requirement by about 6,625 megawatts.
PJM's independent market monitor attributes about $6.5 billion, roughly 40 percent, of the $16.4 billion 2027/28 capacity cost to data centers, including about $6.2 billion for centers not yet built. That is the arithmetic behind a 141-year-old Ohio brickmaker whose monthly capacity charge alone went from about $1,600 to about $12,000, and behind Maryland's roughly $1.6 billion cost-spreading complaint. Because Section 206 lets the Commission act on its own initiative, the burden now sits on the six operators rather than on complainants proving harm one docket at a time. The judgment here is that the proceeding is about cost allocation more than connection speed, and that through-line is a reading of the record rather than a claim the Commission has made.
A burden-flip puts who pays on a 60-day clock
Regulatory Policy. Because FERC acted under Section 206, the provision that lets the Commission move on its own initiative, the burden now sits on all six operators to justify or reform their large-load tariffs by August 17, 2026, rather than on complainants to prove harm one docket at a time.
Markets & Finance. Tariff language reprices risk across the capital stack: whether large loads pre-fund upgrades through Cost Recovery Agreements or inherit socialized charges changes the risk borne by utility equity, merchant generators and hyperscaler power contracts alike.
The operators' answers, whenever FERC's ruling requires them, propose no gross-basis billing, netting threshold or minimum contribution. The burden flip would have produced a defense of the status quo.
On the capital side: whether large loads pre-fund upgrades or inherit socialized charges is set in tariff language, so which of the six dockets writes the term the others copy?
Net-versus-gross metering is the fulcrum, not a technicality
Digital Infrastructure. If a campus's on-site, behind-the-meter generation trips offline, the load stays on and the grid must instantly cover the full gross draw, so the system has to be firmed for gross regardless; FERC already applied gross-basis billing to co-located loads' ancillary services in PJM on December 18, 2025.
Economics. The incidence is already visible in one line item: Belden Brick, a 141-year-old Ohio brickmaker, saw its monthly capacity charge alone rise from about $1,600 to about $12,000, within a total electricity cost increase of roughly 90%, two distinct figures from the same Reuters investigation.
A show-cause answer on any of the six dockets documents a co-located design that sheds load with its generation, so the grid never carries the gross draw. Netting would be a metering detail, not the fulcrum.
On the engineering side: the grid has to be firmed for gross draw regardless, so where does an operator set the maximum netting threshold, and on what study?
The bill is landing on the manufacturers reshoring is meant to protect
Economics. Per a Reuters review of EIA data, industrial power prices rose about 31% in Pennsylvania and 26% in Ohio in the 12 months to December 2025, against roughly 7% nationally; some tariff rules lump a 60 MW factory into the same class as a 3,000 MW hyperscale campus, a factor-of-50 mismatch.
Regulatory Policy. Maryland's Office of People's Counsel, the state's statutory ratepayer advocate, complained to FERC on May 7, 2026 that PJM's footprint-wide cost spreading charges Marylanders roughly $1.6 billion over a decade for mostly out-of-state, largely Virginia, data centers; 80 state legislators backed the complaint on June 17, 2026.
EIA industrial price data for the following 12 months shows Pennsylvania and Ohio converging back toward the national rate while data-center load keeps growing. The incidence would not track the buildout.
On the industrial side: some rules put a 60 MW factory in the same class as a 3,000 MW campus, so what would a manufacturer have to show to be classed apart?
The Weave maps a single development across domains and across time. Each row follows one domain from where things stand now through the next eighteen months, and expands for the reasoning behind that trajectory.
- Two national goals are funded out of one rate base, so one of them pays for the other.
- A rule that treats a factory and a campus as a single class misprices both by design.
- Whether the dockets split those classes is what decides where the burden finally lands.
- The rate base grows either way, so the variable left is who ends up carrying the risk.
- Load-pays designs sit well with incumbents and leave the marginal project holding the cost.
- If socialization survives, the pressure does not clear; it moves to the ratepayer side.
- The threshold that sets the bill also marks the line between federal and state authority.
- The proceeding settles who governs large loads, which outlasts whatever rate it produces.
- Authority never used before invites a challenge, and states are pressing from the other side.
- Three independent institutions land in the same range, which is what makes this a trend.
- Transmission takes about a decade while a campus takes a year or two, and that gap is physical.
- A billing rule can only allocate a shortfall; it has no power to keep one from forming.
v1 · July 8, 2026The Responses Decide Allocation. The Price Cap Cannot
Whether this proceeding reallocates costs or ratifies the status quo will show up in a handful of checkable signals between now and the fall.
- July 20, 2026. The resource-adequacy reports each operator must file, the first system-wide, on-the-record account of how much of the demand surge is real, committed load versus speculative queue entries.
- August 17, 2026. The show-cause responses: whether each operator proposes gross-basis billing, where it sets the maximum netting threshold in MW, and what minimum financial contribution and Cost Recovery Agreement terms it attaches.
- Manufacturer Carve-Outs. Whether the responses distinguish a 60 MW factory from a 3,000 MW campus, the factor-of-50 mismatch the Reuters investigation surfaced, or leave mid-size industrial loads inside hyperscaler-shaped rules.
- The Maryland Complaint. How FERC disposes of the Office of People's Counsel's ~$1.6 billion cost-spreading complaint, and whether other PJM states file parallel challenges.
- The Next Capacity Auction. Whether PJM prices stay pinned at the cap and whether the market again clears short of its reliability requirement, the condition that moved the fight from price to allocation.
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Primary sources9
- FERCFERC Launches Aggressive Targeted Action to Speed Large Load Integration (show-cause orders, dockets EL26-67 through EL26-72)Jun 18Primary · A burden-flip puts who pays on a 60-day clock · Net-versus-gross metering is the fulcrum, not a technicality · What did FERC actually order on June 18? · Looking Forward · Where Things Stand · The Weave
- PJM Interconnection2026/27 Base Residual Auction ReportJul 22Primary · What did FERC actually order on June 18? · Looking Forward · The Weave
- NERC2025 Long-Term Reliability Assessment (10-year outlook through 2035)Jan 29Primary · The Weave
- Lawrence Berkeley National LaboratoryQueued Up: 2025 Edition (interconnection queues as of end-2024)Dec 15Primary · The Weave
- LBNL / U.S. DOE2024 United States Data Center Energy Usage ReportDec 20Primary · The Weave
- IEAEnergy and AIApr 10Primary · The Weave
- Portland General Electric / Oregon PUCPortland General Electric to increase data center rates by 29%, cut residential rates by 1.3% (Oregon PUC docket UM 2377 / Schedule 96)Jun 4Primary · What did FERC actually order on June 18? · The Weave
- U.S. Department of EnergySecretary Wright directive to FERC under Section 403 of the DOE Organization ActOct 23Primary · Where Things Stand · The Weave
- The White HouseFact Sheet: President Donald J. Trump Advances Energy Affordability with the Ratepayer Protection PledgeMar 4Primary · What did FERC actually order on June 18?
Secondary sources, by sector11
- American Action ForumVirginia's New Data Center Electricity Rate ClassJan 8Secondary · The Weave
- ReutersBig Tech data centers are driving up power bills at America's Rust Belt factories (Laila Kearney)Jul 7Secondary · Net-versus-gross metering is the fulcrum, not a technicality · The bill is landing on the manufacturers reshoring is meant to protect · What did FERC actually order on June 18? · Looking Forward · The Weave
- Utility DiveMaryland lawmakers back data center transmission cost complaint at FERCMay 7Secondary · The bill is landing on the manufacturers reshoring is meant to protect · What did FERC actually order on June 18? · Looking Forward · The Weave
- Utility DivePJM capacity prices hit record high as grid operator falls short of reliability targetDec 18Secondary · A burden-flip puts who pays on a 60-day clock · What did FERC actually order on June 18? · Looking Forward · The Weave
- Day PitneyFERC Issues Show Cause Orders to Six RTOs/ISOs on Large Load IntegrationJun 24Secondary · A burden-flip puts who pays on a 60-day clock · Net-versus-gross metering is the fulcrum, not a technicality · What did FERC actually order on June 18? · Looking Forward · Where Things Stand · The Weave
- Vinson & ElkinsFERC Institutes Six Simultaneous Section 206 Proceedings Targeting Large Load Interconnection Across All RTO/ISO MarketsJun 24Secondary · A burden-flip puts who pays on a 60-day clock · Net-versus-gross metering is the fulcrum, not a technicality · What did FERC actually order on June 18? · Looking Forward · Where Things Stand · The Weave
- K&L GatesDOE Directs FERC to Take Action on Large Load InterconnectionOct 30Secondary · Where Things Stand · The Weave
- Utility DiveData centers were 40% of PJM capacity costs in last auction: market monitorJan 7Secondary · What did FERC actually order on June 18? · The Weave
- POWER MagazineHyperscalers Sign White House Pledge to Fund Data Center Power, Grid UpgradesMar 5Secondary · What did FERC actually order on June 18?
- Energy + Environmental Economics (E3)Virginia's Data Center Boom: E3 Report for JLARC Analyzes Grid Strain and Customer ImpactsDec 10Secondary · What did FERC actually order on June 18?
- EPRIEPRI Study: Data Centers Could Consume up to 9% of U.S. Electricity Generation by 2030 (2024 edition)May 28Secondary · The Weave