Standby, or Stand Firm? (Part 3: Final)

PJM's attempt at large load reform came up empty-handed. FERC has rewritten part of the menu for them.

Policy Gradients went quiet for several weeks this holiday season.¹ PJM did not. This is the final post in the Standby, or Stand Firm series. When we left off, PJM’s Critical Issue Fast Path on Large Load Additions (CIFP-LLA) was in full swing as billion-dollar stakeholders argued over what to do about very large new loads—namely data centers—arriving faster than transmission upgrades and generation additions could accommodate. By late November, the CIFP’s window for deliberation timed out without producing a consensus package, even as the grid’s resource inadequacy—and constituents’ discontent—intensified.

After PJM’s process wound down, FERC stepped in with a related but separate decision that caught many by surprise. On December 18, 2025, the Commission issued an order directing PJM to rewrite its tariff treatment of “co-located load,” and it did so with unusual specificity. Today’s edition explains what exactly FERC deemed so unworkable, what FERC is requiring PJM to adopt instead, and whether that solves the region’s broader large-load challenge.

The CIFP Process in PJM Timed Out Without a Solution

First, a quick recap on the CIFP. The record of comments was split into several camps. Some parties, including Amazon, wanted demand response, but on a strictly opt-in basis, which would reduce peak load without chilling investment in new compute campuses. Others, including Google, Microsoft, and Constellation, argued that PJM should first improve the credibility of its load forecasts, lest PJM base its new policies on exaggerated demand figures. This motif of “forecast first, reform later” had surfaced quite early (starting back in August) alongside broader worries that the system was overreacting to potentially inflated projections, whether due to double counting, poor data, or speculative projects squatting in the interconnection queue.

As a whole, the CIFP-LLA ran as a compressed sprint. Readers may recall that early in the process, one flagship concept was the NCBL (Non-Capacity Backed Load). But over the course of September and October, backlash to the mandatory NCBL reached a fever pitch, and PJM moved away from the construct. By late October and early November, stakeholders were coalescing around packages of smaller, ameliorative ideas instead of a drastic new service model. Multiple competing bundles of reforms circulated, with a mix of ideas being proposed: forecasting improvements, staged energization, interconnection acceleration, and extended-horizon auctions to secure reliable generation over many years. The months-long process culminated in a late-November Members Committee vote.

None of the packages achieved sufficient votes to move ahead. The CIFP had failed to produce a consensus solution by year’s end. Many stakeholders were furious, including governors of PJM states, who criticized the outcome and urged decisive action.

FERC’s December 18th Order

Against that backdrop, FERC’s Dec. 18, 2025 order is particularly relevant, as it forces closure on one specific part of the broader dispute. The Commission declared that PJM’s tariff treatment for co-located loads is “unjust and unreasonable”—a legal finding that triggers mandatory reform. At its core, the Commission argued that the lack of consistent rules for co-location arrangements meant uncertainty for developers, reliability risks for the grid, and undue cost-shifting onto other ratepayers. FERC therefore directs PJM to rewrite the tariff within 60 days and—in a bit of hand-holding—enumerates a menu of four transmission service options that PJM must offer to customers.

The Old Menu: Network vs. Point-to-Point

To understand the change, it helps to review the old menu of options. Suppose that you are a large customer in PJM. Your transmission service offerings fall into two buckets:

• Network Integration Transmission Service (NITS) is the default for load that gets studied and planned as part of the electrical network’s obligations. PJM plans transmission to serve you and coordinates capacity on your behalf. In return, you pay transmission costs on a shared basis, based on your contribution to peak demand.

• Point-to-Point Transmission Service (PTPS) is a reservation for a specific amount of capacity. You’re buying a defined number of megawatts between a Point of Receipt and Point of Delivery. PTPS comes in both firm and non-firm variants, but it’s designed for moving power across the system, not for serving load at a single location.

The existing tariff had several deficiencies that made it ill-suited for co-located arrangements at scale. This created at least three problems. First, PJM’s Behind the Meter Generation (BTMG) netting rules allowed cost-shifting. Some co-location configurations sought treatment to net on-site generation against their load. This means, for instance, that if you had a 200-MW compute campus and 200 MW of generation sitting around on site, you could subtract your on-site generation from your total needs—thus reducing your net withdrawals to virtually zero for billing purposes—while still benefiting from backup service during outages. Second, customers had no way to purchase less than full service even if they wanted it. A campus expecting its co-located generator to provide 90% of its needs had no option to buy firm service other than to buy transmission planning and capacity for 100% of its load. Third, PJM’s planning models had blind spots. If co-located loads showed up as negligible on the network because of netting, system planners couldn’t see the reliability risks. Perpetuating all of this was the longstanding reality that transmission owners across PJM each had their own way of treating co-location arrangements, sowing inconsistency and confusion across the RTO.

The New Menu: Four Ways to Take Service

The recent FERC order remedies these issues by requiring PJM to offer four transmission service options to any customer taking service on behalf of co-located load:

1. Network Integration Transmission Service (but on a “gross demand” basis)

2. Interim Non-Firm Service

3. Firm Contract Demand

4. Non-Firm Contract Demand

Here’s what each provides.

Option 1: Network Integration Transmission Service

This is the traditional path for loads that want full integration into the grid. PJM studies your entire load, incorporates it into planning, and builds transmission to serve it. You pay NITS transmission rates plus capacity charges, and you’re treated as network load in all respects.

The change for co-located loads is that you must take NITS on a gross demand basis. No netting is allowed. If your data center has a 200 MW peak demand and a co-located 180 MW generator, you still pay based on 200 MW, not the 20 MW net withdrawal. This eliminates the cost-shift that troubled so many ratepayers.

Ideal use case: loads that need firm, always-available service and are willing to pay for full network integration.

Option 2: Interim Non-Firm Service

This is a bridge product, available only to customers who are ultimately pursuing NITS but whose network upgrades are not yet complete. It provides interruptible service at NITS rates but without a capacity charge. This means PJM can curtail you during emergencies. Once your upgrades are done, this service terminates, and you move to full NITS.

The interim service addresses a time-to-power problem. Network upgrades can take years. This lets you energize sooner, albeit without firm priority, while the necessary facilities are built.²

Ideal use case: loads that want NITS eventually but need to energize before upgrades finish, and can tolerate curtailment risk in the interim.

Option 3: Firm Contract Demand

This is the option that breaks new ground for PJM. You choose a megawatt cap (your contract demand), and PJM provides firm service up to that level. You have the same curtailment priority as traditional firm transmission customers. PJM plans only to your contract demand, not your gross load. If you exceed your contract demand, you face penalties.

You can combine this with Option 4 (Non-Firm Contract Demand) to meet load above your firm contract level.

The benefit of Firm Contract Demand is cost-effectiveness. A 100 MW co-located load that expects to draw 60 MW from the grid only during extended generator outages can size its firm service to match that expected usage, rather than paying to build a full 100 MW of transmission it will rarely use.

Ideal use case: loads that want firm backup service but only at a level below gross demand, because on-site generation will cover most needs most of the time.

Option 4: Non-Firm Contract Demand

This is interruptible service with no long-term commitment. Reservation periods range from one hour to one month. PJM does not plan upgrades to support this load, and you can be curtailed in emergencies. But the selling point is that you pay no capacity charge.

This option provides flexibility for variable or occasional grid usage without imposing planning obligations on the system.

Ideal use case: loads that want short-term access without committing to long-term service, or as a supplement to Option 3 for usage above the firm contract level.

How the Options Fit Together

As touched on earlier, there is a structural relationship among these offerings. Options 1 and 2 together constitute the pathway to becoming network load; Option 2 is simply an on-ramp that lets you start energizing before upgrades are ready. As the more novel offerings, Options 3 and 4 are alternatives to network load. They let you buy less service; it’s up to your needs and risk tolerance.

All four options require that customers pay regulation and black start charges—on a gross demand basis. This ensures that even loads taking minimal transmission service still contribute to the ancillary services they benefit from. Thus, the December 18th order closes the cost-shifting loophole that long allowed co-located loads to freeride on grid reliability while paying almost nothing.

Not The End of The Story

FERC’s move is not pro-data center or anti-data center. It is a practical cleanup of a tariff that had become too ambiguous to administer fairly or safely. Under the old framework, a co-located campus could make itself negligible on paper but suddenly look to the grid for significant backup. The fault does not rest with data centers per se. Neither should it be pinned on the transmission owners serving those compute campuses. PJM’s old menu was more or less binary, an untenable model for the needs of data centers deploying fast and needing power soon. PJM can meet the challenge with a legible, standardized set of service options so customers can choose what they actually need and PJM can plan, build, and bill accordingly.

This new tariff design is not a resolution to the now-expired CIFP that kicked off this “Standby, or Stand Firm” series, but it is a step to better accommodate the large loads that are causing PJM’s crisis of resource inadequacy in the first place. A cleaner co-location framework does not conjure new generation, accelerate multi-year transmission construction, or provide a crystal ball for load forecasting, despite the many earnest, entertaining, and creative comments submitted to PJM.

Even FERC’s ability to intervene is limited, but it’s been clear and decisive. And last Friday, governors from around PJM descended on the White House to further crack the whip on PJM, calling for an emergency auction and the construction of billions in new power plants. That’s for the next issue.

1. Winners of last issue’s contest will be announced in the next post.

2. “Staged energization”—bringing a site online in phases before every network upgrade is complete—is becoming a core capability for regions trying to accommodate co-location without waiting years. For a state-focused explanation of the facilitating policy, see FAI’s Behind-the-Meter Power Supplement, which is an expansion pack to the existing State Permitting Playbook: Part I & Part II.