FERC Blocks PJM Proposal to Expand Amazon Data Center Load at Susquehanna Nuclear Plant

Nov 03, 2024

The Federal Energy Regulatory Commission (FERC) has rejected an amended interconnection agreement that would have supported expanded co-located load at an Amazon Web Services (AWS) data center connected to the 2,520–MWe Susquehanna nuclear power plant in Pennsylvania, citing grid reliability and cost fairness concerns.

FERC on Nov. 1 voted 2–1, with Commissioners Mark Christie and Lindsay See in favor and Chairman Willie Phillips dissenting, to deny the proposed amendment from PJM Interconnection. The proposal sought to modify an interconnection service agreement (ISA) among PJM, the grid operator, the power plant owner, Susquehanna Nuclear, and interconnected transmission owner PPL Corp. that sought to increase the data center’s co-located load from 300 MW to 480 MW.

The FERC action serves as yet another example of tensions arising as the power industry attempts to grapple with soaring demands from large loads like data centers—which require reliable, high-capacity power—while avoiding burdensome costs for other grid users. As POWER has reported, AEP Ohio recently introduced a structured tariff for hyperscalers that attempts to address some of these uncertainties.

As FERC’s order notes, FERC originally accepted a PJM-filed ISA for the two-unit nuclear power plant owned 90% by Talen Energy and 10% by Allegheny Electric in Luzerne County in 2015. In February 2023, PJM submitted an amended, uncontested ISA to add up to 150 MW—a combined 300 MW—of co-located load behind each of Susquehanna’s two 1,260 MW units interconnected to PJM’s transmission system.

In March 2024, Talen Energy sold its 960-MW Cumulus data center campus, directly connected to the Susquehanna nuclear plant, to Amazon Web Services (AWS) for $650 million. AWS has minimum contractual power commitments for the data center, which was slated to ramp up in 120-MW increments over several years, with a one-time option to cap commitments to 480 MW. To accommodate this, PJM submitted another amendment to the ISA in June 2024, updated in September 2024, to increase the co-located load capacity from 300 MW to 480 MW. However, that amendment was rejected by FERC on Friday.

In its amendment, the grid operator suggested that the increase would not disrupt transmission reliability. However, it warned that any demand over 480 MW could create “generation deliverability violations.” The amendment also added flexibility for future load adjustments, allowing Susquehanna to potentially supply up to 960 MW contingent upon resolving grid stability challenges. Reliability measures, for example, included requiring Susquehanna to disconnect the data center during system disruptions and restricting backup power usage to specific cases pre-approved by PJM and PPL​.

In June, AEP and Exelon challenged the ISA amendment, which they argued lacked adequate support and could potentially set a precedent that allows certain large loads to benefit from transmission resources without paying corresponding costs. The utilities warned in proceedings that such a precedent could harm PJM’s capacity markets by incentivizing large loads to disconnect from PJM’s grid, potentially raising replacement costs and creating a burden for other customers.

PJM’s independent market monitor, meanwhile, contended that the issue had “extremely large significance for the future of PJM markets.” PJM “has not explained how it plans to meet expected increases in the demand for power, given ongoing generator retirements, even without removing multiple large base load units from the system,” it said. “PJM’s latest reliability report and PJM’s RTEP do not address the potential significant changes that would result from reliance on the proposed ISA as a precedent.”

However, the filing was backed by several competitive generators, including PPL, Calpine, Constellation, and Vistra. The parties argued the scope of the proceeding was limited, and utilities’ protest raised issues outside its scope. Several parties suggested that if FERC did not accept the amended ISA, it would frustrate commercial arrangements involving data center load growth. PPL notably stressed that FERC’s rejection of the ISA would leave PJM and PPL in an “untenable” position from a reliability standpoint and that the existing ISA had become “unjust and unreasonable.”

FERC ultimately sided with the challengers, concluding that PJM had not provided sufficient justification for the non-standard provisions that would allow a “unique” arrangement for the data center. Commissioners Christie and See noted that PJM’s proposal did not meet FERC’s standards for deviating from established transmission protocols, which require clear evidence of the necessity for non-standard agreements. In their opinion, the expansion could undermine cost fairness and burden other PJM customers with potential reliability issues.

“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,” Christie wrote. “Given these ramifications, the Commission truly needs to ‘get it right’ when it comes to evaluating co-location issues.” If FERC were to approve the proposal, “we would be setting a precedent that would be used to justify identical or similar arrangements in future cases,” he said.

Still, as Stu Bresler, PJM’s executive vice president of Market Services and Strategy, explained in testimony at FERC’s commissioner-led Technical Conference Regarding Large Loads Co-Located at Generating Facilities on Friday, the urgency to address data center integration issues is mounting. Developers have requested that PJM study nearly 8.5 GW of large loads to be co-located with existing generator interconnections, Bresler underscored.

Because no regulatory governing documents currently address processes and options for co-located load, PJM has been evaluating interconnection modifications on a case-by-case basis. “The Commission should explore the development of a uniform approach to this issue that promotes certainty and clarity to entities interested in pursuing co-located load configurations and those entities potentially impacted by such configurations,” he recommended.

Ideally, large co-located loads should be in front of the meter and designated as network load, Bresler said. “Network Load status offers the most robust reliability benefits and holistic planning efficiencies, minimizes the need for one-off operational procedures (both interim and longer term), and offers a cost allocation framework that assesses charges for use of and reliance on the transmission system.” However, he noted that emerging large co-located load integrations mostly assume “a behind-the-meter, off-system construct.” Any financial arrangement between the generator and the load occurs outside of the PJM settlements system and is not factored into future planning forecasts.

Reliability issues arise when traditional baseload generation exits the supply stack rapidly to exclusively serve off-system co-located load, or if behind-the-meter loads integrate faster than can be reliably planned for, he explained. Reliability concerns can materialize if a generator serving a co-located load trips offline and the load inadvertently continues to draw from the grid, failing to open the intended breakers, he said.

Beyond reliability, Bresler noted, surging behind-the-meter data center integration raises additional critical issues. These include whether conditions should be imposed on transmission providers’ obligation to serve such loads, the potential need for co-located facilities to pay for ancillary and transmission services, specific planning and operational details to include in interconnection agreements, and complex jurisdictional questions about whether such configurations fall under federal or state authority.

“These are complex issues, and generic guidance (as opposed to case-by-case determinations) will facilitate efficiency and predictability for developers advancing emerging and evolving technologies in fields like artificial intelligence and data computing and the electric industry being called upon to facilitate and serve this innovation,” he said. “More work remains to be done.”

On Friday, Phillips, in his dissent, suggested FERC missed its opportunity to address some of these issues and described the order as “a step backward for both electric reliability and national security.” He argued that the amended ISA among PJM, Susquehanna Nuclear, and PPL represents a “first of its kind” co-located load configuration “that presents precisely the sort of specific reliability concerns, novel legal issues, and other unique factors that should have justified the filing of a non-conforming interconnection agreement.”

PJM’s analysis, Phillips noted, found no need for transmission upgrades to support the proposed 480 MW load increase and included additional reliability measures—such as protections to prevent unintended power flow to the data center and generator shutdown notifications—that would strengthen grid stability. He contended that FERC should have accepted the proposal while requiring PJM to submit regular informational filings, “to provide transparency into the arrangement’s operations over time, including certain of the issues in dispute, such as back-up service.”

“That approach would also have allowed PJM to go through a further stakeholder process for tariff revisions and decide on generic next steps regarding these important issues in the months ahead,” he added. “In failing to accept the agreement, we are rejecting protections that the interconnected transmission owner says will enhance reliability while also creating unnecessary roadblocks to an industry that is necessary for our national security.”

“At the end of the day, I am concerned that the arguments the Commission relies on to reject the Amended ISA lead it to miss the forest for the trees,” he said. “We are on the cusp of a new phase in the energy transition, one that is characterized as much by soaring energy demand, due in large part to [artificial intelligence (AI)], as it is by rapid changes in the resource mix. Ensuring reliable and affordable supplies of electricity throughout the coming period of increasing demand and changing supply will require pragmatic leadership that facilitates that transition.”

In a statement, Todd Snitchler, president and CEO of the Electric Power Supply Association (EPSA), a trade group for competitive power suppliers, suggested optimism, pointing to FERC’s nearly six-hour technical conference on Friday to address concerns about large co-located loads at generating facilities. “We are pleased to see FERC’s leadership on this issue and believe today’s constructive and enlightening discussions will help provide opportunities to flesh out the optimal outcomes for consumers and a reliable power system,” he said.

“While we have seen varying estimates about how much energy demand data center growth will bring in the coming decade, it is clear that new approaches to solve the emerging situation are needed to build and deliver more power rapidly, as cost-effectively as possible, and most importantly—reliably,” he said. “While many paths can be taken, competitive power suppliers are uniquely suited—and are already acting—to meet the moment. Our members’ business model allows them to respond nimbly and efficiently to this new market signal to deploy reliable, long-duration generation resources, shielding consumers from investment risks associated with the expected buildout of new resources.”

While co-locating resources with large demand customers “has emerged as an innovative and promising approach to address this issue,” as “with any new arrangement that could impact the existing grid and competitive markets, getting the particulars right and carefully assessing surrounding market ramifications is essential,” Snitcher said. “We have already seen the impacts to consumers and reliability imposed by policies and regulations that lead to the retirement of dispatchable resources and tightening power supply, underscoring the need for solutions and new ideas that can advance a reliable and cost-effective energy expansion.”

—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).