FERC Order Bolsters Maryland Case Against Billions in Data Center Grid Costs

A new federal order could strengthen Maryland’s claim that its households and businesses have been unlawfully billed billions of dollars for transmission upgrades to serve out-of-state data centers. But it is unclear whether the Federal Energy Regulatory Commission’s recent directive, which requires six regional grid operators, including PJM Interconnection, to justify how they assign those costs or propose changes, will help Maryland recover money PJM already allocated to the state or will apply only to future cost allocations.

FERC’s order almost coincided with a June 16 letter signed by 80 Maryland lawmakers who pressed commissioners to grant immediate relief from $2 billion in costs that PJM Interconnection, the regional grid operator serving Maryland, portions of 12 other states and Washington, D.C., has billed the state as cost-sharing for building new power lines for data centers in neighboring Virginia. 

Legislators wrote that if the costs are not refunded, as a complaint from the Maryland Office of People’s Counsel (OPC) calls for, “Maryland electric customers will pay $1.6 billion for

just these projects over the next ten years, and much more over longer periods.” The customers who’d pay the larger bills did not cause the upgrades and will not meaningfully benefit from them, the lawmakers said.

“The Commission must fix PJM’s unfair cost allocation methods to meet the customer-protection commitments embodied in the White House and PJM governors’ statement of principles and the Ratepayer Protection Pledge,” the letter said, referencing a March agreement in which major tech companies agreed to “provide for their own power needs” by securing their own dedicated supply. The pledge is a set of voluntary promises that lack the force of a statute or a regulation. 

Efforts by Maryland lawmakers and agencies such as the OPC to protect ratepayers from surging utility bills tied to out-of-state data centers are part of a nationwide push to require tech companies and other developers to pay a larger share of the costs associated with their energy demand. The issue has broad bipartisan support. 

In the June 18 order, FERC ordered PJM and the five other grid operators “to either defend or revise their tariffs” to prevent the kind of cost-shifting Maryland alleges unlawfully burdens ratepayers. The commission told each grid operator to improve the transparency of transmission costs, prevent cost shifting and more clearly assign the expenses of grid upgrades tied to large loads such as manufacturing units and data centers. The order also requires grid operators to reevaluate how they study and connect those customers, account for co-location and plan transmission and generation service for data centers and other energy-intensive facilities.

David Lapp, People’s Counsel for Maryland, said the order “shares the same intent as OPC’s complaint—to protect ordinary customers from costs imposed by data centers,” even if it does not directly address the large regional transmission projects that are the subject of OPC’s complaint. In emailed comments, Lapp said, “we believe the intent of the order, as well as the requirements of the Federal Power Act, require that PJM respond to the order by modifying its cost allocation methodology to ensure data centers pay their full freight.” 

Lapp said FERC’s order only addresses future transmission costs while OPC’s complaint is seeking relief from future cost allocations as well as from those PJM has already assigned for projects approved over the past three years. “Our complaint proceeding is the only proceeding in which customers can get relief from the unfairness of those cost allocations that have already happened,” he said. Most of the costs, he noted, “have not yet been paid by customers.” 

OPC is asking FERC to require PJM and its transmission owners to assign the costs to the data centers and the geographic zones where they are located.

State Del. Lorig Charkoudian (D-Montgomery County) said the lawmakers’ letter, which she signed, was part of a broader effort to pull “every lever” to drive down electric bills. “Data centers driving costs should pay for the costs they’re driving up,” she said in an interview with Inside Climate News. 

Charkoudian said Maryland is not arguing that it does not benefit from new transmission projects. However, the current cost allocations are unfair because “Maryland is paying more than our fair share.”

FERC’s order showed her the debate had shifted from the understanding that data centers should pay their fair share to the practical question of who pays for transmission lines built primarily to serve large new loads. 

Abe Silverman, an assistant research scholar with the Ralph O’Connor Sustainable Energy Institute at Johns Hopkins University, said FERC’s order is more focused on transparency than Maryland’s complaint, but addresses the same problem. In his view, PJM’s current framework was not built for the scale of demand generated by hyperscale data centers. He said the speed of data center growth has outpaced the existing rules for deciding who pays for grid upgrades, and the method for cost allocation is no longer fair.  

Silverman said the harder question is whether FERC will stop at forcing PJM to show where costs are coming from or go further and change who pays. Right now, he said, PJM “does not currently provide enough information for us to see this cost shift,” because the transmission needed to serve large new loads is largely spread across the region. 

“When FERC talks about radical transparency,” he said, commissioners are “really talking about giving state regulators and PJM participants enough data to be able to see how much of these increased transmission costs is due to data centers.” The next step, he said, would be to assign more of those costs to the zones driving the load growth and let states decide how much to charge the data centers. 

But “there’s plenty of gray area to go around,” he cautioned, and said FERC still has not decided whether greater transparency will lead to a revised cost-allocation structure.

Tom Rutigliano, a senior advocate at the Natural Resources Defense Council, said Maryland ratepayers could be left paying if the forecast data centers don’t get built. “The phantom-load risk is real and nearly impossible to forecast—we have no way of knowing how business plans or technology might change,” he said in an emailed comment. 

Rutigliano said long-distance transmission is not the only way to serve large new loads like data centers, noting that energy storage solutions closer to those facilities could better handle some of the demand. From NRDC’s standpoint, he said, the more significant threat is that policymakers could end up subsidizing fossil fuels if they solely focus on transmission instead of weighing cleaner and potentially cheaper alternatives for serving data centers.