On February 20, 2025, the Federal Energy Regulatory Commission (FERC) issued two important orders addressing the treatment of co-located loads, including data centers, in the PJM Interconnection, L.L.C. (PJM) region.  FERC directed PJM and its Transmission Owners (the TOs) to take steps to resolve co-located load issues.~~I.    Introduction~~In the marquee order of the day, FERC consolidated several proceedings raising questions about co-located loads and data centers and instituted a “show cause” proceeding under Section 206 of the Federal Power Act (FPA) and directed PJM and the TOs—within thirty (30) days—to either (a) demonstrate that the PJM Open Access Transmission Tariff along with related PJM governing documents (PJM Tariff) is just and reasonable without any changes notwithstanding its failure to state with sufficient clarity or consistency the rates, terms, and conditions of service that apply to co-located load arrangements or (b) explain what changes to the PJM Tariff would remedy the identified concerns if FERC were to find the PJM Tariff unjust and unreasonable.  The order directs PJM and the TOs to respond to numerous complex questions (38, to be exact) related to co-located loads.  Importantly, FERC invites other interested parties to submit responses to PJM and the TOs filings.[1]  FERC directs PJM and the PJM TOs to respond to the Show Cause Order and answer all 38 specific questions within 30 days – by March 24, 2025.  Other interested parties are invited to file responses within 30 days of the PJM and PJM TO filings.~~In a second related order, FERC rejected the Exelon TOs’ proposed tariff filings under Section 205 of the FPA aimed at clarifying how the Exelon TOs would treat co-located load.  FERC said that the proposed changes would change a defined term or condition in the PJM Tariff, and found that individual PJM TOs do not have Section 205 filing rights to proposed changes to such terms and conditions.[2]  However, as discussed herein, the substantive issues raised by the Exelon TOs are incorporated into the questions raised in the FERC Show Cause Order.~~In the following paragraphs we provide more detail on these proceedings and why the co-located load issue has become an acute concern for PJM, the PJM TOs, generators and data center developers in PJM, and state regulators.  The Show Cause Order also has important implications for generators, data center developers, RTOs, transmission owners, and state regulators across the country.~~II.     New FERC Orders on Co-Located Loads, including Data Centers~~a. PJM Consolidated Show Cause Order~~The new Consolidated Show Cause Order consolidates two pre-existing dockets (a technical conference docket and a complaint docket) with a new Section 206 docket and directs PJM and its TOs to make further filings to address crucial questions raised by FERC regarding co-located loads and their impact on the transmission system.[3]  The first pre-existing docket, Docket No. AD24-11-000, is for the FERC technical conference on co-located large loads held on November 1, 2024.  The second pre-existing docket, Docket No. EL25-20-000, is regarding the Constellation Energy Generation, LLC complaint against PJM (“Constellation Complaint”) asking that FERC (1) find the PJM Tariff unjust and unreasonable because it does not address the interconnection of co-located loads and (2) incorporate parts of PJM’s existing guidance on co-located loads into the PJM Tariff.  FERC consolidated the two pre-existing dockets into the Show Cause Order in order to capture the extensive records that had been created in these two proceedings.  Notably, however, FERC did not grant the Constellation Complaint, and instead indicated that that the PJM Tariff appears to be unjust and unreasonable in its treatment of co-located loads.~~In the Consolidated Show Cause Order, FERC discussed the questions that were raised in the consolidated proceedings but provided very few answers to most of those questions.  FERC did, however, show its hand on a few important issues related to co-located load.  First, FERC addressed federal and state jurisdiction over the sale of electricity, an issue which had been raised not only in the consolidated proceedings but also in a separate another, unconsolidated proceeding in which Exelon companies filed a petition for declaratory order field by two of Exelon’s TOs in Docket No. EL24-149-000 (“Exelon Petition”).  In that Petition, the Exelon TOs requested FERC to find, among other things, that “interconnection of end-use load is a matter of state, not federal, jurisdiction.”[4]  In the Consolidated Show Cause Order, FERC addressed important aspects of federal and state jurisdiction over co-located loads.  First,  FERC confirmed that its own jurisdiction is over interstate wholesale sales, interstate transmission, and the facilities used for such transmission and sale, while states’ jurisdiction is “over any other sale of electric energy,” which includes retail sales, non-interstate wholesale sales, and sales that are not for resale (i.e., sales made directly to the end-user).[5]  Importantly, FERC found that as “[a]pplied in the context of co-location, . . . under the FPA, the states get to determine which entities are legally permitted to provide electricity to retail customers in co-location arrangements.”[6]  Confirming this, FERC stated “[t]hat is true irrespective of where the load interconnects (i.e., to the distribution system, the transmission system, or the generator itself).”[7]  Further clarifying jurisdiction, FERC stated “if [sales] are made directly to the end-use customer . . . then the co-located generator’s sales are under state jurisdiction.”[8]~~Also, while it did not yet draw conclusions, FERC indicated that it is very concerned that co-located loads are not being required to pay for PJM wholesale services they are receiving, and likely benefit from the use of the PJM transmission system.  FERC stated “we are especially concerned that the absence of [PJM] Tariff provisions creates the potential that participates in a co-location arrangement may not be required to pay for wholesale services that they receive, as required by the cost causation principle . . . .”[9]   FERC also stated that “[t]he record demonstrates that different co-location arrangement are likely to use or benefit from the transmission system in different ways depending on how they are configured . . . .”[10]  In particular, with regard to black start service, FERC stated that it “appears to be undisputed in the record” that co-located load arrangements with nuclear facilities cannot function without a PJM resource providing black start service.[11]  We expect that these issues will be vigorously addressed in the responses to FERC’s 38 questions.~~In contrast to the jurisdictional question, FERC did not offer much substantive guidance on the many other co-located load questions raised at the technical conference and in the Constellation Complaint.  Instead, FERC asked PJM and the TOs to answer a list of 38 questions about co-located loads, and will allow interested parties to respond to PJM and the TOs’ answers to those questions.  FERC also specifically  stated that parties could “introduce the issues raised in the [Exelon Petition]” into the consolidated dockets in order to address those issues there.[12]~~Although FERC stated in the Consolidated Show Cause Order that the PJM Tariff may be unjust and unreasonable , it stopped short of finding that PJM’s Tariff was actually unjust and unreasonable.  Instead, FERC noted concerns with the status quo of co-location arrangements in PJM, noting in particular the PJM Tariff may be unjust and unreasonable because it (1) “does not contain provisions addressing with sufficient clarity or consistency the rates, terms, and conditions of service that apply to co-location arrangements;”[13] (2) lacks “rates, terms, and conditions governing the use and sale of ancillary services and black start services by co-location arrangements;”[14] and (3) “lacks rules necessary to provide PJM with sufficient information to perform appropriate analysis to ensure reliable system operations given the characteristics of co-location arrangements.”[15]~~FERC’s 38 questions request input on a broad swath of topics related to co-located load, including:~~b. Order Rejecting Exelon TO Tariff Filings~~In Docket Nos. ER24-2888-001 et al., the Exelon TOs proposed changes under Section 205 of the FPA to the Exelon-specific provisions of Attachment H of the PJM Tariff that would have required co-located load either to be  “designated as Network Load,” or to arrange “appropriate Point-to-Point transmission service . . . for the end-use customer,” by modifying the definition of “Network Load.”[16]  FERC sidestepped the Exelon filings on a legal technicality.   However, FERC captured the issues raised by Exelon, including the important matter of state and federal jurisdiction, in the Show Cause order.   FERC rejected Exelon’s Section 205 filing, finding that Exelon’s proposed change to the definition of “Network Load” would altered “terms and conditions” of the PJM Tariff, and only PJM (not TOs) can propose changes to the generally-applicable terms and conditions of the PJM Tariff under Section 205.[17]  Based on that determination, FERC completely bypassed the substance of the Exelon filings.[18]  However, in his concurrence, Commissioner Willie Phillips observed that the issues raised by Exelon are incorporated in the Consolidated Show Cause Order, and noted that he is “grateful that [Exelon] has raised such important questions, which will help the Commission set the framework for how we address co-location arrangements going forward, including a transparent mechanism for ensuring that large loads pay their fair share of costs.”[19]~~c. No Order on Exelon Petition for Declaratory Order on Co-Located Loads~~Notably absent from FERC’s orders was any action on Exelon’s pending petition for declaratory order regarding co-located loads in Docket No. EL24-149-000.   In that the Exelon Petition, two Exelon TOs (BG&E and PECO) asked FERC to address jurisdictional issues for co-located loads, including whether interconnection of end-use load is a matter of state, not federal, jurisdiction.  It was filed in October 2024, and FERC has not acted on the Petition.  In the new Show Cause Order, however, FERC squarely addresses matters of FERC and state jurisdiction, and asks parties to comment on FERC’s view in the 38 questions.  Because FERC addressed jurisdiction in the Show Cause Order, it is possible that FERC will not act on the Exelon Petition.~~III.     Next Steps and FERC-Wide Implications~~In the Consolidated Show Cause Order, FERC directs PJM and the TOs to respond to FERC’s concerns regarding the treatment of co-located loads under the PJM Tariff.  FERC directed PJM and the TOs to within 30 days (by March 24, 2025) to either (a) demonstrate the PJM Tariff remains just and reasonable with no changes,  or (b) explain what changes to the PJM Tariff would remedy the identified concerns.[20]  FERC also directed PJM and the TOs to answer all 38 of FERC’s questions on co-located loads, with supporting evidence and analysis.  FERC indicated that interested parties may respond to PJM and the TOs’ filings within 30 days of PJM’s and the PJM TOs’ filings, addressing either or both (a) whether the current PJM Tariff is just and reasonable and not unduly discriminatory or preferential, and (b) if not, what changes to the PJM Tariff should be implemented as a replacement rate.[21]~~We expect the outcome of this proceeding will have broad impacts on the co-located load and data center requirements in other FERC-jurisdictional ISO and RTO regions.  If the PJM Tariff is unjust and unreasonable because it does not address co-located load matters, then other ISO and RTO tariffs presumably would be found by FERC to be unjust and unreasonable as well.  As a result, a broad array of interested parties, including generators, data center developers, transmission owners, and RTOs and ISOs are advised to pay close attention to this PJM proceeding.  Interested parties may consider filing comments on the PJM and TO filings scheduled for March 24.  Such responsive comments would be due in late April.~~[1] PJM Interconnection, L.L.C., 190 FERC ¶ 61,115 (2025) (“Consolidated Show Cause Order”).~~[2] PJM Interconnection, L.L.C., 190 FERC ¶ 61,109 (2025) (“PJM Exelon Order”).~~[3] Consolidated Show Cause Order.~~[4] Petition for Declaratory Order of Baltimore Gas & Electric Company and PECO Energy Company, Docket No. EL24-149-000  (Sep. 30, 2025).~~[5] Consolidated Show Cause Order at PP 66-67.~~[6] Id. at P 69 (emphasis added).~~[7] Id. at P 69 (emphasis added).~~[8] Id. at P 71 (emphasis added).~~[9] Id. at P 74.~~[10] Id. at P 76.~~[11] Id. at P 81.~~[12] Id. at P 73, n.225 (mentioning Docket No. ER24-149-000 stating that “to the extent that parties to this proceeding want to introduce the issues raised in the petition in Docket No. EL24-149-000 to this proceeding and address those issues, they are free to do so.”).~~[13] Id. at P 74.~~[14] Id. at P 82.~~[15] Id. at P 83.~~[16] Tariff Filing of Atlantic City Electric Company, Docket No. ER24-2888-000 (Aug. 8, 2024).~~[17] PJM Exelon Order at P 33.~~[18] Id. at P 39.~~[19] Id., Commissioner Phillips Concurrence at PP 5-7.~~[20] Consolidated Show Cause Order at P 87, Ordering Para. (B).~~[21] Id. at P 87.~~The following Gibson Dunn lawyers prepared this update: William R. Hollaway, Ph.D., Tory Lauterbach, Janine Durand, and Jess Rollinson.~~Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments.  To learn more about these issues or for assistance with data center energy supply issues, such as preparing comments to be filed in the above-discussed proceedings, please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Energy Regulation and Litigation, Power and Renewables, Real Estate/Data Centers, Cleantech, or Oil and Gas practice groups, or the following members of the firm’s Energy team:~~Energy Regulation and Litigation: William R. Hollaway – Washington, D.C. (+1 202.955.8592, whollaway@gibsondunn.com) Tory Lauterbach – Washington, D.C. (+1 202.955.8519, tlauterbach@gibsondunn.com)~~Power and Renewables: Peter J. Hanlon – New York (+1 212.351.2425, phanlon@gibsondunn.com) Nicholas H. Politan, Jr. – New York (+1 212.351.2616, npolitan@gibsondunn.com)~~Real Estate/Data Centers: Emily Naughton – Washington, D.C. (+1 202.955.8509, enaughton@gibsondunn.com) Whitney Smith – Washington, D.C. (+1 202.777.9307, wsmith@gibsondunn.com)~~Cleantech: John T. Gaffney – New York (+1 212.351.2626, jgaffney@gibsondunn.com) Daniel S. Alterbaum – New York (+1 212.351.4084, dalterbaum@gibsondunn.com) Adam Whitehouse – Houston (+1 346.718.6696, awhitehouse@gibsondunn.com)~~Oil and Gas: Michael P. Darden – Houston (+1 346.718.6789, mpdarden@gibsondunn.com) Rahul D. Vashi – Houston (+1 346.718.6659, rvashi@gibsondunn.com)~~© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.~~Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials.  The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel.  Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.~~Download PDF~~