Who Pays When a Data Center Plugs In? Inside the Federal Push to Rewrite the Rules
An unfolding regulatory fight will decide whether large power users cover their own grid costs, or whether those costs keep landing on everyone else's bill.
By Keith Reynolds | Publisher & Editor, ChargedUp!
In June, the Federal Energy Regulatory Commission (FERC) ordered all six of the regional grid operators it regulates to justify or rewrite the rules that determine how large electricity users, above all data centers, connect to the grid and who pays for the upgrades they require. The stakes for commercial property are direct. If large loads are required to cover more of their own connection costs, the burden shifts away from everyone else on the system, including the office, industrial, and multifamily owners who have watched grid costs climb on their bills. The proceedings are unfolding now, with regional responses filed in August and federal review running through the rest of the year. This report explains what changed, why it matters to a property owner, and what to watch as the rules take shape.
Why We Are Running This as a Special Report
This story did not break this week. It began in June and is still being decided, which is exactly why it deserves a step back rather than a headline. The rules being rewritten now will govern who pays for grid expansion for years, and the outcome will show up in commercial utility bills long after the initial order fades from the news. This report gathers the situation in one place so the context is clear as the decisions land.
Key Facts at a Glance
On June 18, FERC issued six show-cause orders, one to each regional grid operator it oversees: PJM, MISO, SPP, CAISO, ISO-NE, and NYISO.
Together these regions cover close to two-thirds of the electricity demand under federal jurisdiction.
FERC preliminarily found each operator's existing rules inadequate for connecting large loads and put the burden on them to justify or reform those rules.
FERC defined a large load as a single site drawing at least 50 megawatts and connecting at 69 kilovolts or higher, the scale of a data center or large factory.
The central question is cost allocation: how much of the grid upgrades a large load triggers should that load pay, versus other customers.
Regional responses were due August 17, and federal review continues through the rest of 2026, with individual states opening their own reviews in parallel.
What Did FERC Actually Do?
FERC put the country's grid operators on notice that the rules for connecting large power users are broken and must be fixed. The Federal Energy Regulatory Commission (FERC) is the federal agency that regulates interstate electricity markets, and on June 18 it issued what it calls show-cause orders to the six regional grid operators under its authority, according to FERC's own account of the action. A show-cause order flips the usual burden of proof: rather than propose a rule and invite comment, FERC preliminarily found each operator's current tariff, the rulebook that sets rates and connection terms, to be unjust and unreasonable, and directed each operator to prove otherwise or file a fix.
The six operators are the regional traffic controllers of the grid, known as regional transmission organizations (RTOs) and independent system operators (ISOs): PJM in the Mid-Atlantic and Midwest, MISO in the central states, SPP in the plains, CAISO in California, ISO-NE in New England, and NYISO in New York. FERC set a clear threshold for what counts, defining a large load as a single site that draws at least 50 megawatts and connects at 69 kilovolts or more, as several regulatory analyses have detailed. That is the scale of a hyperscale data center or a large manufacturing plant, not an office tower, so the rules target the specific customers driving the surge in demand. FERC chose this route, six tailored orders rather than one national rule, because it moves faster and lets each region address its own circumstances.
Why Does This Issue Come Down to Who Pays?
The heart of the matter is cost allocation, the rules that decide which customers pay for new grid infrastructure. When a large load connects, it often forces expensive upgrades to substations, transmission lines, and transformers. The question FERC is forcing each region to answer is how much of that cost the new load should bear, rather than spreading it across all ratepayers, as the U.S. Department of Energy framed in the directive that started the process. The federal framework that prompted the action recommended assigning 100 percent of network upgrade costs to the interconnecting load, a standard that, if adopted, would keep data-center-driven expansion off other customers' bills.
For a commercial property owner, that is the entire point. Grid costs have been rising for every customer, and independent monitors have tied a growing share of those increases to data-center demand. A rule that makes large loads pay their own way protects the office, industrial, retail, and multifamily owners who otherwise subsidize the buildout through higher rates and demand charges. The outcome is not guaranteed, and the balance each region strikes between speeding data centers onto the grid and shielding existing customers is the variable worth watching.
What Does FERC Want Each Region to Fix?
FERC asked each operator to address the same set of problems, tailored to its region. Five areas recur across the orders. The first is the study and connection process itself, including how deposits work and whether a large load's demand is studied alongside the generation meant to serve it. The second is cost responsibility, the who-pays question, for the network upgrades a large load requires. The third is the treatment of co-located load, meaning a data center built directly next to a power plant to draw from it, an arrangement that raises questions about who still pays for grid access. The fourth is the terms of transmission service a large load receives. The fifth is generation adequacy, ensuring enough power supply exists to serve both new large loads and the customers already on the system.
That last point connects the rules directly to reliability. A region that connects gigawatts of new data-center demand without securing the generation to match risks the shortfalls that drive up prices and threaten outages, costs that fall on every tenant and every operating budget in the region.
Why Does It Play Out Differently by Region?
The rules will not land uniformly, because the regions started in different places. FERC credited two operators, PJM and SPP, for progress already made and gave them narrower directives, according to a review of the tailored orders. SPP, for example, has already created a service that lets a large load connect on a temporary basis for up to seven years while the permanent grid upgrades it needs get built. Other regions are starting closer to the beginning.
For owners and site selectors, that regional variation becomes a practical factor. The cost, speed, and certainty of connecting a large power user will differ from one market to the next, which shapes where data centers, and the tax base and grid stress they bring, choose to land. A market that resolves these rules clearly and early gains an advantage in attracting large investment, while also setting the terms that protect its existing ratepayers. Planners weighing large developments should track how their region answers FERC, because the answer affects both economic development and the bills of everyone already connected.
Where Does the Situation Stand Now?
The proceedings are active and moving. Each region faced an August 17 deadline to either defend its existing rules or file reforms, and FERC is reviewing those responses through the rest of 2026, with the option to accept the changes, set them for hearing, or push further, as tracked in ongoing regulatory analysis. Individual states are moving in parallel: Texas directed its utility regulator and grid operator in August to audit all data-center interconnections in the state, a sign that the who-pays and reliability questions are being taken up at the state level as well as the federal one.
None of this is settled, which is the reason to watch it now rather than after the fact. The rules taking shape over the coming months will determine, region by region, whether the cost of powering the data-center boom is carried by the data centers or shared by every other customer on the grid. That distinction will show up, quietly and durably, in commercial operating budgets for years.
What Should Owners and Planners Do?
The situation is a policy story, but it carries a few concrete actions. Owners in a data-center-heavy region should factor potential rate and demand-charge changes into underwriting and budgeting, because the direction of those charges depends partly on how their region resolves cost allocation. Owners weighing onsite generation and storage gain a further reason to act, since controlling more of a building's power reduces exposure to whatever the grid rules become. Planners and municipal officials evaluating large developments should ask directly how a project's grid-upgrade costs will be assigned, and press for terms that protect existing ratepayers. And every owner should treat the coming regional rulings as information worth following, because a rule about data centers is, in the end, a rule about the bill.
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Frequently Asked Questions
What is a show-cause order, in plain terms?
It is a directive from a regulator that shifts the burden of proof onto the party being regulated. Instead of proposing a new rule and asking for input, FERC preliminarily found the grid operators' current rules inadequate and ordered each to prove its rules are still fair or to fix them. It is a faster and more forceful path than a standard rulemaking.
Why does a rule about data centers matter to a commercial property owner?
Because grid upgrade costs are shared among customers, and a growing share of recent increases traces to data-center demand. If FERC's process results in large loads paying more of their own connection costs, that relieves pressure on the rates and demand charges other commercial owners pay. If it does not, those costs continue to spread across everyone's bills.
What does cost allocation mean here?
Cost allocation is the set of rules deciding which customers pay for new grid infrastructure. When a large load triggers expensive upgrades, the question is whether that load covers the cost or whether it is spread across all ratepayers. The federal framework behind this action recommended assigning the full cost of network upgrades to the interconnecting large load.
Will the rules be the same across the country?
No. FERC issued six separate orders rather than one national rule, and each region is starting from a different point. Some operators are further along than others, so the cost, speed, and certainty of connecting a large load will vary by market, which becomes a factor in where large developments locate.
When will this be resolved?
There is no single finish line. Regional responses were due in August, and FERC is reviewing them through the rest of 2026, after which it may accept the changes, hold hearings, or push further. States are also opening their own parallel reviews, so the situation will continue developing into 2027.
