FERC issued show-cause orders to large load (AI datacenter) interconnection applicants, signaling grid bottleneck concerns.
The rapid growth of data centers, advanced manufacturing, and other energy-intensive industries is reshaping electricity demand across the United States. In response, the Federal Energy Regulatory Commission (FERC) has taken a significant step toward improving how large loads connect to the transmission system.
On June 18, 2026, FERC issued a series of Federal Power Act Section 206 show cause orders directing organized market operators to justify or reform their existing rules relating to large load interconnection. The orders reflect FERC's preliminary view that current frameworks may be inadequate to address reliability, cost allocation, and timing challenges associated with large load growth.
FERC's June 18, 2026, show cause orders require each RTO/ISO to demonstrate whether its existing tariff provisions adequately enable the efficient and reliable interconnection of large loads. If an RTO/ISO cannot make that showing to FERC's satisfaction, FERC expects it to propose tariff revisions under Section 205 of the Federal Power Act. These tariff revisions are developed through stakeholder processes and subject to FERC review. RTOs/ISOs may request and receive extensions of these timelines from FERC, though FERC may decide to strictly enforce these deadlines.
FERC's actions are driven by a sharp increase in electricity demand from data centers, AI infrastructure, and advanced manufacturing, coupled with the perception that interconnected transmission owners within RTO/ISO footprints were not keeping up with processing such requests. The Commission identified several limitations in existing frameworks, concluding that existing rules may not adequately address reliability risks, cost allocation concerns, or interconnection delays.
For purposes of the show cause orders, FERC defines a large load as a new or expanded load for which the maximum electricity consumption is at least 100 megawatts. While this definition provides a baseline, each RTO/ISO may propose alternative definitions to FERC, subject to demonstrating that they are just and reasonable.
FERC directed RTOs/ISOs to assess and, if necessary, revise their tariffs across several key areas affecting large load interconnection. These include establishing baseline timelines for major interconnection milestones, evaluating cost allocation methodologies to ensure they reflect cost causation principles, accelerating the feasibility study process, clarifying the role of network upgrades versus local upgrades, and standardizing procedures for operational acceptance and testing. Collectively, these reforms are intended to accelerate interconnection timelines while preserving reliability and cost causation principles.
FERC also addressed co-located loads—end-use customers physically connected to a generating facility on the customer's side of the point of interconnection. These structures, sometimes proposed in data center interconnection strategies as a temporary or permanent measure, raise several regulatory issues regarding tariff treatment, cost allocation, and network reliability. FERC has directed RTOs/ISOs to establish clear tariff provisions governing these arrangements.
The show cause orders apply only to FERC-jurisdictional RTOs/ISOs: ISO New England, PJM Interconnection, the Midwest Independent Transmission System Operator, the Southwest Power Pool, and CAISO. They do not apply to ERCOT or regions where transmission utilities have not ceded operational control of their facilities to an ISO/RTO—such as much of the Southeast, Northwest, and portions of the Southwest—though FERC has encouraged voluntary adoption of similar reforms. Rather than pursuing a nationwide rulemaking, FERC used its authority under Section 206 of the Federal Power Act to require region-specific responses. This approach reduces the possibility of unnecessary uniformity but introduces the possibility of more inconsistencies across RTOs/ISOs, depending on how each entity responds and how FERC evaluates those responses.
The show cause process will unfold over the coming months, with RTOs/ISOs expected to file responses demonstrating whether their existing tariffs adequately serve large load interconnection, and to propose amendments as necessary. Because these processes are region-specific and stakeholder-driven, timelines and outcomes may vary significantly across markets. Stakeholder processes at the RTO/ISO level may be crucial, and many decisions will be made during those processes that FERC may choose not to change or reverse even if there is opposition once those proposals are submitted for FERC's review.
For data center developers, FERC's recent show cause orders signal both regulatory momentum and near-term opportunities. The orders underscore the Commission's commitment to reassessing large load interconnection frameworks, potentially opening pathways for faster processing and clearer cost allocation. However, they also introduce uncertainty regarding how each RTO/ISO will respond and whether their proposed solutions will satisfy FERC's expectations. While the proceedings introduce near-term uncertainty, they are expected to produce a more transparent, though not necessarily uniform, framework for large load interconnection.
FERC's June 2026 show cause orders represent a significant development in the regulation of large load interconnection. By requiring RTOs and ISOs to reassess their tariff frameworks, the Commission is seeking to balance faster interconnection timelines with reliability and equitable cost allocation. For companies pursuing data center interconnection or other energy-intensive projects and other stakeholders, early engagement in stakeholder processes and proactive planning will be critical to navigating evolving requirements and securing timely access to transmission service.