Questioning The Recent Reclassification of Electricity Transmission Service to PJM Customers
By: Kyle Shepherd
Last month, the Trump Administration announced a historic $15 billion initiative to expand the nation’s electricity supply and safeguard energy affordability, while also supporting the development of data center demand. On the supply side, the initiative involves grid operator PJM Interconnection, L.L.C. (“PJM”), which provides electricity across thirteen Mid-Atlantic and Midwest states, holding “emergency” auctions for the construction of new power plants. Meanwhile, on the demand side, the agreement provides incentives for those existing power plants to remain in service while imposing transmission limits on high-load customers, including data centers which have rapidly emerged as major electricity consumers due to the growth of artificial intelligence and massive corporate investment.
PJM has developed three new types of transmission services that it must offer as alternatives to the traditional Network Integration Transmission Service. These are available for residential customers who have experienced rising electricity prices over the last year. The services include: interim non-firm service, which provides transmission temporarily while infrastructure upgrades are completed; firm contract demand service, which benefits customers with on-site generation; and non-firm contract service, which provides transmission only after higher-priority commitments are met.
The Federal Energy Regulatory Commission (“FERC”) has supported the development of differentiated ratepayer frameworks consistent with the “just, reasonable, and in the public interest” principles embedded into federal regulatory laws, such as the Public Utility Regulatory Policies Act (“PURPA”) and the Federal Power Act (“FPA”). Federal law allows for discrimination among classes of ratepayers based on “factual differences between customers,” as recognized in Cities of Newark v. FERC (1985). For example, in Block Tree Properties v. Grant County PUD (2020), a federal court upheld a higher “evolving industries” rate for cryptocurrency miners, finding it non-discriminatory because those customers imposed unique costs and risks on the grid. The growing number of high-load data center customers may justify a similar reclassification, distinguishing them from residential customers within PJM’s interstate network.
While this new agreement between PJM and the Trump Administration aims to protect residential ratepayers, it also seeks to benefit large technology corporations. A press release from the U.S. Department of the Interior described the initiative as a “first-of-its-kind partnership” with “a coalition of leading technology companies [that] has committed to funding this new generation capacity.”
However, non-transparent deal-making and opaque agreements raise concerns about the integrity of these “emergency” auctions. A forthcoming law review article from the University of California proposes a demand-side connect-and-manage approach, in which high-load consumers can trade for electricity on secondary markets. This model resembles the interim service offered under PJM’s new framework, but it is much more expedited. While the article does not fully develop the structure of these secondary markets, its endorsement of a secondary market of private transactions operating alongside the broader public electricity transmission system raises questions about the fundamental principles of energy law that have long shaped the market.
Scholars Alessandra Krass and Dave Owen framed the argument against the fundamental assumption that a utility has a duty to serve all the customers in its territory. Drawing on regulatory approaches from natural gas and water systems, they propose allocating electricity based on temporal priority and contractual agreements, which may be more feasible in electricity markets than in other resource systems. However, in the current push for emergency auctions to build power plans, PJM’s framework may reduce incentives for electricity conservation and deprioritize the need for investor contingency plans. Furthermore, in light of climate change and political pressure, federal lawmakers must reinforce the duty to serve the public and protect regional utilities from undue influence by large tech corporations.
FERC, as an independent federal agency, is meant to function as a “traffic cop” within interstate electricity markets. When new classes of transmission ratepayers are created within monopolistic utility territories, FERC must ensure that essential public utilities are not pressured into rushed infrastructure projects or a return to more carbon-intensive energy sources.
This article was written by PECC's Energy and Climate Law Scholar Kyle Shepherd, a law student at Elisabeth Haub School of Law at Pace University. It was originally published on February 27, 2026, in Volume 1, Issue 4 of the R.E.A.C.T. by PECC Newsletter.
Editors: Mercè Martí I Exposito, Frances Gothard, Carington Lowe