M-2025-3054271

Docket No. M-2025-3054271 before the Pennsylvania Public Utility Commission concerns the interconnection and tariff design for large load customers, particularly in the context of rapid growth in data centers and other high-demand facilities. The proceeding aims to address how best to manage the significant new electrical demand these customers bring, while balancing economic development opportunities, grid reliability, rate stability, and fair cost allocation among all ratepayers.

Key issues and themes include:

- The scale of new large load requests, with utilities such as PPL Electric seeing over 9 GW of new data center load requests, more than doubling current system peak in the next 5-6 years 1.
- The need for transparent and equitable cost allocation, ensuring that costs for upgrades specific to large load customers are not unfairly shifted onto existing ratepayers, while also recognizing potential system-wide benefits and rate reductions for other customers due to increased load 1, 2.
- The importance of robust protections against stranded costs, including financial guarantees, minimum contract terms, and security requirements for large load customers 1.
- Consideration of innovative technologies and flexible load management (e.g., AI-powered demand response, battery storage) to expedite interconnections and optimize grid utilization, potentially reducing the need for costly infrastructure upgrades 3, 4.
- Alignment of state tariffs and interconnection processes with PJM market reforms (such as CIR transfers and Option 6) to accelerate replacement generation and support resource adequacy 5.
- Stakeholder emphasis on defining "large load" (often suggested as 25 MW or above), standardizing requirements, and preventing the circumvention of tariff obligations via load splitting 1.
- Broader economic, security, and infrastructure impacts, including opportunities for job creation, technological advancement, and addressing emerging cyber and physical risks associated with concentrated large loads 2, 6.
- The need for improved transparency and predictability in interconnection processes, especially for sectors like EV fast charging that increasingly fall under "large load" definitions 7.

The docket features input from a wide range of stakeholders: utilities, consumer and small business advocates, data center operators, technology companies, energy suppliers, and public interest organizations. The proceeding is intended to guide the Commission in developing a model tariff and interconnection framework that supports Pennsylvania's competitiveness for large load investments while protecting existing customers and maintaining grid reliability.

Key events and submissions in the Pennsylvania Public Utility Commission proceeding regarding interconnection and tariffs for large load customers (Docket No. M-2025-3054271) include:

- March 27, 2025: Chairman DeFrank moved the Commission to convene an en banc hearing to address the increasing number of large load customers, such as hyperscale data centers 1.

- April 12, 2025: The Commission issued a secretarial letter scheduling the en banc hearing for April 24, 2025, and establishing deadlines for filing comments and reply comments regarding the prudent design of a large load customer model tariff 2.

- April 23, 2025: Deadline for individuals selected as panelists to file their testimony to the docket 3, 4, 5.

- April 24, 2025: The en banc hearing was held at the Commonwealth Keystone Building in Harrisburg, PA. The hearing included written submissions and oral testimony from various stakeholders, including utilities and market participants 1, 4, 5.

- May 12, 2025: The Energy Association of Pennsylvania (EAP) requested a 10-day extension for both comments and reply comments deadlines 6.

- May 15–16, 2025: The Commission granted EAP’s request, extending the comment deadline to June 6, 2025, and the reply comment deadline to June 23, 2025 2, 1.

- June 6, 2025: Extended deadline for initial comments on the design of the large load customer model tariff 2.

- June 23, 2025: Extended deadline for reply comments in the proceeding 2.

This timeline covers the main procedural milestones and comment deadlines established for this docket as of June 2025.

The docket identifies several key areas of growth, primarily:

1. Data Centers (including hyperscale and AI-driven centers)
2. Electrification of Transportation (notably, high-capacity EV charging)
3. Broader Industrial and Manufacturing Load Growth (including clean energy manufacturing and other electrified industries)

Key considerations related to each area:

Data Centers:
- Growth: Data centers are forecast to more than double existing system peak load in some utility territories, with requests for new load in Pennsylvania in excess of 9 GW (compared to a current summer peak of 7.5 GW for PPL Electric), and could make up to 37% of Duquesne's network service peak load. PECO has projects that could increase distribution load by nearly 40% 1, 2, 3.
- Considerations:
- Economic opportunity: Job creation, economic growth, technological advancement, rate stability, and national security benefits.
- Cost Allocation: Ensuring that large load customers pay their fair share of interconnection and upgrade costs, and that costs are not unfairly shifted to existing customers.
- Resource Adequacy: Ensuring sufficient generation and transmission capacity to meet increased demand, especially with the potential for data center load to double utility system peaks within 5-6 years.
- Reliability: Grid reliability, need for prudent planning, and consideration of flexible or innovative tariffs to accommodate fast growth.
- Ratepayer Protection: Mechanisms to protect against stranded costs if anticipated load does not materialize (e.g., requiring customer commitments, letters of credit, or other securities) 1, 2, 3.

Electrification of Transportation (EV Charging):
- Growth: High-capacity direct current fast chargers (DCFCs) for EVs are increasingly considered large load interconnections.
- Considerations:
- Interconnection Delays: Developers face uncertainty due to inconsistent utility timelines and upgrade requirements.
- Transparent Cost Recovery: Need for clear cost structures and prudent standby rates to avoid undue burdens on other customers.
- Best Practices: Adoption of best practices from other jurisdictions to enable efficient and timely interconnection of large EV charging loads 4.

Broader Industrial and Manufacturing Load Growth:
- Growth: Includes clean energy manufacturing, electrified industries, and new sectors like hydrogen hubs, contributing to rapid and sometimes unanticipated load increases.
- Considerations:
- Climate Policy: Managing the balance between meeting new demand and advancing decarbonization goals; ensuring that rapid load growth does not result in extended reliance on fossil fuel generation.
- Resource Planning: Utilities must use integrated resource plans and rate cases to assess and plan for new demand, considering investments in clean energy, storage, and transmission alongside demand management 5, 5.

General Considerations Across All Growth Areas:
- Tariff Design: Ensuring tariffs reflect cost-causation, non-discrimination, and efficiency so that large new loads do not create undue burdens for existing customers 2, 3.
- Grid Modernization: Large loads provide impetus for reinvestment and modernization of the grid, which can benefit all ratepayers if managed prudently 6.
- Stakeholder Engagement: The importance of open, non-discriminatory access and active engagement from utilities, regulators, and large customers in designing solutions that accommodate growth while protecting the public interest 3.

In summary, the docket highlights rapid and significant load growth from data centers, EV charging infrastructure, and broader industrial electrification. Key considerations include economic opportunities, fair cost allocation, resource adequacy, reliability, ratepayer protection, climate policy alignment, and the need for carefully designed tariffs and stakeholder engagement.

The key stakeholders in the Pennsylvania Public Utilities Commission docket on interconnection and tariffs for large load customers include:

- Electric distribution companies (EDCs) and utilities, such as PECO Energy Company and members of the Energy Association of Pennsylvania (EAP)
- Large load customers, especially data centers and technology companies
- Independent data center developers
- Distributed energy technology providers (e.g., Calibrant Energy)
- Consumer advocates, including the Office of Small Business Advocate (OSBA)
- Public interest groups and ratepayer advocates
- The Electrification Coalition (focused on EV charging infrastructure)
- State commissioners and utility regulators

Stakeholder positions and proposals:

1. Electric Distribution Companies (EDCs) & Utilities:
- PECO and other EDCs recognize the economic opportunities brought by data centers but emphasize the unprecedented challenges to grid reliability and system planning from large load interconnections. They are actively working with stakeholders and suggest the need for prudent tariff design to balance benefits and protect existing customers 1.
- The EAP requested more time for stakeholders to comment, suggesting a collaborative approach to the proceedings 2.

2. Large Load Customers (Data Centers & Developers):
- Data centers seek fair, predictable tariffs and the ability to use technologies like battery storage to manage demand and participate in demand response. They are generally in favor of flexible interconnection agreements and innovative rate structures that acknowledge their operational flexibility and technological capabilities 3.

3. Distributed Energy Providers (e.g., Calibrant Energy):
- Support reforms that would enable the use of behind-the-meter battery storage to help data centers avoid increasing coincident peaks and improve grid reliability, advocating for non-standard, flexible interconnection agreements 3.

4. Public Interest & Consumer Advocates:
- Express concern about potential cost-shifting from speculative or short-lived data center investments onto existing ratepayers and advocate for transparency, fair cost allocation, and safeguards against undue burdens on current customers 4, 1.
- The OSBA highlights the need to balance economic growth with the protection of existing ratepayers and supports just and reasonable tariffs that prevent undue burden 5.

5. Electrification Coalition:
- Urges explicit inclusion of EV charging infrastructure as a stakeholder in large load interconnection discussions, emphasizing the need for transparent cost structures and efficient interconnection processes 6.

6. State Commissioners and Regulators:
- They pose targeted questions to all stakeholders about contract structures, risk management, cost allocation, flexibility incentives, and transparency in tariff design, without taking explicit positions but seeking stakeholder input to inform policy decisions 7, 7.

Positions on Proposals:
- Support for flexible, technology-enabled interconnection and tariff frameworks: Data centers, distributed energy providers, and some utilities are in favor.
- Concern about cost-shifting and need for transparency: Consumer advocates, public interest groups, and some commissioners are focused on ensuring fair allocation and safeguarding existing ratepayers.
- Call for explicit inclusion of emerging large loads (like EV charging): Electrification Coalition is in favor.

No stakeholder is explicitly "against" data center development; rather, the opposition is focused on specific aspects such as unfair cost allocation, lack of transparency, or inadequate safeguards for existing ratepayers. Most positions call for balancing economic opportunities with prudent regulation and consumer protection.

The docket discusses several financial and timeline risks and concerns related to the rapid interconnection and integration of large load customers, such as data centers, into Pennsylvania’s electric grid:

Financial Risks and Concerns:
- Stranded Cost Risk: Utilities and regulators are concerned about the risk of stranded costs if large customers do not fulfill their load commitments after significant infrastructure investments. To mitigate this, utilities like PPL Electric require load commitment guarantees and security (such as letters of credit) from large customers to ensure that if the customer fails to take service as agreed, they are responsible for any unrecovered costs from system upgrades that have been socialized through transmission rates 1.
- Overbuilding and Cost Recovery: There is a risk that utilities may overbuild generation and transmission resources based on speculative or inflated load forecasts, leading to excess costs that may not be recoverable if the anticipated demand does not materialize. This can negatively impact ratepayers and exposes utilities to credit risk, as highlighted by recent Fitch Ratings warnings. Transparent, realistic load projections based on firm customer commitments are recommended to avoid unnecessary financial exposure 2.
- Cost Allocation: The appropriate allocation of costs between large load customers and existing ratepayers is a major concern. The influx of large loads can lower transmission costs for other customers if properly managed, but if upgrades primarily benefit the broader system, some costs may be socialized, raising questions of fairness and rate impact 1.
- Fossil Fuel Dependency: Rapid load growth may prompt utilities to invest in new fossil generation or delay coal plant retirements to meet capacity needs, resulting in long-term financial exposure to volatile fossil fuel markets and potentially stranded fossil assets as decarbonization policies advance 2, 3.

Timeline Risks and Concerns:
- Interconnection Delays: Data center and EV charging developers report delays and uncertainties in the interconnection process, largely due to inconsistent utility timelines, complex upgrade requirements, and lack of transparency in cost recovery policies. These delays can jeopardize project timelines and increase costs for developers 4.
- Planning Uncertainty: The unprecedented pace and scale of large load requests challenge traditional utility planning, increasing the risk of both under- and over-preparation. Large, rapid load additions can strain even the best system planning practices, leading to rushed or suboptimal investment decisions 2, 2.
- Generation Adequacy: There is concern about whether sufficient generation capacity will be available in time to meet the increased demand from large loads, especially as transmission capacity alone is not the limiting factor. This uncertainty adds risk to both reliability and financial planning for utilities and customers 1.

In summary, the key financial risks are stranded costs, overbuilding, cost allocation disputes, and fossil fuel dependency; the main timeline risks are interconnection delays, planning uncertainties, and doubts about timely generation adequacy. Transparent forecasting, contractual commitments, and stakeholder engagement are recommended to address these risks.