Speed to Power: FERC Gives Grid Operators Flexibility to Respond to Hyperscale Load Concerns

In June 2026, acting under Section 206 of the Federal Power Act, the Commission issued show cause orders to each of the six Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) and transmission owners in their regions, directing each to justify how its existing rates, rules, regulations, and practices adequately account for the interconnection of large and co-located loads. Alternatively, RTOs/ISOs may submit revised terms, conditions, and rates that account for large load integration, are just and reasonable, and are not unduly discriminatory.¹ Rather than initiate a nationwide rulemaking, the Commission elected to let reform efforts already underway in each RTO/ISO region continue while requiring each grid operator to defend its existing rules, regulations, and procedures or develop new ones. The Commission's approach lets each market, which best understands its own system, propose market-specific solutions before the Commission imposes any reforms.

The Commission's action traces back to October 2025, when the U.S. Department of Energy, acting under Section 403 of the Department of Energy Organization Act, directed FERC to issue an Advance Notice of Proposed Rulemaking (ANOPR) on the interconnection of large loads to the transmission system. The ANOPR pointed toward nationwide rulemaking, and in April 2026 FERC announced that it would act on the ANOPR by June. In the following months, the Commission addressed large load issues case by case in individual dockets, including its December 2025 order directing PJM Interconnection, L.L.C. (PJM) to adopt clear rules for co-located load, as well as its January 2026 approval of Southwest Power Pool, Inc. (SPP)'s High Impact Large Load initiative. Though an ANOPR normally proceeds through formal notice and comment, the Commission, instead, issued the June 2026 targeted Section 206 show cause orders. Its decision is expected to yield faster and more tailored reform.

What FERC Is Directing the Grid Operators to Do

Through Section 206 show cause orders, the Commission identifies five categories of reform that each RTO/ISO must either demonstrate it already employs or proposes to adopt, to accelerate service to large loads while protecting other transmission customers from the costs those loads cause. In broad strokes, the orders direct the grid operators to:

1. Establish clear and efficient application and study processes. Operators must show that their tariffs already provide, or propose to add, provisions addressing the application process, study procedures, and ongoing operational requirements that apply to large load transmission service, including the evaluation of alternative transmission technologies (often called grid-enhancing technologies, such as dynamic line ratings and advanced power flow control) that can add capacity to existing lines more quickly and at lower cost than traditional network upgrades. If alternative transmission technologies are not used, the operator must explain the reason for not doing so.
    
2. Provide cost transparency and guard against cost shifting. Operators must show that their tariffs already make the costs of connecting large loads public, accessible, and clear and must demonstrate that their rules adequately prevent cost shifting among transmission customers or develop adequate cost transparency and anti-cost shifting rules. A key component of these reforms is the required development of pro forma cost recovery agreements designed to ensure that, if infrastructure is built to serve a data center that does not ultimately come online, other transmission customers are not responsible for stranded costs.
    
3. Adopt clear co-location and behind-the-meter rules. Operators must show that their tariffs already contain, or propose to add, terms and conditions of service for co-location arrangements and for loads served by behind-the-meter generation.
    
4. Provide new transmission services for flexible large loads. Operators must show cause why their tariffs remain just and reasonable without two specifically identified transmission services that reflect the ability of certain large loads to limit their use of the transmission system, namely (1) an interim, non-firm network service available while network upgrades are built and (2) permanent firm and non-firm contract demand service, or propose such revisions.
    
5. Study load and generation together in future planning. Operators must show that their tariffs already provide, or propose to develop, study pathways that evaluate generating facilities serving electrically proximate² large loads and co-located loads together with those loads, to avoid unnecessary and costly transmission build-out and shorten the time to connect.

In addition, the Commission directed each RTO/ISO to explain how it intends to ensure that adequate generation will be available to serve existing and new large loads.

The effective refund date for the Section 206 proceedings is June 24, 2026.

What to Expect Next

In issuing these Section 206 show cause orders, the Commission recognized that some RTO/ISOs are on an accelerated path to developing region-specific meaningful reforms to meet exponential growth in load demand, including a strong desire for faster interconnection of large loads, while other regions are still catching up. By electing to issue individualized orders, rather than engage in rulemaking, the Commission has embraced widening regional variation as the more efficient mechanism to spur widespread reform. The Commission anticipates some RTO/ISOs will respond to the orders by making separate Section 205 filings proposing revisions to their tariffs. Whatever the form of the response, once the RTO/ISOs make their filings, the Commission is expected to promptly evaluate them and to quickly establish appropriate reforms.

This bottom-up approach to large load interconnection within the RTO/ISO markets will play out over the next few weeks and months, and diligent monitoring of the Section 206 proceedings is imperative for any stakeholder wanting to keep pace with developments. The orders, which cover two-thirds of load subject to jurisdictional rates, may be only a first step in FERC's attempt to address reliability and affordability challenges posed by the unprecedented addition of large loads projected over the next few years. Commissioner Lindsay S. See, for instance, noted that "real-world experience with new transmission services for co-located load may clarify if future action becomes needed to address potential cost shifts"; and FERC Chairman Laura V. Swett, in her concurrence, stressed that the orders "do not foreclose the possibility of a future rulemaking" or bar the Commission from "acting on filings made under Sections 205 and 206."

Though not directly impacted, transmission providers outside the six RTO/ISO regions targeted by the orders may still want to monitor these proceedings. Chairman Swett said that she is "under no illusion that the challenges discussed in [the] orders are somehow unique to the RTO/ISO regions" and encouraged those providers and other stakeholders outside the six RTO/ISO regions "to make individual filings to address the issues" addressed in the orders.

Key Upcoming Deadlines

The Section 206 show cause orders establish several deadlines that are important for stakeholders to track:

• Any interested person wanting to participate in the Section 206 proceedings must intervene no later than July 9, 2026.
   
• RTO/ISOs must submit a detailed informational report on any proposals being considered to address resource adequacy by July 20, 2026.
   
• RTO/ISOs must file their response to the orders by August 17, 2026.
   
• Stakeholders must file any comments on the RTO/ISO response filings by September 16, 2026.

Importantly, these dates could be affected by a request from an RTO/ISO to hold in abeyance, for up to 90 days, all or certain aspects of Section 206 proceedings, including the deadline to respond to the orders. A request to hold any part of the proceedings in abeyance must be made no later than August 3, 2026.

For more information or questions, please contact J. Ashley Cooper, Leopoldo J. Yanez, J. Boone Aiken IV, or the Baker Donelson attorney with whom you regularly work with.

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¹ FERC issued substantively similar show cause orders to each of the six RTOs/ISOs and their transmission owners: PJM Interconnection, L.L.C. (Docket No. EL26-67-000); Midcontinent Independent System Operator, Inc. (Docket No. EL26-70-000); Southwest Power Pool, Inc. (Docket No. EL26-68-000); California Independent System Operator Corporation (Docket No. EL26-71-000); ISO New England Inc. (Docket No. EL26-72-000); and New York Independent System Operator, Inc. (Docket No. EL26-69-000).

² The orders use the concept of "electrically proximate" large load to describe a large load located close enough to an associated generating facility that the two can be studied together, reducing grid impacts and the need for network upgrades. For example, under SPPs current High Impact Large Load Generation Assessment process, the generating facility and the large load it serves must be located no more than two substations apart.