High Level
The U.S. interconnection landscape saw decisive action this
week as federal and state regulators responded to the rising demands of data
center growth and mounting queue backlogs. The Federal Energy Regulatory
Commission spotlighted structural weaknesses in queue and transmission
alignment. Meanwhile, Ohio implemented new rules to govern how large-load
customers, especially data centers, access the grid. A key RMI analysis
emphasized the urgency of reform, highlighting the technical, financial, and
procedural hurdles that continue to prevent most clean energy projects from
reaching completion. Together, the developments underscore a sector-wide pivot
toward speed, fairness, and infrastructure discipline.
Full View
Chang warns that queue and transmission misalignment
threatens competitive markets
• What happened:
FERC Commissioner Judy Chang warned that misaligned interconnection and
transmission planning processes could undermine competitive power markets and
slow infrastructure buildout.
• Who did it:
Commissioner Chang, speaking at a WIRES event on July 10, 2025.
• Why they did it:
To call attention to short-term queue fixes, cost allocation disputes, and
permitting delays that risk fragmenting federal and state energy coordination.
• Stakeholder views:
“I don’t really love short-term fixes,” Chang said. “I prefer better processes
— fair and competitive processes.” She also urged caution in awarding
incentives, adding, “Don’t be greedy.”
• What happens next:
Chang called for faster planning, permitting, and design across all grid
infrastructure sectors. She also urged utilities to explain the consumer value
of new investments.
Utility Dive, “Misaligned interconnection, transmission planning
could hurt competitive markets: FERC’s Chang,” July 11, 2025
Ohio regulators approve AEP Ohio’s data center
interconnection framework
• What happened: The
Public Utilities Commission of Ohio approved a settlement requiring AEP Ohio to
resume data center interconnections under updated tariff rules.
• Who did it: The
Ohio PUC, in a unanimous vote informed by a settlement among AEP Ohio,
commission staff, the Ohio Consumers’ Counsel, the Ohio Energy Group, and
others.
• Why they did it:
To ensure that large-load customers contribute fairly to the grid’s expansion
and protect other ratepayers from bearing excessive costs.
• Stakeholder views:
– PUCO Chair Jenifer French said, “Today’s order represents a well‑balanced
package that safeguards non‑data center customers on an industrial and
residential level while establishing a dependable and reasonable environment
for data centers to continue to thrive.”
– Lucas Fykes of the Data Center Coalition criticized the outcome as a “stark
departure from solutions enacted in other key data center markets,” and added
that the industry “is committed to paying its full cost of service.”
– Maureen Willis of the Consumers’ Counsel stated, “We are grateful that the
PUCO acted today to protect residential consumers from bearing excessive costs
caused by data centers. It’s a step in the right direction for Ohio consumers.”
– AEP Ohio President Marc Reitter said, “We are glad the PUCO agrees that it is
critical to align data centers’ demand for energy with the infrastructure costs
needed to support their growth in Ohio.”
• What happens next:
AEP Ohio must file revised tariffs and lift its moratorium immediately. New
obligations, including minimum billing at 85 percent capacity, collateral
requirements, and exit fees, will phase in over four years and remain in place
for up to 12 years.
Utility Dive, “Ohio regulators approve AEP data center
interconnection rules,” July 10, 2025
Power
Magazine, “Regulator Approves AEP Ohio’s Landmark Data Center Tariff,” July 11,
2025
Washington
Post, “Ohio Rules That Data Centers, Not Residents, Must Pay Infrastructure
Costs,” July 10, 2025
Signal
Ohio, “Data Centers, Not Ohioans, Must Pay Costs of New Power Grid
Investments,” July 10, 2025
RMI flags delays and low success rates as core
interconnection challenges
• What happened: On
a July 8 podcast from the Kleinman Center, RMI’s Sarah Toth Kotwis discussed
how regulatory bottlenecks, speculative queue behavior, and limited grid
capacity are delaying clean energy deployment and threatening grid reliability.
• Who did it: The
interview featured Kotwis, Senior Associate at RMI’s Clean Competitive Grids
team, in conversation with the University of Pennsylvania’s Andy Stone.
• Why they did it:
With U.S. interconnection queues now holding more than twice the current
generation fleet’s capacity, the goal was to explain systemic delays and
evaluate whether reforms under FERC Order 2023 can unlock progress.
• Stakeholder views:
Kotwis cited a Lawrence Berkeley National Lab finding that just 20 percent of
projects entering queues between 2000 and 2018 reached commercial operations by
2023. She emphasized that only with transmission expansion, queue reform, and
smart use of grid-enhancing tech can project success rates improve.
• What happens next:
Continued rule implementation under Order 2023 will be critical. Kotwis urged
grid operators to embrace technologies like dynamic line ratings and topology
optimization, while improving data transparency and exploring surplus
interconnection pathways to accelerate approvals.
Kleinman Center for Energy Policy, “Will Interconnection Reform
Unlock the Grid?” July 8, 2025
What’s the So What?
This week’s developments mark a rare but necessary blending
of two threads in interconnection policy: generation interconnection and load
interconnection. While the former typically dominates regulatory and media
attention, the latter is becoming just as critical as data centers and other
high-load users reshape grid planning and capacity needs. Recognizing that
interconnection involves both supply and demand connections is essential to
designing fair, durable, and scalable infrastructure rules.
FERC Commissioner Chang emphasized that short-term queue
fixes, cost disputes, and permitting delays threaten to erode confidence in
competitive markets. This concern is especially relevant as some states
consider exiting regional transmission organizations. Her remarks highlight
that interconnection backlogs are not just technical issues but also political
and economic stress points for the entire clean energy transition.
In Ohio, regulators are responding with tailored rules for
data center customers. The AEP-specific tariff reforms aim to protect
ratepayers while enabling large-load growth. This demonstrates that
interconnection policy now operates on both sides of the meter. It governs not
only who supplies the grid but also who consumes from it, and under what terms.
Meanwhile, RMI’s analysis serves as a reminder that systemic
reform remains incomplete. Even with cluster studies and readiness screens in
place, most generation projects still fail to reach commercial operation.
Without significant transmission buildout, improved data transparency, and
widespread use of grid-enhancing technologies, the system risks producing
studies and applications without delivering actual power.
If the sector takes this week’s warnings seriously and
adopts best practices from ERCOT and regions implementing Order 2023,
interconnection can become a tool for enhancing resource adequacy and market
stability. If reforms remain shallow or inconsistently applied, the gap between
policy ambition and project completion will continue to grow. This gap
increases risks to both reliability and investor confidence.
Bibliography
Utility Dive. “Misaligned interconnection, transmission
planning could hurt competitive markets: FERC’s Chang.” July 11, 2025. https://www.utilitydive.com/news/interconnection-transmission-planning-wires-ferc-chang/752775/
Utility Dive. “Ohio regulators approve AEP data center interconnection rules.”
July 10, 2025. https://www.utilitydive.com/news/Ohio-regulators-approve-aep-data-center-interconnection-rules/752690/
Power Magazine. “Regulator Approves AEP Ohio’s Landmark Data Center Tariff.”
July 11, 2025. https://www.powermag.com/regulator-approves-aep-ohios-landmark-data-center-tariff/
Washington Post. “Ohio Rules That Data Centers, Not Residents, Must Pay
Infrastructure Costs.” July 10, 2025. https://www.washingtonpost.com/technology/2025/07/10/ohio-data-centers-energy-costs/
Signal Ohio. “Data Centers, Not Ohioans, Must Pay Costs of New Power Grid
Investments.” July 10, 2025. https://signalohio.org/data-centers-not-ohioans-must-pay-costs-of-new-power-grid-investments/
Kleinman Center for Energy Policy. “Will Interconnection Reform Unlock the
Grid?” July 8, 2025. https://kleinmanenergy.upenn.edu/commentary/podcast/will-interconnection-reform-unlock-the-grid/