Energy Department asserts FERC authority to act on interconnection delays

1. Large-load interconnections are a “critical component of open access transmission service.” This is an area FERC Order 888 spelled out in 1996, defined by requiring utilities to have open access transmission tariffs, or OATT, on file with FERC.
2. The interconnection of large loads to the grid falls under FERC’s authority to monitor wholesale electricity rates.
3. DOE’s directive does not impact states authority over retail electricity prices.
4. FERC has exclusive jurisdiction over the transmission of electric energy in interstate commerce, including the rates, terms and conditions of transmission service and all facilities for transmission or sale of electric energy at wholesale in interstate commerce.

The DOE directive to FERC

The DOE has directed FERC to initiate rulemaking that would grant FERC jurisdiction over the interconnections of loads larger than 20 megawatts (MW), with the goal of “rapidly” accelerating their addition to the grid. Wright asked FERC to take final action by April 30, 2026.

DOE said the move is driven by what it sees as load growth driven by artificial intelligence and a broader push for more US manufacturing, which the department described as requiring “unprecedented and extraordinary quantities of electricity.”

I couldn’t agree more. The demand pull from data centers has been much discussed, and their appetite is voracious, with price being no object. The DOE’s request signals recognition of the issue and its intent for FERC to play a more assertive role in power supply.

However, DOE’s directive raises many questions within the utility sector.

“This is quite unusual,” said Nick Guidi, a senior attorney with the Southern Environmental Law Center, in an email. “DOE has the power under Section 403 of the Department of Energy Organization Act to propose rules to FERC. There’s no obligation for FERC to adopt them, but I believe they have to respond.”

“It is extremely rare that DOE files a proposed rule at FERC,” said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, in a post on X. “This one is, legally speaking, particularly odd. It also gives FERC a teeny tiny boost in the pending litigation about Order No. 1920 (regional transmission planning).”

Why this matters

At the end of 2024, the interconnection queue stood at an estimated 2,290 gigawatts, according to the Lawrence Berkeley National Laboratory, a DOE national laboratory. Getting this pent-up supply into the market would help ease some of the demand-pull pressure on electricity prices.

Concurrently, market-driven pricing incentives for grid operators to connect stranded power remain intriguing. This approach would allow stranded power generators – producers able to generate electricity but unable to deliver it adequately to consumers – to bid for connection rights from incumbent grid operators, with those rights priced on the basis of the forward curve in regional grids.

For example, if the Midcontinent Independent System Operator (MISO) is trading at $75 per megawatt hour (MWh), a stranded operator might be willing to pay $20/MWh for the right to connect to the grid and sell into the market.

In this case, the $20 isn’t the cost of generation or delivery; it represents the value the generator assigns to gaining access to the grid and capturing the remaining $55 margin once connected.

It remains to be seen how FERC will respond now that DOE has thrown down the gauntlet to claim a larger role in the interconnection process. The move marks a potential step in the right direction for energy-intensive manufacturers such as EGA and Century Aluminum, which are eager to build smelting capacity in the US.