06 Jul
The United States is in the middle of the strongest four-year growth in electricity demand since 2000. After two decades of essentially flat load, demand is climbing again — driven by data centers, new manufacturing, and the broader electrification of the economy. That shift is reshaping how the grid is planned, paid for, and built, and it has put one question at the center of energy policy: how do we connect a wave of large new electricity users without raising costs for everyone already on the system?
On June 18, the Federal Energy Regulatory Commission took its most significant step yet toward answering it. Rather than imposing a single national rule, the Commission issued show-cause orders to all six organized regional markets — PJM, MISO, SPP, CAISO, ISO-NE, and NYISO — directing each to demonstrate that its rules for interconnecting large loads are just and reasonable, or to fix them. Regions have 60 days to respond and 30 days to file a separate briefing on resource adequacy.
It’s a constructive move, and the reasoning behind it is sound. As FERC framed it, the goal is to protect existing customers from the cost-shifting that can occur when very large new users connect to the system on unclear or inconsistent terms. Clear, fair interconnection rules — built region by region, tailored to how each market actually operates — are exactly what’s needed as demand climbs at a pace the grid hasn’t seen in a generation.
The crux of the matter is cost allocation: who pays for what when a new large load arrives. Get it wrong, and the costs of new connections can land on households and existing businesses that had nothing to do with the new demand. Get it right, and large loads can connect on terms that are fair to them and to everyone else. This is the harder, less visible part of interconnection policy, and it’s the right thing for FERC to be focused on. Large loads aren’t a problem to be managed away — connected on the right terms, they’re partners in building a stronger, more resilient grid.
But there’s a limit to what interconnection rules alone can accomplish. Rules govern how something connects to the grid. They don’t change how much grid there is to connect to. And the same demand growth that prompted FERC to act is the clearest signal in a generation that we do not have enough of it.
This is where the conversation has to go next. The most carefully designed interconnection process in the world still bottlenecks if new load and new resources are competing for capacity on a transmission system that hasn’t kept pace. Building transmission proactively — planning for the demand we can already see coming, rather than reacting to it one interconnection request at a time — is what makes fast, affordable connection possible in the first place. It is also, increasingly, the affordability story.
Recent analysis bears this out. In the second volume of its Federal Transmission Pricing report series, prepared by Grid Strategies and co-published with the Electricity Customer Alliance and Americans for a Clean Energy Grid, the authors find that adding new demand to the system need not raise rates for existing customers — and can even put downward pressure on them — but that this outcome depends on the planning and cost-allocation choices regulators make now. A well-planned transmission system is among the most effective tools available for holding costs down as demand grows: it spreads investment across a larger base, reduces congestion, and gives regions access to lower-cost resources. The alternative — paying to relieve constraints after they bind — is consistently the more expensive path.
So FERC’s action and the case for transmission aren’t competing priorities; they’re two halves of the same answer. Fair interconnection rules determine the terms on which new load joins the system. Proactive transmission planning determines whether there’s a system robust enough to join. We need both, and we need them moving together. As the regions develop their responses over the coming weeks, they have a real opportunity to treat forward-looking transmission planning not as a separate conversation, but as part of how they answer FERC.
The demand is already here. The question is whether we build ahead of it, or keep paying to catch up.
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