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PJM seeks FERC’s approval of proposed changes to its retail behind-the-meter generation rules that among other objectives aims to facilitate collocating generating resources with data centers and other large loads.

In its filing PJM stated that “PJM continues to work with its members to support efforts to accelerate the speed and increase the scale with which the United States can build the next generation of AI infrastructure, especially the necessary capacity to support this load while also ensuring reliability and fair treatment for all users of the grid.”

New loads larger than 50 MW would be ineligible for netting, and backup generation wouldn’t count towards the 50-MW threshold.

PJM also proposed three new transmission services for collocated loads but did not provide specifics in this FERC filing.

As background, PJM’s filing is in response to FERC’s December 18, 2025, order directing PJM“to (1) revise its behind-the-meter generation Tariff provisions, (2) establish three new transmission services for Eligible Customers seeking to take service on behalf of CoLocated Load, and (3) revise its necessary studies processes, among other changes.”

Regarding the revisions to Behind The Meter Generation (“BTMG”) rules the Commission found that “PJM’s existing Retail Behind The Meter Generation (“Retail BTMG”) rules in the Tariff are no longer just and reasonable, in part, because “PJM’s existing [Retail] BTMG rules may lead to both reliability and resource adequacy risks.” Accordingly, in the Order, the Commission required PJM to revise the rules for “retail BTMG” to (1) establish a “materiality threshold,” (2) set a three-year transition period for implementation of the threshold, and (3) establish a legacy arrangement to allow entities with existing contracts effectuating retail BTMG arrangements above the newly established threshold to continue utilizing the existing retail BTMG rules through the remainder of the current contract terms.”

In response to the Commission’s order, PJM’s filing states that, “PJM is updating the definition of Behind the Meter Generation and adding a new definition for Retail Behind the Meter Generation to: (1) establish a “materiality threshold” for Retail BTMG, (2) implement a “three-year transition period,” and (3) provide the ability to “grandfather certain entities with existing contracts.” In accordance with the Commission’s clarification, this compliance filing is limited to retail BTMG and did not direct any changes to Non-Retail BTMG rules.”

Specifically, PJM’s proposed definition for Retail Behind the Meter Generation (to be added to Parts I and VIII of the Tariff, and not Part VII which relates to a transition process no longer accepting new applications) is:

“Retail Behind The Meter Generation” shall refer to Behind The Meter Generation that is used to serve a retail load served by a Network Customer located at the same electrical location, where such generation has a cumulative nameplate rating of no greater than 50 MW (not including back-up generation at the same electrical location as the retail load that can only be used to serve such retail load during conditions that may threaten the integrity or reliability of the PJM Region or the regional power system). Notwithstanding the foregoing and for a transition period through December 18, 2028, Retail Behind The Meter Generation includes any generation with a cumulative nameplate rating greater than 50 MW used to serve a retail load served by a Network Customer to net load prior to December 18, 2025. Provided further, Retail Behind The Meter Generation includes any generation used to serve a retail load served by a Network Customer to net load if it is the subject of a contractual arrangement (including but not limited to a bilateral agreement or interconnection agreement) that was in effect as of December 18, 2025 through the end of the term of such agreement, which may be renewed or extended per the terms of such agreement. Further, Retail Behind The Meter Generation also includes any generation with a cumulative nameplate rating greater than 50 MW used to serve a retail load served by a Network Customer to net load that, as of December 18, 2025, was a Qualifying Facility consistent with the requirements of the Public Utility Regulatory Policies Act of 1978, as amended, and its implementing regulations. Any facility that qualifies as Retail Behind The Meter Generation shall be excluded from Co-Located Load configurations.

Legacy Treatment of Contracts that Effectuate Retail BTMG Arrangements:

“PJM interprets the Commission’s compliance directive to allow existing BTMG arrangements to qualify for legacy treatment so long as there is an existing contractual agreement for the purpose of effectuating a BTMG arrangement (e.g., bilateral agreement, interconnection agreement, etc.)32 that was in effect prior to December 18, 2025. And to recognize contracting parties’ expectation of renewal or extension rights under such existing agreements and to avoid interference with such reliance expectations upon which investment decisions likely have been made (the specific terms and conditions of which PJM does not have knowledge of), PJM further interprets the Commission’s use of the phrase “the current term remaining under the existing contract” to encompass existing renewal or extension rights recognized under such existing contracts.”

“Given that existing retail BTMG arrangements with such contractual agreements and that otherwise have QF status have been in place and netted against Network Loads within PJM without known operational issues to date, PJM proposes to allow such arrangements, which in some cases have been in place for decades, to qualify for legacy treatment and continue to be eligible to net under the existing BTMG rules.”

“Going forward, however, consistent with the Commission’s directive, any new large Retail BTMG that is greater than the proposed threshold would not be eligible to qualify as Retail BTMG given that significant increases of new large loads generally on the system that the Commission determined could increase operational risks and costs shifting concerns.35 Specifically, the Commission directed PJM to “maintain the current BTMG rules for customers that fall below a new MW materiality threshold.”36 Given the Commission’s identified cost causation, transition, and resource adequacy concerns with the existing Retail BTMG rules, the proposal is based on an interpretation of the compliance directive that demands an “all or nothing” approach to Retail BTMG qualification – meaning that a Retail BTMG cannot both net up to a certain threshold but still potentially have generation and load above that threshold which cannot be netted. PJM understands that such a hybrid approach would impose significant costs on all Retail BTMG that would have to install previously unnecessary metering equipment (that, for some facilities, may be cost prohibitive) and it amplifies compliance risks for units because it might require many facilities to monitor and report different generator output and load thresholds in relation to the threshold.”

Three-Year Transition Period

“To “minimize the impact” of changing the BTMG rules on existing customers, the Commission ordered PJM “to allow Network Customers already using the BTMG rules to continue to do so for a transition period of three years . . . from the date of issuance of this order.”37 Thus, in the event there are any existing Retail BTMG larger than the proposed threshold discussed below and not the subject of an existing contractual agreement in effect or qualifying QF status as of December 18, 2025, such resources would continue to be eligible to participate as retail BTMG for up to three additional years (i.e., through December 18, 2028).

Materiality Threshold

“PJM proposes to establish a materiality threshold of up to 50 MW for a generator at the same electrical location as the Network Load for generation units to qualify as Retail BTMG. This 50 MW threshold aligns with the PJM Board’s definition of large loads additions, which comprise of individual loads at or above 50 MW at a single point of interconnection. Based on stakeholder feedback and engagement on this point, PJM understands the proposed 50 MW threshold to avoid unneeded regulatory uncertainty for retail customers whose grid impacts on reliability are more limited and have been in existence without noted impact for decades.”

“Further, the proposed threshold and proposed exclusion for backup generation from the threshold (along with the proposed legacy treatment) will avoid the unintended consequence of causing Retail BTMG resources to prematurely cease operations and discontinue investment in grid-enhancing backup generation, outcomes which would frustrate system reliability in an unintended fashion.”

“PJM proposes to establish a threshold based on the size of the generator that may qualify as retail BTMG, which is consistent with the Commission’s points of reference to potential threshold sizes based on various generator sizes.42 Establishing a threshold based on the size of the generator to qualify as retail BTMG is similarly consistent with the recognition that BTMG is defined as a generation unit, rather than a load. Further, a threshold based on the size of the generator provides a clear and bright line for what can continue qualifying as retail BTMG. That is, load sizes can fluctuate, unlike the nameplate rating of a generator, which is static.”

“While a 50 MW materiality threshold for new retail BTMG is appropriate going forward, in the event the Commission does not accept PJM’s proposed legacy treatment for the purpose of effectuating BTMG discussed above, PJM requests that the Commission allow an interim initial materiality threshold to be in place for the start of the transition period to avoid setting an initial threshold that is too low and that could, for the reasons stated above, cause Retail BTMG resources to cease operations and in turn exacerbate in an unintended fashion the resource adequacy issues in the PJM Region.”