FERC issued a unanimous order on December 18, 2025 (Docket No. EL25-49), telling PJM that its current tariff for data centers co-located with power plants is unjust and unreasonable. PJM's initial compliance briefs were due February 16, 2026. State regulators haven't waited for FERC: PUCO approved the AEP Ohio Data Center Tariff in July 2025, and the Virginia SCC approved Dominion's GS-5 large-load rate class in November 2025 (effective January 2027).
If you're negotiating a co-located generation deal right now, you're signing into rules that haven't finished being written. The decision point is whether to wait, sign with reset clauses, or proceed on the current architecture and accept the reopener risk.
What changed
FERC's December order directs PJM to build three new transmission service categories: Interim non-firm, Firm Contract Demand, and Non-Firm Contract Demand. The Behind-the-Meter Generation (BTMG) rules also get rewritten. Loads above a new (still-to-be-set) MW threshold must be studied for reliability impact and carry full cost responsibility for any upgrades the study finds. Translation: the price you negotiated assumed a netting rule that's about to disappear.
The state moves are already on the books. Virginia's GS-5 class, effective January 2027, applies to Dominion customers at 25 MW or more with a monthly load factor above 75 percent, and it puts 85 percent of contracted distribution and transmission demand plus 60 percent of generation demand on the customer, locked in by a 14-year contract. AEP Ohio's Data Center Tariff is operative now and pegs payment at 85 percent of contracted capacity for new or expanded projects above 25 MW, used or not.
Three scenarios
If you're a hyperscaler or AI compute operator with a co-located generation MOU still in negotiation, the conservative path is an explicit regulatory reopener triggered by the final PJM tariff. The reset has to cover three things: the MW threshold for BTMG netting, the cost-responsibility rule for reliability upgrades, and the transmission service category the load takes. Without it, you've locked in a price built on a tariff that's about to be rewritten.
If you're a generator monetizing existing capacity behind-the-meter to a single large load, the question is whether your deal survives the new BTMG threshold. If the threshold lands below your customer's draw, the netting goes away and the customer suddenly owes the transmission cost it thought it had escaped. The protective move is a price-reopener tied to BTMG threshold finality, paired with a clear allocation of who eats the difference if the threshold cuts the netting. A 50/50 split of the regulatory delta is a defensible default. One-sided allocations are where post-tariff disputes are going to live.
If you're a founder running an AI compute startup signing a hosted infrastructure deal, the regulatory risk isn't yours directly, but your hosting cost is going to move when the tariff lands. Ask the hosting counterparty for a pass-through cap and a 90-day notice obligation. The cap puts a ceiling on how much of the tariff change rolls into your bill. The notice gives you time to reprice customers or move workloads if the cap gets hit. Neither is unusual. Both are easier to negotiate before signature than after.
The recommended path
Don't wait for the tariff. The rules likely won't be operationally final before late 2026 or 2027, and holding deals that long means missing the build-out window. Our read: sign on the current architecture with explicit regulatory reopener language, a four-corners cost-allocation rule, and a notice mechanism so both sides can react when the tariff lands.
Three things to do this week
- Pull every in-flight co-location MOU and term sheet and check whether it has a regulatory reopener triggered by the final PJM tariff, before your next signature. A generic "applicable law" clause isn't enough; the reopener has to name the FERC order and the BTMG threshold by reference.
- Get your cost-allocation rule for the BTMG threshold change into the four corners of the document, before bind. A side letter saying "the parties will negotiate in good faith if the threshold changes" is a dispute waiting to happen. A fraction (50/50, 70/30, or full passthrough up to a cap) inside the agreement is enforceable.
- Stack-rank your state-level exposure this week. If your data center sits in AEP Ohio territory, the 85 percent rule is in effect today; if it's in Dominion territory, the GS-5 class plus a 14-year contract reservation hits January 2027. Run the actual numbers against your deal economics before signature, not after.
The regulatory work has started. The companies that take the next nine months seriously won't have to repaper their deals when the tariff lands. The ones that don't, will.
This article is general educational analysis. It does not provide individualized legal advice, client-specific recommendations, outcome guarantees, or jurisdiction-specific directives without factual context.
This article is for informational purposes only and does not constitute legal advice. Consult qualified legal counsel before making compliance decisions based on the developments discussed here.