Talen Energy’s deal to carve out capacity from its Susquehanna Nuclear Plant to serve a growing data center on its site drew protests at FERC from other parties who argued the deal and others like it could shift costs and threaten reliability (ER24-2172). 

Talen developed the data center on its own, which is next to the Susquehanna plant in northeastern Pennsylvania, and this year sold it to Amazon Web Services. PJM filed an amendment to an existing interconnection service agreement (ISA) so it could expand the data center’s power from 300 MW to 480 MW, while the nuclear plant produces 2,520 MW between two reactors. Eventually, the data center could grow to 960 MW. 

The deal included operating provisions that are meant to preserve reliability, all of which were agreed to by the nuclear plant, PPL (the local utility) and PJM, Talen subsidiary Susquehanna Nuclear told FERC. 

The debate kicked off with a protest Exelon and American Electric Power filed last month, arguing that the application to change the ISA brings up too many novel issues and should be set for hearings. 

“Absent further factual development, the commission will be unable to make an informed decision, and parties will be denied due process,” the two utilities said. 

AEP and Exelon argued that the ISA represents “an end-run around the PJM stakeholder process” and would create new categories of load and alter the fundamentals of the RTO’s market design. While the two claimed the deal itself would lead to $140 million per year in cost shifts to other consumers, they argued the real risk is that it will be replicated many times over. 

“Should large quantities of load rush to co-locate with generation on terms that bear even a resemblance to the ISA at issue here, PJM capacity markets will have steadily decreasing volume as the capacity resources flee to serve load that uses and benefits from — but does not pay for — the transmission system and the ancillary services that keep the system running,” AEP and Exelon said. 

Building generation and transmission to replace that lost capacity will take years, and in the meantime, a tighter supply-and-demand balance will result in “rising energy and capacity prices” and make it harder to address resource adequacy, they added. 

Their protest drew rebukes from Talen, Amazon, Constellation Energy and Vistra. Both Constellation and Vistra, which filed a reply jointly, own large generation fleets with major competitive retail power businesses. Constellation was spun off from Exelon in 2022. 

Data centers are being driven by advances in artificial intelligence, which the White House, state governments in PJM and others see as a huge economic opportunity, Constellation and Vistra said in their filing July 10. 

“The corresponding technological advancement is critical to America’s competitiveness and our national security and thus building out our digital infrastructure has been a focus at both the federal and state levels,” they added. 

They said the proceeding in question is limited, and FERC has a straightforward task: assessing the ISA updates needed to facilitate interconnection of the expanding data center. The protest from AEP and Exelon throws unrelated spaghetti on the wall to see what might stick, the companies said. 

“It is yet another attempt by AEP and Exelon to deter or outright prevent the development of new data centers, particularly co-located, behind-the-meter data centers,” Constellation and Vistra said. “The protest spotlights AEP and Exelon’s efforts to erect roadblocks to PJM generators serving co-located load, which would leave utilities as the only option for meeting the robust demand for data center infrastructure in the region.” 

The behind-the-meter configuration of the Susquehanna deal means the data center is not leaning on the grid at all, and if anything, it saves some money on the transmission upgrades that meeting such large demand would otherwise require, they said. 

If FERC has concerns about the issue of data centers connecting directly to generators, then it should require PJM to restart its stakeholder process on the issue but limit that to 90 days to “expeditiously accommodate these types of innovative, behind-the-meter arrangements in light of the nation’s urgent data infrastructure needs,” Constellation and Vistra said. 

Susquehanna told FERC the updated ISA is supported by PJM studies that show no reliability impacts from increasing the co-located load from 300 MW to 480 MW. It noted that FERC already approved the initial 300 MW. The filing is a routine document that FERC regularly approves, the firm said. 

“Susquehanna Nuclear did not hoodwink PJM and PPL,” the firm said. “The parties to this interconnection agreement, being fully aware of the configuration, the facts and the current operations for this co-located load, simply do not share AEP/Exelon’s concerns.” 

PJM and Monitor Responses

PJM filed a response to AEP and Exelon urging FERC to approve the ISA, but it added that that does not foreclose it from looking at new rules on co-locating large demands with power plants. The RTO ran a stakeholder process on that subject in 2022 and 2023, but it did not lead to any rule changes. 

“Depending upon the outcome of any such process, other ISA revisions may be necessary,” PJM said. “But those are separate matters for another day in another docket and should be viewed as outside the scope of this narrow proceeding about a single amended service agreement. Any open policy issues do not change the fact that, today, Susquehanna is indirectly supplying power to a co-located load arrangement.” 

While Talen and other major retailers want FERC to avoid upsetting the applecart on a growing source of demand for their services, other parties agreed with the two utilities that the issue warrants a deeper look. 

PJM’s Independent Market Monitor seconded AEP and Exelon’s protest, saying the amended ISA brings up significant issues that go well beyond one contract. 

“It is well understood that this ISA will be precedential and will lead to similar arrangements at many other PJM nuclear plant sites and potentially other generator sites,” the Monitor said. “PJM needs to provide a comprehensive analysis of the impact of removing significant levels of generation from the market.” 

The policy decisions embedded in the ISA that cover how backup power is handled, and other issues, differ greatly from positions PJM previously took in the stakeholder process, the IMM added. 

Talen could have sold output from the plant to the data center over the transmission system, but the co-location approach avoids transmission and distribution charges, as well as being directly subjected to the rate regulation of states and FERC, the Monitor said. 

It also argued that if other nuclear plants in PJM started offering similar services to large customers, it would lead to higher costs and emissions, eventually undermining reliability and the RTO’s markets. 

“Power flows on the grid that was built in significant part to deliver low-cost nuclear energy to load would change significantly,” the IMM said. 

The Pennsylvania Public Utility Commission posted a short intervention, but it agreed with the calls for FERC to take a deeper look at the issue. 

The Natural Resources Defense Fund weighed in with a blog post arguing that while the data center would get carbon-free power, it would lead to higher demand for natural gas generation to serve other nearby demand and that would lead to higher emissions. 

Other nuclear plants are considering similar deals, with NRDC pointing to Dominion Energy’s Millstone plant in Connecticut, Public Service Enterprise Group’s nuclear plants in New Jersey and even the previously retired Palisades plant in Michigan.