On December 18, 2025, FERC issued the colocation order that the data center and reactor industries had been waiting on for the better part of two years. It does what previous declaratory orders and technical conferences could not: it establishes an actual transmission service framework for large loads colocating behind the meter of a generating facility. If you are a reactor developer structuring a behind-the-meter arrangement with a data center, hyperscaler, or industrial customer inside PJM, this order is the new floor. Here is how to read it.
The 30-second version
Before this order, behind-the-meter colocation of a data center load at a generating facility lived in a regulatory gray zone. PJM accepted the Amazon–Talen Susquehanna interconnection service agreement amendment in 2024, then FERC rejected it, and the industry has been operating off informal guidance ever since. The December 2025 order replaces that gray zone with a defined service tier. One with eligibility criteria, cost-allocation rules, and a compliance timeline. The order is prospective for new configurations and gives existing arrangements a transition window.
The gap FERC needed to close
The premise that broke the old framework was simple: a colocated data center is not the same animal as a traditional retail customer, and it is not the same as a network load that draws fully from the grid. It sits in between. The host generator may serve some portion of the load behind the meter, while the grid backs up the rest. Existing transmission tariffs were not written for this case. The result was a patchwork of bilateral arrangements that PJM had no clean way to approve and that FERC had no clean way to police.
The order acknowledges what every participant in the conversation has known: colocation is going to happen at scale, whether the regulatory framework catches up or not. The catalyst, of course, is the AI buildout. Mid-tier operators looking at 50–500 MW sites need power on a timeline the standard interconnection queue cannot meet. Colocation behind an existing nuclear or gas plant compresses that timeline dramatically, but only if operators can get a service agreement signed and approved.
What the order actually establishes
Three things matter most for operators reading the order for the first time:
1. A defined transmission service tier for colocated load. The order creates eligibility criteria for the service and specifies how the load is treated for capacity, transmission, and ancillary service obligations. Loads that meet the criteria get a clear path; loads outside them default back to standard network service.
2. Cost-allocation rules that bind PJM and the host utility. The long-running fight has been over who pays for what when a large load sits behind a generator. The order does not eliminate cost-sharing; it defines the formula. The implication for operators is that the colocation discount is real but bounded; the savings are not the same as fully behind-the-meter operation outside the FERC tariff.
3. A compliance filing schedule. PJM and the host utilities have a defined window to file conforming tariff amendments. Operators evaluating sites today need to read those forthcoming compliance filings as the operative document, not the order itself. The order tells you the shape; the compliance filings will tell you the numbers.
Three implications for operators evaluating colocation right now
Your siting analysis just got more honest. Pre-order, the cost models for colocation versus grid interconnection lived in the headroom between “we think this will be allowed” and “we think the discount will be this big.” The order narrows both ranges. If your model assumed the maximum behind-the-meter discount, revise it down. If your model assumed colocation would be permitted at all, you can finally take that assumption off the risk register.
State PUC engagement is now the slow path, not FERC. The order resolves the federal question for transmission service. It does not resolve the state question for retail service, behind-the-meter generation rules, or environmental siting. In Virginia, Ohio, and Pennsylvania (the three PJM states with the most data center load in development), state-level frameworks for colocated configurations remain inconsistent. Expect the bottleneck to move from FERC to the state PUCs over the next eighteen months.
Plant availability becomes the binding constraint. If the regulatory framework is now defined, the next scarce resource is host plants willing and able to sign a colocation arrangement. The Constellation, Vistra, and Talen fleets are the obvious near-term candidates, but their inventory is finite and PPA conflicts are real. For operators on a 2027–2029 energization target, mapping plant inventory against site location is now more urgent than understanding the order itself.
What we are watching for next
Three filings will tell us how the order plays in practice. First, PJM’s compliance filing (the numbers and tariff language that translate the order into operational rules). Second, the first new colocation interconnection service agreement filed under the order, which will signal how PJM is reading the eligibility criteria. Third, whichever state PUC moves first to align (or diverge from) the federal framework.
The order is, fundamentally, a permission slip. The work of converting it into actual megawatts under load happens at PJM’s docket, the host utility’s tariff, and the state commissions. We are tracking each of those proceedings and will publish updates as the compliance filings land.
Bottom line
December 18, 2025 is the date the colocation framework moved from contested to defined. That does not make colocation easy; it makes it actionable. If you are an operator with a site profile in PJM and a target energization date inside the next four years, the next thirty days are when you align your siting analysis, your plant outreach, and your state regulatory engagement to the new floor. The window is open. The framework that will govern your competitors’ decisions is the same framework that governs yours.
Sources
- FERC December 18, 2025 colocation order announcement
- FERC eLibrary (search by docket for the full order text and compliance filings)
- Google + Kairos Power + TVA partnership for Hermes 2 (data center reactor offtake context)
- Amazon “Cascade” / X-energy / Energy Northwest project (BPA interconnection context)
- X-energy / Dow Texas project (ERCOT industrial colocation context)
- PJM Data Miner 2 (queue and transmission data)