FERC RM26-4 Is Now Law. Here Is What Data Center Developers Need to Do.

The first federal standard for large-load grid interconnection rewrites cost allocation, queue strategy, and co-location underwriting for every project above 20 MW.

The Federal Energy Regulatory Commission's June 2026 action on Docket RM26-4-000 is the most consequential federal intervention in data center development in a generation. For the first time, a national framework governs how power-hungry facilities connect to the U.S. interstate transmission system. The order is not a proposal. It is enforceable policy, and its cost allocation provisions will change the economics of projects that are already in queue.

What the Rule Actually Does

FERC's order establishes standardized interconnection procedures for large electrical loads above 20 MW connecting directly to FERC-jurisdictional transmission infrastructure. Before RM26-4, large-load interconnection was handled region by region, case by case, with no uniform process, no readiness standards, and inconsistent cost assignment rules. That patchwork benefited experienced repeat players and disadvantaged developers who lacked the regulatory relationships to navigate individual utility procedures.

The core provisions:

20 MW threshold. Any load above 20 MW connecting directly to interstate transmission is now subject to standardized study deposits, readiness requirements, and withdrawal penalties. This mirrors the framework that applies to generators under FERC's pro forma Large Generator Interconnection Procedures. Loads below 20 MW remain under distribution-level rules.

100% caused-cost assignment. Interconnecting large loads are responsible for 100% of the network upgrade costs their connection requires. The previous practice of spreading upgrade costs across ratepayers ends for new queue positions under this order. Developers who built underwriting models assuming shared cost allocation need to revise their pro formas now.

Expedited pathway for curtailable loads. Facilities willing to accept contractual curtailability can access an expedited interconnection study, potentially as short as 60 days. This creates a viable fast-track option for data center operators with on-site backup generation who can demonstrate grid flexibility. The tradeoff is a binding curtailment obligation that must be underwritten against tenant SLA requirements.

Hybrid facility treatment. Co-located generation and load facilities are studied on a net injection/withdrawal basis. A 1,000 MW generation facility paired with a 900 MW data center requests interconnection rights for the 100 MW net injection only. This changes the economics of behind-the-meter gas, solar, and storage projects materially, and makes hybrid configurations more attractive in markets where generation rights are easier to secure than direct load interconnection.

Who This Hits First

Projects currently in PJM, MISO, SPP, and WECC queues will face transition provisions. FERC has signaled a grandfathering approach for existing queue positions, though the scope and conditions of that grandfathering are still being worked out through compliance filings. Developers with active queue positions should treat any existing cost allocation assumptions as provisional until the compliance process resolves -- likely by Q1 2027.

New queue filings after the June order take effect immediately. Developers who have been waiting for regulatory clarity before committing to queue positions now have no reason to delay. Waiting longer does not reduce cost exposure; it only moves a project later in the queue.

ERCOT is explicitly excluded from FERC jurisdiction. Texas projects are unaffected by RM26-4 from a federal cost allocation standpoint, though the NERC Level 3 Alert issued May 4, 2026 introduces separate reliability obligations for large computational loads in ERCOT and other regional systems.

The Underwriting Implications

Three line items move in every pro forma that has not already priced these provisions.

First, network upgrade costs. Under the 100% caused-cost rule, a developer connecting a 200 MW campus to a constrained transmission system may now own all costs associated with a substation upgrade, a transmission line extension, or both. FERC interconnection study costs for large projects routinely surface $20M to $100M+ in required network upgrades. Those numbers belong in the development budget, not in a contingency reserve.

Second, readiness deposit requirements. The order mirrors generator interconnection procedures, which require deposits that demonstrate a project is real and progressing. Developers who have used queue positions speculatively -- to hold a place while still evaluating whether to proceed -- will face withdrawal penalties that make that strategy expensive.

Third, co-location IRR. The hybrid facility treatment changes the calculus for projects that pair on-site generation with data center load. If a 500 MW gas turbine co-located with a 480 MW data center can file for only 20 MW of net interconnection, the cost to interconnect the generation component separately -- or to operate behind the meter without transmission-level interconnection -- must be modeled explicitly.

What Developers Should Do Before the Compliance Period Closes

Five concrete actions before the compliance period resolves in early 2027:

Re-underwrite existing queue positions. Determine whether cost allocation assumptions embedded in current feasibility studies were based on shared upgrade costs. If so, revise the analysis with 100% caused-cost exposure and retest project feasibility.

Evaluate curtailability for expedited study. If a project has on-site backup generation sufficient to carry critical loads during curtailment events, the expedited pathway is worth evaluating. A 60-day study timeline versus a 24-month study timeline has schedule value that can offset the curtailability obligation.

Reassess co-location structures. Projects that pair generation and load should be modeled under the net injection/withdrawal framework to determine whether a hybrid structure lowers total interconnection cost.

Engage a transmission attorney before the next queue filing. RM26-4 compliance filings from utilities will contain jurisdiction-specific implementation details. Standard developer teams are not equipped to parse those filings without transmission counsel.

Accelerate electrical equipment procurement. The rule does not solve the transformer shortage. A project that secures favorable interconnection rights under the new rules still cannot energize without equipment. Tier 1 transformer lead times from ABB, Siemens, and Hitachi Energy now extend to 48-60 months. Queue position and transformer order should be initiated in the same planning cycle, not sequentially.

The FERC RM26-4 order changes what it costs to connect to the grid, who pays for upgrades, and how fast developers can move through the system. None of those changes reduce the cost of data center development. Most increase it. Teams that have already modeled their projects under something close to the RM26-4 framework will absorb the transition easily. Teams that have not will need to do that work now.