An Outdated FERC Policy Is Undermining the White House’s Ratepayer Protection Pledge

Why It Matters

If FERC does not modernize its pricing rules, ratepayers will continue subsidizing data‑center transmission upgrades, undermining the White House’s commitment to protect consumers and distorting utility revenue models.

Key Takeaways

• Utilities embed data‑center transmission upgrades into universal rates.
• FERC’s 1994 “and‑pricing” ban blocks full cost recovery for data centers.
• Disaggregated pricing can charge embedded and incremental costs separately.
• Updating policy would align with White House pledge to protect ratepayers.
• Southwest Power Pool leads RTOs in assigning regional costs to data centers.

Pulse Analysis

The surge in hyperscale data centers has created a new class of power‑hungry customers that strain existing transmission networks. Utilities, seeking to recoup the billions spent on network upgrades, are using the Federal Energy Regulatory Commission’s 1994 transmission pricing framework to bundle those costs into general rate structures. That policy, originally intended to prevent utilities from overcharging competing generators, does not reflect the modern reality where retail‑scale loads require both existing network capacity and dedicated infrastructure expansions.

A key loophole lies in the agency’s prohibition on “and‑pricing,” which bars utilities from charging two cost measures for the same facility. While the rule blocks stacking embedded and incremental costs on a single line, it permits utilities to apply separate cost measures to different facilities. By adopting a disaggregated pricing model—charging embedded costs for the existing grid and incremental costs for new upgrades—utilities could transparently allocate the full transmission burden to data centers without violating the ban. Such an approach would align with the White House’s ratepayer protection pledge, ensuring that the entities driving demand also shoulder the associated infrastructure expenses.

Regional transmission organizations are beginning to address the gap. The Southwest Power Pool, for example, is exploring mechanisms to assign regional transmission project costs directly to large loads like data centers, setting a precedent for other RTOs. If FERC revises its 1994 policy to endorse disaggregated, full‑cost recovery, it would close the subsidy loop, protect consumers, and provide a clearer regulatory path for utilities investing in the grid upgrades needed to support the digital economy.