Commissioner Chang's Concurrence to Transmission Security Agreement Between PECO Energy Company and Amazon Data Services, Inc., ER25-3492

Today’s order accepts the Transmission Security Agreement (Agreement) between PECO Energy Company (PECO) and Amazon Data Services, Inc. (Amazon) based on the Commission’s determination that the Agreement qualifies for the Mobile-Sierra presumption[1] and is therefore just and reasonable.  I write separately because the Agreement raises significant questions about how the Commission and our colleagues at state regulatory commissions will address customer protection in light of discrete and significant load additions to the system.

Financial agreements related to consumer protection can affect Commission-jurisdictional transmission rates, but they can also implicate the traditional relationship between the retail service provider (or load-serving entities) and the ultimate retail customers.  Managing how costs are allocated among customer classes, particularly costs related to the addition of new load, has historically been the purview of state regulators, falling under their retail rate responsibilities.  However, given the potential magnitude of new transmission investment triggered by large load additions, concerns about costs are increasingly spilling into Commission proceedings, raising complicated jurisdictional and policy questions with significant implications for both state and federal regulators.   

The Commission and the states are tasked with protecting customers in their respective jurisdictional spheres, and we should exercise our authorities in a complementary fashion to ensure that both retail and wholesale customers are protected against unjustified cost increases associated with large discrete load additions.  Consistent with that complementary spirit, the Commission should not allow transmission owners to create jurisdictional “silos” or “loopholes,” where states are prevented from taking steps they deem appropriate to protect retail customers while the Commission approves provisions under a Mobile-Sierra framework without giving them meaningful scrutiny.[2]  This concern is amplified if a customer effectively is required to sign a Mobile-Sierra-protected contract as a pre-condition of obtaining of retail service.[3]  Given that concern, I particularly appreciate the order’s recognition that the Pennsylvania Public Utility Commission retains authority to establish terms of retail service between Amazon and PECO, including consumer protection provisions it deems appropriate.[4]  This critical affirmation will help ensure that the Commission’s acceptance of the Agreement and possible similar agreements in the future recognizes and preserves states’ essential role in protecting retail customers.  

From a transmission perspective, the new load addition paradigm, in which increasing numbers of large, discrete loads interconnect to the grid, has the potential to fundamentally alter the pace, amount, and size of new transmission investment.  Historically, most load increases were gradual and dispersed, with limited (if any) low voltage transmission upgrades needed to reliably interconnect them.  By comparison, the large, discrete loads seeking to interconnect now can trigger significant system upgrades, as well as impacts that affect neighboring transmission systems.  For example, one recent study in PJM identified 130 transmission projects, totaling more than $4.3 billion, approved to interconnect data centers in 2024 alone.[5]  The Commission has traditionally assessed these types of incremental transmission costs through its “higher of” policy.[6] 

If the Commission were to adopt such a “higher of” policy in this situation, the new, discrete large load would pay the “higher of” the rolled-in rate or an incremental rate where the costs of the upgrades to the transmission system are paid for solely by the new loads.  Under such a pricing policy, existing consumers would be protected from cost increases associated with the potential significant cost of the upgrades to the transmission system necessary to serve the new incremental customer(s).  This “higher of” pricing policy could serve as a useful approach for ensuring that the new, discrete large load’s demand does not significantly and directly increase the cost of transmission for other customers.  In this instance, however, the Agreement is a contractual revenue guarantee that is not tethered to the potential cost of network upgrades or regional upgrades, and as a result, the Agreement does not necessarily reflect the Commission’s “higher of” policy.[7]  Although I appreciate that the Agreement provides some consumer protection, PECO could go farther to ensure that Amazon’s discrete large load does not create a significant cost burden for PECO’s other transmission customers.   

Finally, while I agree that in this particular case the Commission properly accepts the Agreement under the Mobile-Sierra framework, I raise customer protection concerns here because I expect that the Commission will increasingly be asked to review one-off agreements purporting to protect customers against transmission cost shifts, without a substantive framework for assessing the adequacy of those protections.  The Commission has not historically required specific customer protection agreements or such provisions within tariffs, but the scale and cost implications of discrete large loads are clearly bringing this issue to the fore.[8]  It may be time for the Commission to proactively consider how to guarantee sufficient customer protections, such as the “higher of” pricing policy, to ensure that we do not outsource our customer protection responsibility to bilateral agreements by the utilities we regulate.

For these reasons, I respectfully concur.

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Judy W. Chang

Commissioner