The surge in data centers with energy needs equivalent to small cities has put a spotlight on the new transmission infrastructure required to serve these customers. But recent action from the Federal Energy Regulatory Commission (FERC), America’s top energy market regulator, takes aim at a more basic question in this rapid buildout: who pays for that new steel in the ground, and when? Right now, the rules that determine cost allocation are opaque enough that customers who never asked for those upgrades can end up footing the bill. That is the cost-shifting problem the Commission just put a target on for transmission utilities across the country.

The much-repeated rule for grid costs is “beneficiary pays.” In plain terms, the customers who drive the need for new infrastructure should be the ones who cover it. That rule matters in transmission, because regulated monopolies control the wires and thus determine how costs get spread. When that rule breaks in a monopoly system, costs slide onto everyone else’s bills instead. 

In theory, the path for large industrial customers and transmission owners to avoid that outcome is straightforward. A company asks to connect a data center, the grid operator performs a study to determine necessary grid upgrades, and the parties negotiate an agreement for the company to finance the new equipment in full. Then, the upgrades get built, paid for by the company who benefits, and everyone knows who is charged for what. These are the fundamentals of a cost-recovery agreement.

In practice, this common-sense negotiation is not the standard. Transmission owners often build the upgrades and line up the responsible parties to pay, but don’t bind those parties to paying should their project underdeliver or fail to materialize entirely. Because monopoly transmission owners earn a regulated profit on infrastructure investments, they are incentivized to build new projects themselves instead of locking in a single payer front. If costs have already been incurred for the upgrades and demand from the new customer disappears, costs are levied onto all other customers in the area—this is cost-shifting in action. Every factory, household, and small business in the zone quietly absorbs millions of dollars in upgrades that were never built to serve them.

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FERC’s new orders target that accountability gap. The Commission directed each regional grid operator to make the costs and cost-causers of network upgrades publicly visible, and to pair that transparency with binding cost-recovery agreements for large customers. For decades, monopoly transmission companies haven’t been required to keep a basic, accessible ledger of what upgrades cost and who caused them. Amid today’s demand growth, that is no longer acceptable. 

The Commission has grounded this in its statutory duty to ensure just and reasonable rates. Rates that expose every customer in a zone to the financial risk of a single large project’s failure do not meet that standard. 

Two caveats matter. First, this fixes cost-shifting for the transmission system, not all new infrastructure costs that will land on consumer utility bills. It does not answer who carries the financial risk when new power plants are built primarily to serve these same large customers. The question of how the risk of new generation should be shared remains alive, and should be addressed fairly by state legislatures and regulators. 

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Second, the impact of this direction from FERC will depend on how regional operators respond over the next few months, and some will request delays. The key question is how they standardize cost transparency and accountability. The priorities should be powering these facilities on faster timelines while ensuring the fair allocation of upgrade costs. 

Nonetheless, the intent of these orders from FERC is important, and they left the door open for a nationwide rule should regional operators’ responses fall short. But the principle is now unmistakable: if a utility builds upgrades to serve your megawatt-scale facility, the costs must be transparent and you must agree upfront to pay for it.

The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.