FERC’s 2025 State of the Markets Report and Implications for Interconnection Reform

On March 19, 2026, the Federal Energy Regulatory Commission (“FERC”) released its 2025 State of the Markets Report (“Report”), which provides an update and assessment of recent market conditions and emerging issues in the U.S. electricity market.

At the same time in Docket RM26-4-000 (Interconnection of Large Loads to the Interstate Transmission System), FERC is considering a Department of Energy directed Advance Notice of Proposed Rulemaking (“ANOPR”) focused on the timely and orderly interconnection of large electrical loads to the interstate transmission system, which requested final Commission action by April 30, 2026. However, on April 16, 2026, FERC issued an Order announcing that it is extending the date by which it intends to act on this docket to the end of June 2026. FERC noted that it is hard at work having reviewed more than 3,500 pages of comments filed in the docket, conducted meetings with stakeholders, and coordinated with government-wide partners. The Order recognizes the unprecedented growth of large loads, including data centers and the urgent need for reforms to ensure timely, orderly, and non-discriminatory interconnection.

The State of the Markets Report and Docket RM26-4-000 signal how FERC is viewing the issue of rapid load growth—and why the Western grid, including the California Independent System Operator (“CAISO”), is likely to remain central to that discussion.

The State of the Markets Report Frames Large Loads as a Fundamental Driver

The 2025 State of the Markets Report emphasizes that U.S. electricity demand growth is accelerating, with peak load forecasts showing faster growth rates driven by large load additions. FERC staff highlight data centers and continued electrification loads as key contributors to this trend, noting that recent demand increases differ materially from the incremental growth patterns that historically informed regional planning. The Report states that “[m]uch of the projected and recent new load comes from large loads, particularly data centers, which saw 24% compound annual growth in capacity over the last five years.”

Moreover, the emergence of data centers have doubled the amount of electricity used between 2018 and 2023. The Report attributes 4.4% of total U.S. electricity in 2023 to power servers, data center infrastructure (such as lighting and cooling), and other related equipment. The Report suggests that data centers have used even more electricity in 2025.

For California, where electrification policies, climate goals, and interest from large commercial customers converge, the Report underscores that large loads are no longer a marginal planning consideration. Instead, they are a central driver of market outcomes—setting the stage for more direct federal engagement with how those loads access the transmission system. The Report highlights a reality: the size, scale, and need for faster interconnection make data centers unlike traditional loads.

The Large Load ANOPR Seeks to Address the Same Risks Identified in the Report

The large load interconnection ANOPR was initiated after the Secretary of Energy directed FERC to consider reforms to ensure the “timely and orderly interconnection” of loads greater than 20 MW, including data centers and advanced manufacturing facilities. The ANOPR explicitly ties the need for reform to unprecedented load growth and concerns about reliability, non-discriminatory access, and cost allocation.

Key topics on which FERC is seeking stakeholder comment include:

• Whether large loads should be subject to standardized interconnection procedures;
• How network upgrade costs should be assigned and potentially refunded over time; and
• Whether curtailable or dispatchable loads should receive expedited interconnection study treatment.

The risks described in the ANOPR—queue delays, uncertainty, and infrastructure stress—closely mirror the challenges identified in the State of the Markets Report. Together, the documents suggest that FERC views large load interconnection not as a localized administrative issue, but as a system level market concern.

Interconnection Backlogs Are Reframed as a Market Integrity Issue

The State of the Markets Report discusses interconnection queues, observing continued congestion and withdrawals across regions: “More than 160 GW of capacity withdrew from the interconnection queue in 2025, a historically high withdrawal rate.” Although the Report focuses primarily on generator interconnection, its analysis emphasizes that delays in bringing resources online can affect resource adequacy, prices, and reliability.

The large load ANOPR extends this logic to the demand side, proposing that uncoordinated or opaque load interconnection processes can create similar problems.

Signal for CAISO

For CAISO, which already manages complex generator interconnection processes, the paired developments suggest that large loads may increasingly be treated as market participants for planning and study purposes. This could have implications for how CAISO and its transmission owners evaluate load requests alongside generation and transmission needs.

Transmission Planning Is the Unifying Theme

In the State of the Markets Report, transmission development is identified as one of the most effective tools for addressing congestion, price volatility, and reliability risks associated with load growth. The Report also highlights ongoing efforts to expand and coordinate Western markets, reflecting the importance of regional solutions.

Similarly, the ANOPR contemplates whether large loads should bear full responsibility for network upgrades necessary for interconnection, whether those costs could be credited back, and how those upgrades should be integrated into broader transmission planning.

Taken together, the Report and the ANOPR reinforce the expectation that load growth, interconnection policy, and transmission planning will be addressed within a single ecosystem. Therefore, CAISO’s long-term transmission planning processes and coordination with state regulators are likely to remain under close federal scrutiny.

The ANOPR acknowledges that FERC has not historically asserted jurisdiction over load interconnections, and seeks comment on the scope of its authority. The Secretary of Energy stated “[i]t is my view that the interconnection of large loads directly to the interstate transmission system to access the transmission system and the electricity transmitted over it falls squarely within the Commission’s jurisdiction.”

For California stakeholders, this pairing highlights a potential shift in the federal/state balance. While no outcome is predetermined, the analytical foundation laid in the State of the Markets Report may support broader federal involvement where large loads are viewed as affecting wholesale rates and system reliability.

Key Takeaways for CAISO Stakeholders

• Large loads are now central to FERC’s market analysis, not peripheral.
• The ANOPR operationalizes concerns articulated in the State of the Markets Report.
• Transmission planning and cost allocation sit at the center of both efforts.
• CAISO’s treatment of large loads may increasingly be viewed through a federal reliability and market integrity lens.

Conclusion FERC’s 2025 State of the Markets Report and the pending large load interconnection proceeding together signal a regulatory environment in which rapid load growth—particularly from data centers —is reshaping federal priorities. For CAISO and the Western grid, these developments reflect the continued focus on how large loads are planned, studied, and integrated into a system already under significant transition.

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