The "Pay-to-Play" Grid: Kavulla's Data Center Proposal and Corporate PPA Risk Allocation

Author: Philip Herold · Published: 2026-05-21 · Part 3 in a series on FERC data center interconnection policy

Kavulla Framework

• Proposes a separate interconnection queue for data-centers (300 MW–1 GW loads)
• Fast-track access in exchange for full direct cost absorption of network upgrades
• Implicit acknowledgment that ferc Order 2023 cluster study process (Docket RM22-14-000) is inadequate for hyperscale loads

PPA Structural Impacts

• LOCs expand: Hyperscalers may need to post collateral covering transmission upgrade costs (~$200–400M for 500 MW campus)
• Milestone bifurcation: Generation and transmission milestones decoupled; COD definitions require new conditionality
• Change-in-law clauses: Most contested term; offtakers seek repricing triggers, developers resist for bankability

Market Signals

• Assets with executed ISAs command steep M&A premiums (see NextEra–Dominion deal, May 20)
• pjm accelerating backstop reliability auction; Virginia SCC and Maryland PSC drafting tariff riders to isolate data center costs
• Talen/Amazon Susquehanna co-location (Docket ER24-2125) ruling will shape behind-the-meter vs. front-of-meter attractiveness

Key Watchpoints

1. FERC NOPR or technical conference formalizing Kavulla's framework
2. PJM stakeholder process on backstop auction cost allocation
3. Resolution of Talen/Amazon ER24-2125 co-location docket