Overview
On April 1, the North American Electric Reliability Corporation (NERC) issued draft registration criteria that would require "computational load entities" (CLEs)—primarily data centers and cryptocurrency mining facilities—to register with NERC.[1] These registration requirements are part of a suite of reforms that NERC, the nation's electrical-reliability watchdog, is advancing as part of its efforts to account for the reliability impacts of large load customers. Data center and cryptocurrency facility developers and operators should consider becoming active participants in these processes, not only because of the burdens that will arise from complying with new NERC standards, but also because of the substantial Federal Energy Regulatory Commission (FERC) enforcement risk these reforms carry with them.
In this release, we summarize the regulatory status-quo in which these changes are occurring, what revised standards and guidelines may require of CLEs, and flag the potentially significant FERC enforcement risk arising from these changes.
Background and Status of CLE Requirements
These draft registration requirements are the product of NERC’s Large Load Working Group (LLWG) initiative, launched last August 2024.[2] These proposed criteria would require computational load entities—entities hosting 1 MW or more of load from "information technology equipment, such as servers, storage, and networking hardware" as part of an “aggregate connected” load of 20MW or more connected "at a single point of interconnection . . . a voltage greater than or equal to 60 kV"—to become NERC-registered.[3] Proposed Reliability Guidelines for CLEs are expected to be published later this month, with the drafting of CLE-specific reliability standards expected to begin early this summer.[4]
This initiative represents a transformative shift in how data centers and the bulk power system as a whole is regulated. Historically, NERC registration and compliance obligations have not fallen on customers but instead flow almost exclusively from ownership or operation of generation or transmission assets. But the emerging concern that certain large load customers—particularly data centers, cryptocurrency mining operations, hydrogen electrolyzers, and other energy-intensive facilities—can create system‑wide reliability risks has upset this expectation. As a result, NERC for the first time is developing standards that would govern how a specific category of end users interact with the bulk-power system.
Although NERC has issued draft Reliability Guidelines related to large load customers, those materials start with the premise that large load customers are not themselves NERC registered.[5] Accordingly, the contours of any eventual substantive reliability guidelines and requirements which might apply to CLEs as their own category of NERC-registered entities remain uncertain. But the LLWG's public evaluation of the perceived risks and challenges associated with CLEs provides an indication of where NERC's process is likely to land.
NERC Previews Significant Compliance Obligations for CLEs
In a report issued last month, NERC's LLWG identified gaps in existing Reliability Standards as applied to large‑load customers. According to the LLWG, current requirements governing long‑term planning, operations and balancing, and system stability do not sufficiently account for how large, fast‑changing loads—such as data centers—can materially affect frequency, voltage, and post‑disturbance system behavior at a grid‑impacting scale. Among those identified by the LLWG are risks to:
- Short-term demand forecasting and reserves (the risk to reserves is "high because the large amount of demand variability that large loads such as data centers can have can lead to exhaustion of operating reserves"),
- Real-time coordination (this risk is "is high because a lack of real-time coordination" which "can lead to thermal, voltage, or frequency stability impacts if the load changes demand without coordination or begins/ends a non-forced outage without coordination"), and
- Voltage stability (this "risk is high because over-voltages from large load demand changes or trips can lead to tripping of nearby generation or loads, creating a cascading effect").
These risks, which stem from the rapid fluctuation of computational load, scale with size: as noted by the LLWG, "the potential impact of several 100 MW loads may be less than the impact of a 500 MW load and may require different treatment." Which means that "the emergence of gigawatt-scale loads may create exponential complications for study, planning and operations."
The core takeaway from the LLWG's report is that "there are multiple high-impact risks to the BPS from large loads that NERC registered entities cannot adequately address." And, that these risks grow as the underlying CLE grows. To help fill these gaps, the LLWG recommended "that NERC pursue registration of a type of entity (or types of entities)"—i.e. CLEs. Critically, however, the LLWG believes that filing the reliability gaps created by large load customers will require more than ministerial registration and reporting requirements. Instead, the LLWG urged this new category of entities be assigned substantial operational burdens like "real-time . . . coordination" with grid operators, "[c]omply[ing] with operating instructions" issued to them, providing "appropriate training" related to these obligations, and performance requirements (e.g. "disturbance ride-through requirements" and "ramp rate requirements").
Requiring CLEs to fill this role would impose operational, technological, and organizational demands far beyond existing requirements, introduce new burdens under NERC's compliance and audit regime. What data center developers and operators must also appreciate is how these reforms will expose them to FERC oversight—and particularly, its enforcement authority.
Reliability Driven Enforcement Risk for CLEs
Although NERC manages most enforcement activity related to its standards in-house, FERC has express statutory authority to enforce these standards on its own account, see FPA Section 215(e)(3), and has shown a willingness to interject itself when it feels it necessary to do so.[6] Moreover, as Steptoe has previously detailed, FERC has a track record of focusing enforcement resources on conduct related to high profile reliability events.
As noted above, what the LLWG’s analysis shows is that the kinds of reliability risks that NERC is seeking to address through its reforms are high-impact, high-risk concerns—a further catalyst for FERC scrutiny. And, given the substantial public focus on CLEs (e.g. data centers), it is fair to predict that FERC will take a specific interest in the reliability implications of CLE-focused standards. CLEs should be wary of how these factors coalesce under FERC’s Penalty Guidelines.
Under FERC's Penalty Guidelines, low‑risk, low-impact violations may result in only minor penalties; but penalties associated with even moderate risks of meaningful loss of load can quickly escalate to hundreds of thousands or millions of dollars. And, where such risks result in loss of load, the consequences are severe. Take for instance the events of July 10, 2024, where a transmission line fault led to a data-center initiated "simultaneous loss of approximately 1,500 MW of voltage-sensitive load" most of which "did not return for hours."[7] A CLE found responsible for violating a reliability standard aimed at preventing this kind of event—standards of the sort under consideration right now by the LLWG—would face a penalty of $17.5 million under the Guidelines. For CLEs, the best antidote to this risk will be investment in compliance: having a solid compliance program will not only help avoid violations in the first place but will allow CLEs to capture mitigation credit under the Guidelines (which can cut a penalty in half, or more).
It is too early to tell how NERC will choose to address and allocate responsibility for the reliability risks identified by the LLWG. The LLWG’s proposed approach—one where CLEs would assume significant obligations and, potentially, significant FERC enforcement risk—may not come to pass. Further, stakeholders will have an opportunity to review and comment on any proposed reforms as they are evaluated within NERC; and, eventually, to challenge any new standards submitted to FERC for approval.
What these developments make clear, however, is that large load customers, and especially hyperscale data centers, should closely monitor NERC's evolving posture, consider engaging proactively in industry processes, and even begin assessing whether their current modeling, operational, and disturbance‑response capabilities would withstand the expectations placed on entities within the NERC compliance regime. If and when registration becomes a reality, data center operators should be prepared for the compliance and enforcement burdens that will flow from being NERC-registered.
[1] https://www.nerc.com/globalassets/who-we-are/rules-of-procedure/proposed/computational-load-entity-summary-of-changes-april-2026-posting.pdf
[2] The Large Loads Working Group was previously described as the “Large Load Task Force”
[3] https://www.nerc.com/globalassets/who-we-are/rules-of-procedure/proposed/computational-load-entity-summary-of-changes-april-2026-posting.pdf
[4] https://www.nerc.com/globalassets/initiatives/large-loads-action-plan/large-load-action-plan.pdf
[5] These draft materials describe themselves as providing “actionable BPS reliability-enhancing guidance for both existing NERC registered entities as well as non registered large load entities[.]” See https://www.nerc.com/globalassets/who-we-are/standing-committees/rstc/draft_reliabilityguideline_riskmitigationforemerginglargeloads.pdf (emphasis added).
[6] Examples include LADWP (2025), Berkshire (2016), APSC (2014), Entergy (2013),and PacifiCorp (2011).
[7] https://www.nerc.com/globalassets/our-work/reports/event-reports/incident_review_large_load_loss.pdf
