FERC Order 1920: Impact on Commercial Electricity Transmission Costs
The implementation of FERC Order 1920 structurally changes commercial electricity billing in 2026. By mandating proactive, 20-year regional transmission planning across the U.S., the Federal Energy Regulatory Commission ensures new high-voltage backbone infrastructure will be built to integrate renewables and AI data centers. Crucially, Order 1920 codifies "cost allocation," virtually guaranteeing that the multi-billion dollar capital expenditure required will be socialized via non-bypassable transmission tariffs (NITS) levied upon all commercial ratepayer bills.
Executive Impact
- →The 20-Year Horizon Requirement: Historically, grid operators (ISOs/RTOs) built transmission lines reactively—upgrading wires only when the system was actively approaching failure. Order 1920 legally forces grid operators to project load growth (EVs, AI, electrification) 20 years into the future and proactively authorize the massive infrastructure required to support it today.
- →The "Beneficiary Pays" Principle: The most contentious aspect of Order 1920 is cost allocation. If a $2 billion line is built from a windy plain in Iowa to a tech hub in Chicago, who pays for it? The Order dictates a broad definition of "multiple benefits" (reliability, reduced congestion, meeting state laws), meaning utility delivery tariffs are raised broadly across the region, heavily impacting manufacturing plants hundreds of miles away from the physical wires.
- →Un-Hedgeable Inflation: Because these capital costs are recovered through the transmission and distribution (T&D) side of the utility bill (specifically within the Non-Bypassable Charges or NITS section), a business cannot use a retail competitive supplier to shield themselves from this inflation. "Fixed-Rate" contracts only lock in the electrons, not the structural federal mandate to rebuild the poles and wires.
Navigating the T&D Tariff Squeeze
With federal policy ensuring that the "delivery" portion of the electric bill will rise consistently over the next decade, commercial energy strategy must pivot.
- Contract Auditing for Pass-Throughs: Procurement managers must ruthlessly audit their supplier contracts. Many suppliers obscure transmission charges, waiting until a FERC-approved rate hike hits, and then slamming the client with an off-cycle invoice using a "Change in Law" clause. Organizations must push for "Transmission Included" (NITS enclosed) products to force the supplier to bear the regulatory risk, or maintain a clear budget reserve if opting for a pass-through product.
- Demand Side Leverage: Because transmission costs are allocated to an individual facility based on their Peak Load Contribution (PLC) or peak coincident demand (kW), aggressive energy efficiency and Behind-The-Meter battery storage are the only mathematical defense against Order 1920. Lowering the facility's physical peak draw directly lowers the multiplier applied against the newly raised federal transmission rates.
- State vs. Federal Jurisdictional Battles: Order 1920 is currently facing aggressive litigation from several state Attorneys General who argue FERC overstepped its authority by forcing states without clean energy goals (e.g., Ohio) to pay for transmission lines built to satisfy the clean energy goals of neighboring states (e.g., Illinois or New Jersey). While this plays out in the D.C. Circuit Court, the grid operators are still complying with the planning mandates, meaning the cost signals are already entering the market in 2026.
The ERCOT Exception
It is hyper-critical to note that FERC Order 1920 does not apply to the ERCOT grid in Texas. Because ERCOT does not cross state lines (interstate commerce), it is not subject to FERC jurisdiction. Texas manages its own transmission planning and cost allocation entirely in-house. While Texas is also spending billions on transmission for load growth, they are immune to the complex, multi-state cost socialization combat triggered by Order 1920 in PJM, MISO, and SPP.