Constellation Energy Corp. will not be dissuaded from signing colocation deals with datacenters, despite efforts to quash a proposed interconnection service agreement between PPL Corp. and a Talen Energy Corp. nuclear plant.
"We're working with our customers towards finalizing deals," Constellation President and CEO Joseph Dominguez said Aug. 6.
Constellation will likely sign a contract similar to the 2,494-MW Susquehanna Nuclear facility's deal with Amazon.com Inc. to provide behind-the-meter power to a datacenter campus. The Federal Energy Regulatory Commission is considering a request from Exelon Corp. and American Electric Power Co. Inc. to either hold a hearing or deny the Susquehanna service agreement.
"I could certainly see a circumstance where [Constellation contracts] get announced and there's still some process going on at FERC or some discussion among stakeholders," Dominguez said during a second-quarter earnings call.
Exelon and AEP maintain that putting a datacenter behind the meter would still require Susquehanna to incur system charges from PJM Interconnection LLC and force ratepayers to bear another $58 million to $140 million per year in transmission system costs. The colocated load would likely still need to draw from the broad PJM transmission system in the event of an outage at the nuclear plant, the utility companies said.
Talen, which is calling on FERC to reject the utilities' challenge, has responded that the "behind-the-meter configuration" requires the datacenter to pay delivery facility costs.
Constellation filed a motion to intervene on Talen's behalf in support of the interconnection agreement.
"We really don't see an outcome here where the FERC is going to say, 'You, can't do this,'" Dominguez said. He acknowledged, however, that getting clarity from the regulator "is only going to kind of speed up the process and speed up deal execution" for colocation contracts.
Now that FERC has responded with a deficiency letter that did not mention the AEP and Exelon protest, Morgan Stanley analysts agreed Aug. 5 that "future deals could move forward soon."
"We also think it's possible other deals don't wait for the outcome of this proceeding and get announced in the interim, particularly given rising power prices and capacity prices even before datacenters are coming to the region at scale," Morgan Stanley analysts wrote.
PJM's capacity market auction for the 2025/2026 delivery year cleared at record high prices of $269.92/MW-day for much of the PJM footprint, compared to $28.92/MW-day for the 2024/2025 auction.
Constellation's Dominguez said the results make colocation deals and front-of-the-meter contracts even more urgent for datacenter customers.
"We do see a tightening in the market and people need to get moving to lock up their supply," Dominguez added.
Single-unit nuclear plants might also be an option, even though they do not have backup generation, according to Dominguez.
"It really depends ... whether it's an inference datacenter or a learning datacenter," he said. "I could easily see circumstances where behind-the-meter datacenters are located in the same region as on-grid datacenters and effectively provide reliability through fiber as opposed to through wires and backup generation."
Constellation reported second-quarter 2024 adjusted operating earnings of $531 million, or $1.68 per share, down from $535 million, or $1.64 per share, in the prior-year period. The S&P Capital IQ consensus normalized EPS estimate for Constellation in the second quarter was $1.69.
