PJM’s Distribution-Level Interconnection Reform:Eliminating “First Use” in the Era of FERC Order 2222

Introduction

The U.S. power grid is undergoing a structural transformation driven by the rapid growth of Distributed Energy Resources (DERs) such as solar PV, battery storage, EVs, and demand response technologies. To accommodate this shift, PJM Interconnection has proposed a major regulatory reform: elimination of the “First Use” rule for distribution-level interconnections.

Filed with FERC in October 2025 and supported unanimously by stakeholders, this reform is designed to:

• Simplify interconnection pathways 
• Reduce regulatory overlap 
• Accelerate DER deployment 
• Align PJM processes with FERC Order No. 2222 

This article provides a deep technical and regulatory breakdown of PJM’s proposal, its engineering implications, and how it reshapes the future of DER integration.

Background: DER Growth and FERC Order No. 2222

What is FERC Order 2222?

FERC Order No. 2222 (2020) was a landmark ruling aimed at:

• Enabling aggregated DER participation in wholesale markets 
• Removing barriers for small-scale distributed resources 
• Promoting grid flexibility, reliability, and competition 

DERs include:

• Rooftop solar 
• Battery energy storage systems (BESS) 
• Electric vehicles and charging infrastructure 
• Smart thermostats and demand response systems 
• Energy efficiency and thermal storage systems 

Because individual DERs are often too small, Order 2222 allows them to aggregate into a single market participant, enabling participation in:

• Energy markets 
• Capacity markets 
• Ancillary services markets 
  

Why This Matters for PJM

PJM, as an RTO, must integrate:

• Thousands of small DERs 
• Increasing interconnection requests 
• Complex coordination between: 

• Transmission systems (FERC jurisdiction) 
• Distribution systems (state/local jurisdiction) 

This complexity exposed limitations in PJM’s existing framework especially the “First Use” rule.

The “First Use” Rule: A Legacy Constraint

How It Works

The “First Use” rule determines jurisdiction over interconnection facilities:

• First generator connecting to a distribution line: 

• Uses state/local interconnection agreement + WMPA 

• Subsequent generators: 

• Facility becomes “dual-use” 
• Requires PJM GIA (FERC jurisdiction)

As illustrated in the diagram on page 3, once wholesale power flows through a distribution facility, it triggers federal oversight for all future interconnections. 

Key Problems Identified

1. Regulatory Confusion

Developers struggle to determine whether:

• PJM (FERC) rules apply 
• Or state/local interconnection rules apply 

2. Inefficiency

Small projects (even <5 MW) are forced into:

• Full PJM interconnection queue 
• Lengthy study processes 

3. Operational Burden

• Transmission Owners (TOs) must track “dual-use” assets 
• PJM queue congestion increases 

4. Misalignment with DER Policy

FERC Order 2222 explicitly supports:

• State/local control for DER interconnections 
• Aggregated participation without unnecessary barriers 
  

PJM’s Proposed Reform: Elimination of “First Use”

Core Concept

PJM proposes that:

• All distribution-level resources interconnect through state/local processes and use WMPA for market participation instead of PJM GIA.

Confirmed in page 2 (Key Takeaway) of the presentation. 

What Changes?

Bright-Line Test: Engineering-Based Jurisdiction

To remove ambiguity, PJM introduces a voltage-based classification :

• ≥ 69 kV → Transmission → PJM GIA (FERC jurisdiction) 
• < 69 kV → Distribution → State/local IA + WMPA 

Clearly shown on page 6 of the PDF. 

Why This Matters (Engineering Perspective)

This aligns jurisdiction with physical system characteristics:

• Transmission systems → Bulk power transfer 
• Distribution systems → Local load and DER integration 

It simplifies:

• Study scope 
• Protection coordination responsibility 
• Planning authority 
  

Alignment with Order 2222: A Critical Link

FERC Order 2222 states:

• DER interconnections to distribution systems should not fall under transmission interconnection rules 
• Aggregations should enable participation without overburdening RTO processes

PJM’s compliance language (page 4) confirms:

• DER interconnections are governed by state/local law 
• PJM focuses on market participation, not physical interconnection 
  

Operational Benefits of the Reform

1. Faster Interconnection Timelines

• Removes PJM queue delays for small projects 
• Enables faster deployment of solar + BESS 

2. PJM Resource Optimization

• Staff can focus on: 

• Large transmission projects 
• Reliability-critical studies 

3. Increased DER Penetration

• Simplified entry for: 

• Community solar 
• Behind-the-meter systems 
• Microgrids 

4. Improved Cost Transparency



• Developers gain early clarity on: 

• Upgrade costs 
• Scope 
• Timeline 
  

Dispute Resolution and Governance

PJM includes a structured dispute framework:

• Resolution options: 

• Bilateral agreements 
• State/local processes 
• PJM tariff mechanisms 

• Must be resolved before Phase I studies 

Detailed in page 7 of the presentation. 

What Is Not Affected

1. PURPA Qualifying Facilities (QFs)



• Governed under separate federal law 

2. DER Aggregation Model (Order 2222)

• Aggregations: 

• Use DAPSA agreements 
• Do not enter PJM interconnection queue 

Confirmed on page 9.

Engineering Implications for Developers and Utilities

This reform fundamentally changes project execution strategy:

For Developers

• Focus shifts to: 

• Utility distribution studies 
• Hosting capacity analysis 
• Protection coordinatio

For Engineers (Keentel Perspective)

Critical studies will include:

• Distribution load flow 
• Short circuit analysis 
• Protection coordination 
• Voltage regulation and flicker 
• DER integration studies 

For Utilities

• Increased responsibility for: 

• Interconnection approval 
• Grid impact studies 
• Local reliability 
  

Implementation Timeline

• PJM Filing: October 1, 2025 
• Stakeholder Approval: September 25, 2025 
• Expected Effective Date: April 28, 2026 
  

Conclusion

PJM’s elimination of the “First Use” rule represents a paradigm shift in interconnection policy. It aligns regulatory structure with:

• The decentralized nature of DERs 
• FERC Order 2222 objectives 
• Modern grid operational realities 

This reform will:

• Reduce interconnection bottlenecks 
• Accelerate renewable deployment 
• Improve coordination between RTOs and utilities 

For engineering firms like Keentel Engineering  this opens opportunities in:

• Distribution-level studies 
• DER integration 
• Utility coordination 
• Compliance and interconnection support 
  

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Conclusion

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