PJM did not begin its planned reliability backstop procurement on September 30 after federal regulators suspended the proposal for five months while examining how its costs would be divided. The program is intended to buy new electricity capacity to cover a shortfall as large power users, including data centers, increase demand.
The Federal Energy Regulatory Commission accepted the proposal for filing in a September 29 order, with an effective date of February 28, 2027, subject to refunds and further proceedings. It found most parts reasonable but ordered additional review of three: cost allocation, obligations when a transmission owner leaves PJM, and collateral required from electricity suppliers buying the capacity.
The proposal starts with a target of 6,831 megawatts for the 2028-29 delivery year. Qualifying new supply and certain opt-outs would reduce that amount. Suppliers could receive contracts lasting up to 15 years, with the final delivery year no later than 2042-43.
PJM says the procurement is a one-time transitional measure and only new resources can supply it. Those resources must enter commercial service by June 1, 2032. Its separate voluntary effort to match large customers with new power supply is continuing.
FERC’s main concern about costs is the load forecast used to assign them. PJM proposed distributing costs among utility areas using changes in forecast demand adjustments. The commission found that this calculation could miss some large users already included in an earlier forecast, leaving other customers with bills that do not roughly match the benefits they receive.
In a concurrence, Commissioner Lindsay See said existing customers should not pay costs attributable to new demand. The order encourages PJM to consider updated forecasts or other measures that capture growth more accurately.
Regulators also questioned why transmission owners withdrawing from PJM would owe backstop charges when the capacity is purchased for the electricity suppliers serving customers in their areas. They said exit rules may need to place those obligations on the suppliers receiving the capacity’s benefits.
The proposed buyer collateral requirement was $1.5 million per committed megawatt. FERC said PJM had not supported that amount with quantitative measures such as default probabilities or expected losses. It also questioned the limited forms of collateral allowed and the time buyers would have to provide it.
Utilities have separately required bank guarantees from data center developers to protect against abandoned infrastructure costs. Those connection requirements are distinct from collateral for PJM’s capacity buyers.
PJM says it is reviewing the order and will provide an administrative update at its October 7 Market Implementation Committee meeting. FERC invited a revised filing that could resolve the disputed provisions sooner; the suspended plan’s procurement milestones are being reviewed.
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By the Control Plane Editorial Team