PJM Board and PJM States, Alongside the White House, Propose Separate but Similar Solutions to Address Data Center Load Growth and Affordability in PJM
On January 16, in an unexpected and unprecedented move, the Trump administration, through the Department of Energy (DOE), along with governors of all 13 PJM states, asked PJM to hold a one-time emergency auction intended to shield customers from the cost of new generation needed to serve data centers.
The proposal’s statement of principles calls for PJM to:
- Hold a special auction, separate from PJM’s regular Base Residual Auction (BRA, PJM’s capacity market auction), that would provide a 15-year price lock; a separate DOE press release claims the auction will support $15 billion in new power plants.
- Ensure that the costs of this auction are allocated to data centers through their load-serving entities, whether the data centers use the power or not (with the Governors agreeing to work with their utility commissions to ensure appropriate cost allocation at the state level).
- Implement a two-year extension of the capacity market price collar that has been in place for the last two auctions but is not currently in effect for the 2028/29 auction, scheduled for June 2026.
- Enact further reforms to load forecasting, generator interconnection, and the capacity market.
PJM did not participate in developing the proposal and was not invited to the White House for the announcement. PJM is under no obligation to implement the proposal, and any emergency auction, along with other proposal elements, would need to be approved by the Federal Energy Regulatory Commission (FERC). FERC Chair Laura Swett said at the January 22 FERC open meeting, “This is a monumental moment… I want to recognize this historic agreement reached between the administration and a bipartisan coalition of 13 governors who represent the customers of PJM.”
Separately but almost concurrently, the PJM board issued its long-awaited proposal stemming from PJM’s Critical Issue Fast Path (CIFP) stakeholder process to address large load additions, which began back in August and produced 12 proposals, none of which achieved a consensus stakeholder vote. In December, the PJM Board Chair indicated that PJM would file its CIFP proposal with FERC in January, addressing issues related to future large-load additions. FERC formally requested an update on PJM’s CIFP by January 20 as part of its colocation order (see story below).
The PJM Board ultimately released the framework for its CIFP plan late on January 16, followed by a formal filing of the CIFP plan with FERC. The proposal emphasizes the Board’s commitment to reliability and competitive markets and reflects concepts outlined in various stakeholder proposals. The plan includes a half-dozen proposals: some to be filed directly with FERC, some that entail changes in PJM’s policies and procedures that can be made immediately, and some that will involve stakeholder processes to inform the Board and further flesh out critical details.
These include:
- An immediate initiation of a backstop auction to secure more power supplies after falling 6.6 GW short in their December auction, failing to meet standards aimed at preventing blackouts—similar to the Governors’ proposal but with different proposed parameters, with work to develop the auction to start immediately.
- Voluntary Bring Your Own New Generation (BYONG), along with an Expedited Interconnection Track that would allow certain resources above 250 MW to connect outside of PJM’s interconnection cluster process (to be filed with FERC as soon as this month). The Board’s proposal did not include any reforms to the standard interconnection queue, as requested by the Governors’ proposal.
- A “connect and manage” curtailment framework to address shortfalls between new load and new generation, whereby PJM would give notice to LSEs (Load Serving Entities) and TOs (Transmission Owners) of potential load reductions (PJM notes that it cannot direct individual retail loads to curtail).
- Potential extension of the price collar for the next two capacity auctions—but unlike the Governors, the Board raised pros and cons and is seeking stakeholder feedback before moving forward.
- A focused review of the capacity market to assess whether its design is appropriate for prevailing investment conditions and provide the incentives needed to attract timely new supply is to be conducted by PJM staff in conjunction with stakeholders in 2026. This element aligns with the Governors’ request that PJM initiate immediate reforms to the capacity market.
- Significant Load Forecasting Improvements (as discussed further below, PJM has recently revised down its load forecast)—this aligns with the Governors’ request.
Key Takeaways:
Whether a new auction within PJM to address load growth will be fair, competitive, and effective at incentivizing significant new generation development and shielding other customers from cost and reliability impacts will depend on details of the plan that will need to be worked out by PJM and approved by FERC—and on cost allocation provisions that will need to be ironed out at the state level.
What is clear is that States, the White House, PJM, and FERC all agree that urgent and unprecedented action is needed—and they are at least somewhat aligned on the solution set. And while much of the initial focus has been on the idea of a separate auction to address the influx of new large loads, that does not make any less urgent, the need to implement durable solutions such as fixing the backlogged interconnection queue, building smarter regional and interregional transmission, pursuing market reforms to reflect the shifting resource mix, and adopting new technologies to bring PJM’s grid into the 21st century.
CIFP Next Steps from David Mills – PJM Board Chair and Interim CEO:
David Mills, PJM Board Chair and Interim CEO, provided an update on CIFP and participated in Q&A with PJM stakeholders at the January 22 Member’s Committee meeting. Mills characterized the DOE/Governors’ proposal as an unexpected and unprecedented state-federal intervention into PJM activities. Mills did not address that proposal directly but instead focused on the PJM proposal and next steps; however, he acknowledged and seemed to accept the September timeline for a new backstop reliability auction to address data center load, as outlined in the DOE/Governors’ letter. Mills outlined an “accelerated” stakeholder process that was “already underway” and indicated he would not initiate a formal CIFP process.
Mills’ top priorities include:
- Reliability Backstop Auction
- Developing a “connect and manage” process for large loads.
- Holistic redesign of PJM power markets beyond just the capacity market.
Jacob Finkel, representing PA Governor Josh Shapiro, admonished Mills in the meeting for not taking the DOE/Governor’s proposal more seriously, and specifically for not addressing affordability by adopting the price cap extension.
For its part, PJM issued a request to stakeholders to respond to the questions via a survey available at this link. The survey will close at 5:00 pm on Friday, January 30. All feedback will be posted publicly, with attribution, on the CIFP-LLA webpage.