U.S. Energy Department Backs FERC's Call for PJM Reforms

The U.S. Department of Energy has backed the Federal Energy Regulatory Commission's (FERC) call for PJM reforms. In an October 9 announcement, the department said it had filed a notice of intervention and a statement of position with FERC, and urged PJM, the largest grid operator in the United States, to change its rules so that large electricity users such as data centers pay for new power plants and infrastructure. According to reports, it was the first statement of position the department has filed at FERC in at least five years. At issue is who pays for the Reliability Backstop Procurement (RBP), a one-time procurement of new capacity that PJM is pursuing.

"The Trump Administration remains committed to doing everything it can to lower electricity costs, grow the supply of American energy and strengthen grid reliability," said U.S. Secretary of Energy Chris Wright, adding that "the Energy Department supports having large electricity users pay for reliable new power generation." Deputy Secretary of Energy James Danly said the reforms increase transparency and prevent unjust cost shifts onto existing customers "while ensuring Americans continue to have access to affordable, reliable, and secure electricity." The department also set out four principles, including allowing large loads to build, bring or buy the capacity they need and using accurate and transparent demand information.

Behind the dispute is PJM's capacity shortage. According to FERC's 97-page September 29 order, which METAL reviewed, PJM's 2027/2028 Base Residual Auction in December 2025 cleared significantly below the reliability requirement for the first time in the auction's history, falling 6,623 megawatts short. Of the 5,250 megawatts of load growth forecast for that year, nearly 5,100 megawatts was due to data centers. The auction cleared at the temporary price cap of $333.44 per megawatt-day, and the 2028/2029 auction in July 2026 also fell short of the reliability requirement at the $325 cap. The order said the existing Reliability Backstop Auction, proposed over 20 years ago, has never been used, and found that the current tariff may be unjust and unreasonable.

PJM's RBP aims to fill the 6,831-megawatt shortfall from the 2028/2029 auction with new resources. Winning resources receive commitments of up to 15 years, through the 2042/2043 delivery year, and must begin commercial operation by June 1, 2032. The PJM Board set a cap of $555 per megawatt-day on the weighted average cost of accepted offers. Demand-side interest was strong. In a survey cited in the order, 21 entities submitted 47 large load projects averaging 850 megawatts. On the supply side, 87 entities offered 397 projects totaling about 136 gigawatts.

FERC accepted the plan but suspended it for five months, pushing the effective date to February 28, 2027, and established a paper hearing. It found that three elements may be unjust and unreasonable: cost allocation, transmission owner exit rules, and collateral requirements for load-serving entities (LSEs). FERC said it would likely hold the hearing in abeyance if PJM submitted a new filing within 30 days and encouraged a prompt refiling. PJM postponed the procurement it had planned to open on September 30. "While FERC identified three discrete issues requiring further consideration, the Commission also provided a clear path to resolving those issues expeditiously and moving the procurement forward," PJM said.

The department put the most weight on cost allocation. According to reports, its statement of position said that "under the Ratepayer Protection Pledge, large electric energy loads — not American households or other business ratepayers — must fund the electric energy generation and related infrastructure that such new large load projects require." It also argued that continuously tracking whether projects enter service or are delayed, reduced or cancelled is needed to assign costs to those responsible. According to the FERC order, 282 utilities, cooperatives and data center developers and 23 governors have joined the pledge, which the White House released in March 2026. Signers in PJM's footprint include American Electric Power (AEP), Dominion Energy, Exelon, FirstEnergy and PPL.

Stakeholders are divided. In a June 30 vote of the PJM Members Committee, only one of 13 proposals, from the Data Center Coalition and a coalition of Electric Distributors, passed with 75% support, while PJM's own proposal received 30%. The independent market monitor argued that data centers use power for all 8,760 hours of the year, yet four-hour batteries can qualify as RBP resources, creating a mismatch between the duration of supply and demand. METAL previously reported on how opposition to data centers in Pennsylvania grew into a bipartisan coalition, and the cost burden on ratepayers across PJM's 13 states and the District of Columbia sits at the center of that backlash.

The next deadline is the end of October. According to reports, PJM will file a revised proposal with FERC by October 29 rather than wait for the five-month hearing, and will hold a special Members Committee meeting on October 22 to consult on its substance. The department urged PJM to comply promptly with FERC's order and adopt durable market reforms. From a legal standpoint, the dispute is about how to apply the Federal Power Act's standard of just and reasonable rates, namely the principle that those who cause costs should bear them, in the era of AI data centers. How precisely the revised proposal identifies the share owed by large loads will determine household electricity bills in the eastern United States.