FERC Chair Slams PJM ‘Mess’ As Country’s Largest Grid Operator Delays Power Auction

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PJM postponed a planned reliability backstop procurement auction after the Federal Energy Regulatory Commission partly approved its proposal and flagged concerns about cost allocation, transmission-owner exit rules and collateral for load-serving entities. The auction is intended to address a capacity shortfall tied largely to projected data center demand, but PJM has not announced a new schedule.

PJM Interconnection has delayed a planned reliability backstop procurement auction after the Federal Energy Regulatory Commission partly approved the grid operator’s proposal but found potential problems with its cost-allocation method, transmission-owner exit rules and collateral requirements for load-serving entities. The auction was intended to help address a projected capacity shortfall, much of it linked to expected data center demand.

PJM spokesman Jeffrey Shields told Utility Dive that the procurement, which had been scheduled to begin Wednesday, was postponed following FERC’s decision the day before. The grid operator is reviewing the order and said it intends to work quickly on the commission’s concerns. No replacement schedule has been set, Shields said.

FERC approved some elements of PJM’s plan but said aspects involving cost allocation, rules for transmission owners leaving PJM, and collateral required from load-serving entities may be unjust and unreasonable. The commission described possible changes and strongly encouraged PJM to submit fixes promptly, saying that could avoid a hearing process. FERC accepted PJM’s proposed offer cap of $555 per megawatt-day, calculated as a MW-weighted average over the delivery period, and said the proposed collateral rules for power suppliers were appropriate.

The proposal would seek 6.8 gigawatts of new capacity to address a shortfall identified in PJM’s capacity auction for the 2028-29 delivery year. PJM may lower that target to account for supply expected to join the system. Before the delay, the operator planned to receive offers from Sept. 30 to Oct. 21, select resources between Oct. 22 and Dec. 2, and announce results before its standard auction for the 2029-30 delivery year, scheduled for early December.

Capacity Plans Face a Delay

The delay leaves the timing of a procurement intended to add resources against a projected shortfall unresolved. The stakes extend beyond power suppliers: decisions about who pays for new capacity could affect utilities and customers, especially in areas where large new loads are expected.

FERC said PJM had not shown that its proposed cost allocation would meet the legal standard of being just and reasonable or assign costs to the parties driving them. The commission suggested using updated load forecasts to allocate costs and set the initial procurement target. That dispute matters because forecasts of data center growth can influence both how much capacity is sought and which customers bear its expense.

The order also points to the practical consequences of collateral rules. FERC cited Northern Virginia Electric Cooperative’s estimate that it would need to post about $2 billion in collateral under PJM’s proposal. That figure was presented in the decision as the cooperative’s estimate, not as an independently established final requirement.

Why PJM Proposed Backstop Buying

PJM operates the regional grid across 13 Mid-Atlantic and Midwest states and the District of Columbia. It has said the backstop procurement arose from a fast-track stakeholder process to respond to a capacity shortfall, with rising data center demand among the factors behind forecasts of load growth.

PJM’s last two base capacity auctions did not secure enough capacity to meet its reserve-margin targets, according to the supplied report. The backstop auction was designed as a separate procurement in addition to the operator’s regular capacity-market process. FERC’s order did not reject the entire proposal; it accepted some provisions while identifying elements that PJM would need to revise or justify.

FERC Chairman Laura Swett criticized the timing and quality of PJM’s filing. Commissioner Lindsay See separately emphasized the need for more accurate forecasts as electricity demand grows after years of relatively flat use. The commission also said states have a role in managing data center load growth and that federal market design alone cannot resolve every issue.

“PJM is reviewing the order and intends to work quickly to address the commission’s remaining concerns.”

— PJM spokesman Jeffrey Shields, in an email to Utility Dive

Revised Auction Timing Is Unknown

PJM has not announced when it will restart the procurement or whether the original offer, selection and results dates will be replaced with a schedule that still precedes the regular auction in early December. The operator also has not said what specific revisions it will propose in response to FERC.

The final procurement target remains subject to change: PJM may reduce the proposed 6.8-GW target to reflect supply expected to be added to its system. The available material does not specify how much new supply will qualify or how revised forecasts will affect the target, cost allocation or customer bills.

FERC’s order identified concerns and offered possible approaches, but the supplied report does not describe a final resolution of those issues. It is also unclear whether any remaining disputes will lead to a hearing if PJM’s changes do not address the commission’s concerns.

PJM Must Revise Its Proposal

PJM says it will review FERC’s order and work on changes. The commission encouraged the operator to submit fixes as soon as possible, including revisions addressing how costs are assigned, how costs are handled if a transmission owner exits, and whether load-serving entity collateral requirements appropriately balance default protection with market flexibility.

The next concrete milestone is PJM’s submission of a response or revised proposal, followed by FERC’s consideration of whether the changes address its concerns. A new auction calendar is also pending. Until PJM provides one, the timing of procurement results relative to the standard 2029-30 capacity auction remains uncertain.

Key Questions

Why did PJM delay the reliability procurement auction?

PJM postponed the auction after FERC partly approved its proposal and flagged concerns about cost allocation, transmission-owner exit rules and collateral requirements for load-serving entities.

What is the backstop procurement meant to do?

It is intended to acquire additional capacity to help address a shortfall identified for the 2028-29 delivery year. PJM proposed seeking up to 6.8 GW, subject to possible adjustment for expected new supply.

When will the auction take place?

PJM has not announced a new date. Its spokesman said the operator was reviewing FERC’s order and that a revised timeline had yet to be determined.

Did FERC reject the whole PJM proposal?

No. FERC partly approved the plan, accepted some elements including the proposed $555 per megawatt-day offer cap, and identified other provisions that may need changes or further justification.

Why is data center growth part of the dispute?

PJM’s proposed procurement is tied to a projected capacity shortfall that the report says is driven largely by data center demand forecasts. FERC said updated load forecasts could help set procurement targets and determine how costs are allocated.

Source: rss