PJM's Board Passes Over the One Backstop Plan Members Backed and Orders a FERC Filing That Curtails Data Centers First

PJM’s members voted on 24 proposals in June, and exactly one cleared the two-thirds bar the grid operator uses to measure support: a backstop plan from the Data Center Coalition and a group of utilities ^[4]. On Monday, the PJM Board of Managers set it aside. In a decisional letter dated July 27, board chair Paula Conboy wrote that the Coalition plan “contains several constructive elements” but that “a voluntary subscription framework would not provide sufficient assurance” the region would actually buy the capacity it is short ^[1]. The board instead told PJM staff to file its own package at the Federal Energy Regulatory Commission by the end of July ^[1].

The package would put new data centers that arrive without their own supply ahead of PJM’s emergency demand-response program in the line for load cuts when capacity runs short ^[1,2].

What the PJM Board decided on July 27

The letter directs a FERC filing with four parts ^[1].

A Large Load Registry. Electric Distributors, meaning the utilities and other entities that deliver power to retail customers, must give PJM the information it needs for load forecasts and for running the two programs below ^[1]. PJM’s own summary sets the threshold at 50 MW of peak load at a single site, counting delivery points within a one-mile radius, according to the American Public Power Association ^[3]. Registry data will be shared with the public only “to the extent permitted by applicable confidentiality requirements” ^[1].

A Reliability Backstop Procurement. Starting in September 2026, PJM would buy capacity equal to the shortfall in the 2028/2029 Base Residual Auction, excluding Fixed Resource Requirement load and supply ^[1]. Utility Dive puts that target at 6.8 GW ^[2]. Documented bilateral contracts and self-supply for new capacity serving new load reduce the target ^[1].

An Interim Resource Adequacy Service. This is the program stakeholders called Connect and Manage; the board renamed it ^[1]. It applies to new Large Loads that, as of June 1, 2027, have not brought enough capacity and cannot otherwise be served at the 1-in-10 reliability standard. Their load would be reduced “prior to the deployment of Pre-Emergency Load Management” ^[1].

Compensation for reduced load. Electric Distributors must offer a FERC-approved rate, paid on verified performance, to Large Loads told to cut consumption ^[1]. Which retail customers fund that, and whether a given data center gets it or waives it under the Ratepayer Protection Pledge, is left to state authorities ^[1].

A footnote marks the edge of the service. It “does not address the connection of the load to the electric system,” which the board says belongs to other proceedings, including FERC Docket EL26-67-000 ^[1].

How the backstop auction would run, and its price cap

The board’s letter is short on numbers. PJM’s accompanying summaries, as reported, fill in the mechanics. The window would open Sept. 30 and close Oct. 21, with results in early December ^[2,3]. Commitments run up to 15 years and would be final before the December auction for the 2029/2030 delivery year ^[3]. Accepted offers would be capped at $555/MW-day, compared with the temporary $325/MW-day cap in the last base auction ^[2]. New resources must be online by June 1, 2032, and developers carry their own transmission network upgrade costs in their offers ^[2,3].

A bilateral track runs alongside. PJM issued a request for proposals on June 9, hired Charles River Associates to oversee matchmaking, and expects initial matches in August ^[2]. Every contract it produces shrinks what the central auction has to buy ^[1,3].

Who pays for PJM’s backstop procurement?

The cost goes to load-serving entities, the retail suppliers that carry customers’ capacity obligations ^[1]. If a state regulator directs an allocation and the distributor reports it to PJM, PJM applies it. Otherwise PJM splits the cost within each zone by Peak Load Contribution and the load adjustments in the 2028/2029 forecast ^[1].

What happens below the zone is not PJM’s call. “Because PJM does not have jurisdiction to allocate retail costs directly to individual data centers, state action will be essential,” the letter says ^[1]. PJM chief executive David Mills had already warned the region’s governors on May 5 that without state frameworks, “it is unclear to which customers those costs would be assigned” ^[6].

The board did add one opt-out. An Electric Distributor can leave the procurement only with documented support from the governor’s office, the state retail regulator and the interconnecting customer ^[1]. All three.

The letter’s most consequential paragraph for future bills may be the one about forecasts. Starting with the 2029/2030 delivery year, PJM staff are to drop incremental new Large Loads, measured against the forecast for the 2028/2029 auction, from the demand used in capacity auctions ^[1]. Those loads come back in the year their new supply, covering them fully in ICAP terms, is offered into the auction ^[1]. “This adjustment is for load forecasting purposes only,” the board wrote ^[1].

Where the sides stand

The Coalition. The plan the board passed over was built on what Foley Hoag described as a “registry-based subscription model”: load-serving entities and large loads would tell PJM in advance how much capacity to buy on their behalf ^[4]. It backed the bilateral phase ^[4]. Its supporters lose the voluntary design but keep the bilateral track.

State lawmakers. On June 9 the PJM Legislators’ Collaborative, writing for lawmakers from 13 states and the District of Columbia, asked for five changes ^[5]. The July 27 letter answers them unevenly. The lawmakers wanted large loads removed from the capacity auction until they bring their own supply ^[5]; the board did that for loads above the 2028/2029 forecast, from 2029/2030 on ^[1]. They wanted the procurement limited to “willing buyers” with no recourse to other ratepayers ^[5]; the board kept zonal allocation to load-serving entities ^[1]. They wanted the auction moved to December ^[5]; it stays in September ^[1]. And they asked PJM to let states designate megawatts of Connect and Manage load under state policy ^[5]; the letter routes compensation decisions to states but does not say that ^[1].

The market monitor. Joseph Bowring of Monitoring Analytics told Utility Dive the plan keeps data center load in capacity auctions, which he said raised capacity costs by $29.4 billion over the last four auctions, and that the curtailment service would raise wholesale energy costs and lower reliability by connecting load without generation to serve it ^[2]. He said a fuller response would follow ^[2].

Analysts. Julia Hoos of Aurora Energy Research told Utility Dive the target “is ambitious, but it’s nowhere near close enough to what’s needed if all this large load shows up” ^[2]. Jefferies analysts said a procurement aimed at the last auction’s gap does not reach large loads “which have yet to materialize” ^[2].

The board acknowledged the split: “there were diverging views regarding a number of these elements” ^[1]. Its appendix lists 13 letters it received, including a joint letter from the Virginia State Corporation Commission and the Data Center Coalition and one from the Public Utilities Commission of Ohio ^[1].

What I’m watching

The FERC filing. The board said PJM would file by the end of July ^[1]. The tariff language, not the letter, will set how curtailment order and compensation actually work, and the docket number will tell readers where to send comments.

The Sept. 30 window. PJM’s proposed opening date assumes FERC approval before then ^[2,3]. And for the 2027 curtailment rule, the open question is the one PJM handed back to the states: who pays a data center to stand down, and at what rate.