PJM Refiles Its Data Center Backstop Rules: Collateral Drops to About $686,000 a Megawatt, and Utilities Must Report Their Large Loads

PJM first told FERC that utilities buying backstop capacity for data center growth should post $1.5 million in collateral for every megawatt ^[2]. On November 9 it filed a new number: 40% of the discounted value of the whole payment stream, which PJM illustrates at about $686,000 a megawatt if prices land at the $555/MW-day cap ^[1]. The filing, Docket ER27-454-000, is PJM’s answer to the three problems FERC found in the Reliability Backstop Procurement in September, and it asks for an order by January 29 so the procurement can open March 1, 2027 ^[1].

What PJM put back on FERC’s desk

As this column reported on September 30, FERC accepted the backstop procurement but suspended it for five months, to February 28, 2027, and sent three pieces to a paper hearing: how costs are split among zones, what happens when a transmission owner leaves PJM, and the collateral required of load-serving entities ^[2]. It also invited PJM to fix them through a fresh section 205 filing ^[2]. PJM asked for abeyance on October 13, and FERC pushed initial briefs in Docket EL26-108 from November 13 to January 11, 2027, and reply briefs to January 26 ^[3].

The revised rules first arrived October 29 in Docket ER27-330 ^[1]. PJM refiled them on November 9 as ER27-454, calling the new filing “substantively identical” and saying it changes only the eTariff code, from a compliance filing to a section 205 filing ^[1]. Comments are due November 30 ^[4].

The procurement itself keeps its shape. It still aims at the 2028/2029 Base Residual Auction shortfall, which FERC’s order put at 6,831 MW, and commitments still run up to 15 years ^[1,2]. PJM considered switching to the 2029/2030 auction and declined, saying that would unsettle a design “market participants have already prepared for” ^[1].

Who pays: utilities now have to count their data centers

FERC’s objection to the cost split was narrow. PJM had allocated costs to zones by the change in “Load Adjustments” between the 2026/2027 and 2028/2029 delivery years, and FERC found some large loads may never have shown up as Load Adjustments because PJM had folded them into the base forecast ^[2].

The replacement leans on the 50 MW definition FERC accepted on October 9 ^[1]. Each Electric Distributor outside a Fixed Resource Requirement area must report, at least seven days before the procurement starts, how much its large loads will grow between the 2026 actual summer peak and the expected 2028/2029 peak, and identify each load backed by a service obligation or construction commitment ^[1]. Any gap from what the distributor gave PJM for its load forecast must be explained, and PJM says it can refer unexplained gaps to FERC’s Office of Enforcement ^[1].

Costs then go to zones in proportion to that reported growth, less new capacity covered by bilateral contracts with large loads of at least five delivery years ^[1]. The zone shares stay fixed for the full 15 years ^[1]. Within a zone, states can direct the distributor to assign the obligation to particular load-serving entities, now 120 days before the 2028/2029 delivery year rather than 60; absent that, PJM spreads charges by each LSE’s share of capacity obligation ^[1]. PJM says it “lacks authority” to decide how any LSE recovers the cost from retail customers ^[1].

Two changes reach past the paper hearing. The total target becomes the lesser of the updated shortfall and the region-wide large-load growth that distributors report, a cap PJM says guards against “previously reported Large Load agreements” being canceled ^[1]. And the opt-out for co-ops and municipal systems whose rates no state regulates is gone; FERC had said it may be unduly discriminatory, and PJM now says every LSE serving a large load stays responsible ^[1,2].

The Market Monitor had told FERC that 4,017 MW of data center load, 42% of the forecast increase, was canceled or delayed as of September 21, 2026, with Dominion’s zone at 51% of that and AEP Ohio’s at 29% ^[2]. The cap matters only if what distributors report comes in below the recalculated shortfall.

The collateral math

FERC said PJM never supported its $1.5 million figure with a probability of default, a loss-given-default assumption or any other quantitative measure ^[2]. PJM’s affiant Gwen Kelly supplied them: a BBB weighted-average LSE rating, a 4.05% probability of default, 100% loss given default and a 9.5% discount rate taken from the Brattle Group’s capacity-market cost of capital in PJM’s 2025 cost-of-new-entry review ^[1]. Her finding is that the combined cost of posting collateral and covering defaults bottoms out at 40% ^[1].

The $686,000 figure equals about 3.4 years of undiscounted payments per megawatt, and PJM calls it the highest possible rate, since the actual weighted-average clearing price can only be lower than the cap ^[1]. Notice time for posting rises from 15 days to 75, surety bonds join cash and letters of credit, and no collateral is required for a resource that is not yet operating ^[1]. Unsecured credit stays out; PJM says members already use theirs ^[1].

That responds to NOVEC, East Kentucky Power Cooperative and Constellation, who had argued the old rate sized collateral as if load owed the full contract price rather than a contract-for-differences payment ^[2]. Kelly does not concede the point. She collateralizes both pieces, the backstop charge and the resource’s capacity-market payment, so that protection does not hinge on forecasts of future auction prices ^[1].

Where the sides stand

PJM calls its revisions “carefully tailored” to FERC’s concerns ^[1,10]. Maria Scheller of ICF told Utility Dive the collateral changes sharply cut risk for default service providers, but said a provider of last resort could still carry large collateral and liquidity needs for a time if a large load starts on default service ^[10].

Consumer advocates from Delaware, the District of Columbia, Illinois, Maryland and New Jersey have attacked the procurement more broadly. Their October 29 rehearing request says it “permits the unmitigated exercise of seller-side market power” and lacks locational constraints, though “everyone knows” where the data center load is ^[8]. FERC’s order recounts their earlier point that PJM’s large-load forecasts fell from 14.8 GW to 6.8 GW since April ^[2].

From the generator side, Constellation’s rehearing request targets the rule that committed resources offer into later capacity auctions at $0/MW-day, which it says distorts price signals ^[9]. The revised filing leaves that framework in place ^[1].

A related fight concerns information. On November 9 PJM also filed its compliance tariff for the Large Load Registry in ER26-3515, removing items tied to the rejected interim service ^[6]. The same day, the Ohio Consumers’ Counsel sought rehearing of FERC’s October 9 order because the registry’s confidential data goes to state commissions, transmission owners, the Market Monitor, distributors and LSEs but not to state consumer advocates ^[7]. FERC had noted the advocates’ protests on this point ^[5]. The Ohio office says the omission leaves them unable to test whether large-load costs land on residential customers, and that protective agreements would answer the confidentiality concern ^[7].

What I’m watching

November 30 is the comment date on both PJM filings ^[4]. The other test arrives first. PJM says the 2029/2030 Base Residual Auction is held in December 2026, and a third consecutive short auction would oblige it under the current tariff to declare a capacity shortage and file for a separate Reliability Backstop Auction ^[1]. PJM has asked FERC to waive that one-time obligation, because the procurement it wants to run on March 1 would cover the same ground ^[1]. Whether FERC rules on the waiver before the December auction results post is not in the record.