A NEWSLETTER FROM ADVANCED ENERGY UNITED |
| |
|
Navigating PJM's landscape is increasingly complex with big stakes, as decisions made at PJM impact state policies, energy reliability, affordability, and energy goals. Interconnection bottlenecks, shifting capacity market dynamics, and ongoing regulatory debates at FERC and PJM all shape the future of state energy markets.
Subscribe here to receive PJM Insights for State Leaders—a monthly bulletin designed to keep policymakers, regulators, and stakeholders informed on the latest developments in PJM. |
|
|
Special Edition: PJM Reliability Backstop Auction |
PJM, at the direction of its Board and under pressure from all 13 PJM states and the White House, launches a series of unprecedented initiatives that could result in massive changes to markets and policy to stave off a looming crisis of affordability and reliability while also accommodating massive data center load growth.
PJM is moving full speed ahead to develop plans to reliably meet the unprecedented growth in electricity demand driven by the rise of large energy users (primarily data centers) in PJM, while maintaining affordability for consumers. Many issues PJM needs to address are short-term and transitional, intended to help the region manage a dynamic period in the industry. These efforts overlap and are interrelated, and PJM is moving very quickly on multiple fronts. Recognizing that short-term fixes will not resolve more foundational issues, PJM is simultaneously planning a holistic review of its markets and how they work together to support reliability and affordability.
How we got here: PJM embarked on a "Critical Issue Fast Path Process" (CIFP) with stakeholders in August of 2025 to identify issues and solutions for large load-related challenges.
Following that process, the PJM Board identified internal priorities issued in a decisional letter on January 16, highlighting the following priorities: - Load forecasting improvements
- Voluntary bring your own new generation for large load paired with expedited interconnection track
-
Connect and manage for new large load additions that do not bring gen and curtailment prior to emergency demand response in circumstances necessitating load shed
- Immediate initiation of reliability backstop procurement
- Holistic review of PJM's markets in 2026
- Decide on price collar for 2028/2029 and 2029/2030 capacity auctions
The same day, the White House and the 13 PJM States' Governors issued a statement of principles regarding PJM: - Provide revenue certainty to new generation
- Protect residential customers from capacity price increases
-
Allocate costs to data centers
- Improve load forecasting
- Accelerate ongoing generator interconnection studies
- Return PJM to market fundamentals
- Governors agree to use their authorities to allocate costs to data centers and protect residential customers.
These reform recommendations overlap with a FERC-driven process in response to an order directing PJM to revamp its co-location and behind-the-meter rules for large load additions, as discussed further below.
Where we are today: PJM is challenged to quickly reconcile and address these many priorities and implement potentially massive changes to stave off a looming crisis of affordability and reliability. The most recent capacity auction, held in December for the 2027/2028 delivery year, fell short of the reliability requirement, highlighting the urgent need for new resources and triggering an investigation.
PJM published its analysis, the 2027/2028 Base Residual Auction Reserve Target Shortfall Report, on February 9. That report concludes that PJM "has entered a critical period, or 'transition gap,' where demand growth has temporarily outpaced infrastructure development."
The status of each ongoing reform effort in response to the PJM Board, Governors, and the White House is discussed below. |
|
|
PJM Reliability Backstop Procurement
The first public phase of the PJM-driven reform effort was a series of seven full-day PJM Reliability Backstop Procurement workshops to design a one-time process to rapidly secure new generating capacity independent of PJM's existing capacity market construct in an effort to isolate the cost impacts of new large loads from other electric ratepayers and provide greater long-term certainty to incentivize new resource entry. PJM's stated goal with the backstop procurement is to procure a quantity of capacity that begins to markedly reduce the current and future capacity shortfall, driven largely by data center demand.
The White House National Energy Dominance Council and the governors of all 13 states served by PJM have also urged PJM to undertake such a procurement no later than September, as part of the six principles outlined in their own January 16 letter. As part of those principles, the Governors also committed to exploring how to allocate costs for the Reliability Backstop to new data center loads that have not otherwise procured capacity or agreed to be curtailable in times of system need.
To execute a backstop procurement this year, PJM would need to file a proposal with the Federal Energy Regulatory Commission (FERC) by this summer. To meet that timeline, the first PJM Reliability Backstop Procurement stakeholder workshop was held on February 6, and seven workshops were held through early March to generate ideas and potential solutions. PJM presented their own initial concepts and design preferences in their Reliability Backstop Design Working Paper on February 18. PJM also solicited input through an online survey tool, and survey results are summarized here.
The PJM plan and the workshops themselves have raised more questions than answers, and PJM has its work cut out to develop a comprehensive, workable plan that won't result in unintended consequences by mid-year. Some of the challenges discussed at the workshops included: balancing reliability and the risks of over-procurement; whether changes to credit and collateral rules would be required to account for the greater risks associated with 15-year commitments; and when resources would need to be capable of coming online to participate in the backstop.
A recent report by Aurora Energy Research, analyzes the structure of the proposed backstop procurement and predicts it won't be sufficient to address PJM's looming 2030 capacity shortfall and may also have several unintended consequences, such as eroding investor confidence in the wider market and increasing costs for consumers. The Statement of Principles calls for a 15-year price lock and shares that the backstop costs will be covered by new large loads, which would theoretically provide the long-term price signal needed for new construction while shielding other ratepayers from those added costs. But at current construction costs, Aurora found that the $15 billion of investment called for in the Administration's press release would only result in six to 10 GW of new capacity -- far short of the 24 GW shortfall PJM is facing by 2030, and much less the 55 GW gap by 2035 if data center growth continues to accelerate.
The final stakeholder workshop was held on March 5, and PJM announced it would take a 5-week "hiatus" to consider inputs from the workshops and develop a PJM plan for the September Reliability Backstop Procurement, to be released on April 10. PJM has still not decided if stakeholders would have any opportunity for input and an indicative vote on the plan before it goes to the PJM Board for approval to file at FERC.
Key upcoming dates in the Reliability Backstop Procurement process: - April 10, 2026 – PJM to release its Reliability Backstop Procurement Plan
- April-May - Stakeholder review of PJM Plan
- Late May – PJM plan to be filed at FERC
- September – PJM Reliability Backstop Procurement
Below is a review of other PJM actions in response to the PJM Board's decisional letter priorities. |
|
|
Auction Price Collar Both the White House and Governors' Statement of Principles and the Board's plan addressed extending the price collar that has been in place for the past two auctions in an effort to protect consumers from market volatility, although the Statement of Principles included the extension as a demand, whereas the Board raised the potential extension as a consideration and requested stakeholder input.
After several letters from PJM Governors and pressure from State consumer advocates and others, PJM solicited feedback from stakeholders, whose comments filled nearly 200 pages, the majority of which supported extending the price collar for two more auctions. The Board decided to continue the price collar, and at a meeting of the Members Committee, PJM staff presented Tariff revisions that were approved for filing with FERC on February 27, enabling the collar to be used in the auctions for delivery years 2028/2029 and 2029/2030.
|
|
|
Expedited Interconnection Track
Also at the February Members Committee meeting, PJM reviewed Tariff changes that it ultimately filed with FERC on February 27 to enable a new Expedited Interconnection Track, which would allow a limited number of large-scale resources to be studied through a separate, faster interconnection process.
According to PJM, this stand-alone process would fast-track new, shovel-ready resources and uprates of at least 250 MW of unforced capacity that are supported by a state Primary Siting Authority. The Expedited Interconnection Track will be open to all fuel types, including storage. PJM would choose up to 10 projects annually for two years, with the initiative ending at the end of 2027.
The EIT comes just one year after PJM's "one-time" Reliability Resource Initiative (RRI) interrupted the ongoing interconnection reform transition by adding 51 new projects into one of PJM's transitional clusters; several RRI projects have already dropped out due to high network upgrade costs. The 250 MW floor and 10-project limitation essentially blocks battery storage and renewable energy from participating in the EIT, despite the ability of these resources to be deployed much more quickly and inexpensively than natural gas resources.
Comments and protests are due to FERC by March 20. |
|
|
"Connect and Manage" for New Large Loads
At the February 19 Markets and Reliability Committee, PJM presented a first read of a Problem Statement and Issue Charge to address large loads that do not bring in new generation of their own and would be subject to curtailment. The Issue Charge instructs the development of an emergency procedure that would be used prior to pre-emergency Demand Response, under which PJM would allocate aggregate megawatts and coordinate with LSEs and transmission owners to curtail identified large loads.
In a complementary proposal, Exelon presented a Problem Statement and Issue Charge to connect and manage large load flexibility. It is not yet clear when PJM will finalize its Connect-and-Manage proposal and how it will relate to and interact with the reliability backstop procurement (discussed above) and PJM's compliance with FERC's Co-Location Order (discussed below).
|
|
|
Load Forecasting Improvements
At a February 20 meeting, PJM staff reviewed proposed manual changes with stakeholders to gather feedback, and later presented their data center load forecasting process. The changes add language to address understanding contractual arrangements, ramp rates, and utilization factor.
Further load forecasting improvements discussed included: - State review: This requires the submitter to provide the Relevant Electric Retail Rate Authority an opportunity to review a load forecast adjustment before it is submitted to PJM.
-
Duplicative requests study: Submitters will be directed to inquire with their subject customers and indicate to PJM, based on their best knowledge, whether any load interconnection requests are duplicative with other such requests made to interconnect large loads either within or outside of the PJM region.
-
Transparency: Submitters must ensure customers' nondisclosure agreements include the ability to share all information with PJM related to large loads.
- Additional review: PJM may obtain additional review through an independent third party.
|
|
|
Holistic Market Review
Both the Statement of Principles and the PJM Board’s action plan identify a need to return to market fundamentals. At the Board’s direction, PJM staff has begun a behind-the-scenes holistic review of PJM’s wholesale power markets. The purpose of the review is to recommend reforms that would result in all of PJM’s markets – not just the capacity market – working better in combination to promote resource adequacy and reliability in general. This effort will include the publication of a white paper at midyear, after which stakeholder collaboration is expected to begin.
|
|
|
Updates on Ongoing PJM Proceedings |
|
|
Interconnection Reform (ER22-2110-000)
On February 13, 2026, PJM filed an informational report to update the Commission on the processing of New Service Requests under PJM's Transition Period Rules, to comply with a November 2022 order. The report covers July 1 to December 31, 2025, and tracks the transition to the first-ready, first-served cycle approach, which began on July 10, 2023.
During this time, PJM met performance metrics for Phase completion; only 89 projects remain in the queue across all transition processes. Progress Milestones: - April 18, 2025- Expedited Process completed
- September 19, 2025- Phase III, Transition Cycle 1 completed
- October 31, 2025- Phase I Transition Cycle 2 completed
-
December 3, 2025- Phase II, Transition Cycle 2 began
Progress Projections: - April 27, 2026- new Cycle 1 process begins
- June 1, 2026- Transition Cycle 2 Phase II complete
- July 2 to December 28, 2026- Phase III
|
|
|
FERC PJM "Show Cause" Order on Colocation of Resources for Large Loads As large energy-load users, including data centers, seek faster connections to the PJM grid, co-locating with power plants or committing to flexible operations are potential solutions.
On February 20, 2025, FERC launched a review of issues related to co-locating large loads with new and existing power plants in PJM's footprint. On December 18, 2025, FERC issued an order directing revisions to PJM's Tariff to clarify co-location arrangements. The Order has the potential to create needed regulatory certainty for large load customers as well as some safeguards to ensure that co-location won't negatively impact the electric rates and system reliability of all other customers, but its impact will depend on effective compliance and implementation.
The order directed PJM to revamp its co-location pathways by creating new transmission service options and to revise its behind-the-meter rules, which allow facilities with behind-the-meter generation to net out their load, reducing transmission and other grid charges.
In response, PJM filed at FERC on February 23, asking FERC to approve changes to its retail behind-the-meter generation rules as part of an effort to facilitate the co-location of generating resources with data centers. PJM also incorporated three new transmission services for collocated loads as directed by FERC's Order. The new transmission services are the interim network integration transmission service, the firm contract demand transmission service, and the non-firm contract demand transmission service. The rates, terms, and conditions for those services are the subject of a paper hearing in EL25-49 et al.
|
|
|
Order No. 1920 Compliance (ER26-752-000)
On February 17, 2026, PJM filed a motion in response to protests and comments regarding its Order No. 1920 compliance filing in December. PJM's proposal establishes a multi-step process to classify Long-Term Transmission Needs into two categories. PJM argues the needs classification does not create facility silos or violate Order No. 1920's prohibition on separating projects by driver type. PJM also defends its right-sizing process, emphasizing it respects the division between PJM's regional planning authority and Transmission Owners' local planning responsibilities.
|
|
|
Complaints Of Joint Consumer Advocates V. PJM (EL25-18-000 & EL25-76-00)
On January 6, PJM filed an answer to a motion filed by Consumer Advocates* groups seeking to introduce evidence into the Joint Consumer Advocates complaint against PJM.
The Consumer Advocates filed the motion on December 22, 2025, seeking to introduce the Commission "Acquisition Order" into evidence. The Order approved NRG Energy's acquisition of CPower from LS Power without conditions to address market power concerns. Consumer Advocates argue that DR resources in PJM can manipulate capacity prices and that this structure allows DR providers to exercise substantial capacity market power. The motion argues that, following the acquisition, no action has been taken to address the market power concerns raised in the Joint Consumer Advocates' complaint, and that the acquisition will lead to these power differentials.
PJM argues that the motion is unnecessary because FERC can take notice of its orders without formal lodging and that allowing such a motion would set a poor precedent. PJM also asserts that the order undermines the complainants' case and that the complainants are impermissibly attempting to relitigate previously decided issues. PJM requests FERC reject the motion and dismiss the underlying complaints entirely.
* Maryland Office of People's Counsel, New Jersey Division of Rate Counsel, and Illinois Attorney General's Office |
|
|
The Federal Energy Regulatory Commission is an important independent agency that regulates interstate transmission of electricity, natural gas, and oil. As the agency that oversees regional transmission authorities such as PJM, it is important to know what FERC is working on and how this may impact consumers in your state. Read more FERC PJM Insights below: |
|
|
Proposed Expedited Interconnection Track (ER26-1563-000)
On February 27, PJM submitted tariff revisions to establish an Expedited Interconnection Track (EIT) process for generating facilities. PJM requests an effective date of July 31, 2026.
The EIT is part of a multi-pronged approach to addressing resource adequacy issues in the PJM Region. The EIT will process up to 10 projects per calendar year on a first-come, first-served basis; PJM anticipates that projects will take about 10 months from application to execution of the Generator Interconnection Agreement. The EIT will run parallel to the standard Cycle Process; projects will also be studied using active Cycle models.
Eligibility Requirements: - At least 250MW of accredited capacity
- Demonstrated 100% site control
- Evidence of state authority commitment to expedite siting
- Demonstrated ability to achieve commercial operation within 36 months
EIT projects will bear 100% responsibility for Network Upgrade costs. The EIT is set to sunset at the end of a full calendar year following Commission acceptance. PJM argues that the EIT falls under the independent variation standard and is like the recently accepted ERAS process in MISO and SPP. PJM requests Commission acceptance by May 28, 2026. |
|
|
30-Day Compliance with Order on Show Cause (ER26-1088-000)
On January 20, PJM submitted a compliance filing in response to the Show Cause Order finding PJM's tariff unjust and unreasonable regarding Co-Located Load provisions. PJM's filing implements four main directives from the Order: proposes a new definition of Co-Located Load; clarifies that PJM will consider interconnection service requests below maximum output; confirms Co-Located Load eligibility for acceleration at Decision Points I and II; and clarifies that the Surplus Interconnection Service is available for new generating facilities to serve Co-Located Load at existing interconnection points. PJM requests that the revisions become effective upon Commission acceptance.
|
|
|
BTMG and Co-Located Load Tariff Revisions (ER26-1479-000)
On February 23, 2026, PJM submitted a 60-day compliance filing to revise its Open Access Tariff in response to the December Show Cause Order. Key revisions were made to Behind- the-Meter Generation (BTMG) to establish a 50-megawatt (MW) threshold for Retail BTMG eligibility.
A three-year transition period will allow existing arrangements above the threshold to come into compliance before transitioning out of Retail BTMG, while the proposal grandfathers BTMG with existing arrangements through the term of those contracts (legacy agreements). PJM also outlines 3 new transmission service options and implements new study processes for co-located loads in response to FERC's Order. The filing uses a placeholder effective date of 12/31/9998 pending Commission action.
|
|
|
Co-Located Load Initial Brief (EL25-49-000)
On February 23, 2026, PJM filed an initial brief in response to the December Show-Cause Order. PJM proposes 3 new service alternatives to full NITS: (1) Firm Contract Demand Transmission Service; (2) Non-Firm Contract Demand Transmission Service; and (3) Interim NITS.
All three services require eligible customers to be "willing and able" to limit withdrawals; co-located loads must be separately metered from generation; non-firm service customers must have control technologies and protection systems to limit unauthorized withdrawals; and there will be strict liability penalties. PJM requests June 1, 2029, as the effective date due to the extensive modifications to the core markets and operations system.
*Note this brief was jointly filed in AD24-11-000 and EL25-49-001 |
|
|
Upcoming Events & Opportunities |
|
|
Several annual and seasonal convenings will shape discussions on transmission planning, capacity markets, reliability, and state–federal coordination. These forums present important opportunities for engagement, alignment, and information-sharing. |
|
|
State & Federal Policymaker Convenings
National Conference of State Legislatures — Energy Policy Meetings
Various locations | Throughout 2026
Brings together state legislators and staff to discuss evolving energy policy challenges, including grid reliability, load growth, and transmission investment. |
|
| PJM & Regional Coordination Meetings PJM Interconnection — Annual Members Meeting
Baltimore, MD | May 11-13, 2026
An annual opportunity to hear from PJM leadership on system conditions, planning priorities, and market developments. Organization of PJM States, Inc. (OPSI) — Spring Meeting Wilmington, DE | April 12-14, 2026
Convenes PJM state commissions and consumer advocates to coordinate on transmission planning, cost allocation, and market reforms. This will be a closed meeting. Organization of PJM States, Inc. (OPSI) — Annual Meeting Traverse City, Michigan | October 19-22, 2026 Convenes PJM state commissions and consumer advocates to coordinate on transmission planning, cost allocation, and market reforms. Mid-Atlantic Conference of Regulatory Utilities Commissioners (MACRUC) — 2026 Annual Education Conference
Hilton Columbus Downtown, Columbus, Ohio | June 15-18, 2026
Regional forum for utility commissioners and stakeholders to discuss shared regulatory and infrastructure challenges. |
|
|
Cross-Regional & Long-Term Planning Forums Northwestern Electricity Dialogue on Load Generation and Transmission: Planning in a Time of Uncertainty
Chicago, IL | April 13-15; June 29-30, 2026
A cross-regional forum exploring long-term electricity system planning, governance, and coordination. While outside the PJM footprint, discussions often inform national transmission and planning debates.
Federal Energy Regulatory Commission — Increasing Market and Planning Efficiency through Improved Software Technical Conference
Washington, DC / Virtual | July 7-8, 2026
The conference will include discussions on advanced computational methods, system optimization, and the role of emerging technologies—including Grid-Enhancing Technologies (GETs) and Advanced Transmission Technologies (ATTs)—in improving system performance and operational efficiency. The event will be held in a hybrid format in Washington, DC, and online. |
|
|
Featured Reports & Resources |
|
|
Understanding ELCC and PJM's Capacity Outlook
Advanced Energy United's recent blog and supporting report examine how PJM's ELCC methodology is increasingly shaping capacity market outcomes as demand grows and the resource mix evolves. The analysis highlights that small changes in ELCC assumptions can significantly affect capacity values and investment signals, with overall capacity values likely declining as more variable resources enter the system. Storage is identified as a key reliability tool, enhancing the contribution of solar and demand response by shifting energy to higher-risk hours.
|
|
|
The Storage Gap: Why Capacity Markets Are Falling Short
GridLab's report finds that current capacity market structures and accreditation approaches may undervalue storage, limiting its participation even as reliability needs grow. The analysis highlights a widening gap between system needs and storage deployment as load increases, driven in part by market rules that do not fully capture storage's operational value. The report emphasizes that storage can play a critical role in meeting near-term capacity needs—particularly when paired with other resources—but that better alignment between market design, accreditation, and reliability needs will be required to fully realize its contribution.
|
|
|
|
Advanced Energy United 1801 Pennsylvania Avenue NW, Suite 410, Washington, D.C., 20006 Unsubscribe |
| |
|
|
