PJM Files Revised Reliability Backstop Plan to Address 6.8-GW Capacity Deficit
- Capacity & Wholesale Markets FERC & Federal Grid Capacity News
Marin Holt
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- 7 minutes read
- Targeted procurement start date: March 1
- Capacity shortfall to fill: 6.8-GW
- Auction that produced the shortfall: 2028/29 base residual auction
- When FERC rejected most of the initial plan: late September
PJM Interconnection filed a revised reliability backstop procurement proposal with federal regulators on Thursday to fill a 6.8-GW capacity shortfall driven by data center development. Utility Dive reported that the grid operator set a target start date of March 1. That timeline starts about seven months later than PJM originally planned.
The revisions follow a regulatory setback. The Federal Energy Regulatory Commission in late September rejected most of the initial plan from PJM. Regulators found that earlier rules for cost allocation, transmission owner exits, and load-serving entity collateral requirements risked being unjust and unreasonable.
PJM stated in its filing that the new changes directly address regulatory concerns. The operator maintained the core structure and policy goals of the program. The planned procurement aims to cover the 6.8-GW capacity shortfall resulting from the 2028/29 base residual auction.
The revised terms alter risk distribution across the electricity market. Utility Dive reported that the framework sharply reduces risks for default service providers and providers of last resort. These utilities supply power to retail customers who do not purchase electricity from power marketers.
The filing also reduces direct risk for residential and existing customers. However, the proposal does not eliminate that exposure entirely. Bilateral contracts between data center developers and power suppliers also influence the final volume. Such direct power deals could shrink the total capacity procured under the backstop program.
Regulatory Demands for Cost Causation
Federal regulators insisted on strict cost allocation. FERC Commissioner Rosner issued a concurring statement on the matter. Rosner stated that regulatory guidance enables PJM to assign shortfall costs directly to data center growth zones under cost causation principles.
Rosner stressed that both supply and demand resources need discipline. Load and supply must retain strong incentives to hedge, manage risks, and procure necessary capacity. Rosner asserted that market discipline must serve as the primary safeguard for grid reliability rather than ad hoc backstop mechanisms.
Reuters reported that Commissioner Lindsay See echoed those consumer protections. See affirmed in a concurring statement that existing utility customers should not bear the financial burden of new electricity demand.
Why It Matters
PJM must secure 6.8-GW of capacity without forcing captive residential customers to pay for private data center expansion. The revised March 1 framework attempts to shield utilities and existing consumers by aligning expenses with data center demand zones. If large data center developers enter into bilateral contracts with power suppliers, PJM will procure less capacity through the backstop mechanism.
Federal regulators signaled that backstop programs do not replace competitive market discipline. PJM must now show that its revised exit rules and collateral standards withstand regulatory review before the planned March 1 rollout.
Critical Perspective
PJM stated in its filing that the revised plan addresses regulatory concerns to cover a 6.8 GW capacity shortfall resulting from the 2028/29 auction. Utility Dive reported that the grid operator set a target start date of March 1, which delays the initial timeline by about seven months after regulators rejected earlier cost allocation rules. Even though the proposal attempts to shield default service providers and direct expenses toward data center growth zones, it still fails to eliminate financial exposure for existing residential customers. Will federal regulators accept the modified exit and collateral rules or demand further protections for captive retail consumers?
