The PJM Interconnection Board of Managers has directed a series of actions to strengthen reliability and manage affordability impacts of large loads connecting to the grid at a faster pace than new generation, the grid operator said on July 27.
The Board directed PJM to file two proposals with the Federal Energy Regulatory Commission.
The Board directed one filing to address the need to attract more generation to the grid with a Reliability Backstop Procurement in concert with facilitation of private bilateral contracts.
The second filing aims to facilitate an operational tool to facilitate Large Load growth while preserving system reliability during capacity shortages. Both proposed measures address near-term reliability needs while longer-term holistic market reforms advance at PJM.
The Board decision follows consideration of proposals and debate during the recently concluded Critical Issue Fast Path stakeholder process on these issues.
In its letter, the Board noted it is guided by PJM’s core responsibility to keep the lights on for 67 million people served in the region.
New large loads are forecasted to increase by an estimated 70 GW by 2038, while some 15 GW of electricity generating resources have retired since 2022.
Meanwhile, the most recent capacity auction for the 2028/2029 Delivery Year resulted in a 6,831 GW shortfall below the system’s Reliability Requirement. The Reliability Requirement is a measure of capacity that can reliably serve grid needs during extreme conditions under the standard of one loss of load event every 10 years.
“The Board believes this reliability threat requires decisive action,” the letter stated.
The letter discussed current issues and actions PJM is taking within its authority.
“The Board is also acutely aware of the affordability pressures facing consumers,” the letter added. “The present trajectory of rapid load growth, tightening supply and rising capacity costs is not sustainable. The region needs substantial new investment in supply, and the central affordability question is how the costs of that investment should be allocated.”
“The region has reached a critical point in its resource adequacy outlook. PJM will take the actions within its authority to procure needed supply and maintain reliability while supporting states and other responsible authorities in ensuring that the costs associated with new Large Loads are allocated appropriately.”
The Reliability Backstop Procurement and concurrent bilateral transaction facilitation seek to backfill the recent auction shortfall and address future needs identified in the long-term load forecast.
To avoid over-procurement, the ultimate quantity of generating resources secured through bilateral contracts and self-supply arrangements will reduce the target of the Reliability Backstop Procurement.
PJM expects initial matches in August between buyers and sellers interested in bilateral contracting. Launched June 9 with a Request for Proposals, this process is expected to continue until early next year.
Running the bilateral matching process in parallel with the procurement process gives market participants another path to bring new supply online while reducing the amount PJM ultimately needs to procure, it said.
Central Procurement
PJM proposes to conduct a one-time Reliability Backstop Procurement from Sept. 30 through Oct. 21, with results released in early December.
Commitments of up to 15 years will be finalized prior to the December capacity auction for the 2029/2030 Delivery Year. To maintain affordability while incentivizing new resources, PJM proposed to cap the total cost of accepted supply offers at $555/MW-day.
The Board defined terms for resources eligible to participate. They include:
• New power resources defined as those that demonstrate new installed capacity (ICAP) and new maximum facility output (MFO) are added to the system.
• Capacity Interconnection Rights that are new or transferred from a resource deactivated or announcing deactivation as of April 10, 2026, may participate.
• Resources that did not receive a commitment for the 2028/2029 Delivery Year auction are eligible.
• New annual Demand Response and Distributed Energy Resources are eligible, provided aggregators show sites and contracts for the length of the 15-year term.
• Eligible resources must come online no later than June 1, 2032.
• Resource developers are responsible for transmission network upgrade costs and expected to include these costs in their offers.
• New resources will proceed through standard interconnection studies cycle processes.
• PJM will allocate costs of the Reliability Backstop Procurement among Load Serving Entities in specific zones or service areas. It will be up to those LSEs and their state regulators to determine how those costs are applied to various rate classes.
Managing New Large Loads and Preserving Reliability
PJM will develop and maintain a Large Load Registry to improve load forecast accuracy and transparency. This has been supported by a broad cross-section of PJM stakeholders, the grid operator said.
Large Loads are defined as end-use customer load that has a cumulative peak load quantity of at least 50 MW at a single site behind one or more delivery points/points of interconnection within a one-mile radius.
Information sourced from Electric Distribution Companies that defines the location and load requirements of Large Loads will be made available to the public, subject to confidentiality requirements.
This Large Load Registry will be a key resource for PJM’s Interim Resource Adequacy Service (IRAS) proposal that facilitates Large Load growth while preserving system reliability during capacity shortage periods.
Previously known as Connect and Manage (C&M) in stakeholder processes, this approach includes:
• The PJM Large Load Registry tracks the location and megawatt quantity of Large Loads by detailed site, service areas and whether they bring their own supply.
• During capacity shortages, new Large Loads that do not bring their own generation by June 1, 2027, and have not otherwise secured supply, will be subject to curtailment prior to deployment of Pre-Emergency Load Management. This will create a regional framework for curtailment. In PJM’s suite of Emergency Procedures, Load Management resources are paid to reduce compensation during extreme grid conditions to relieve strain on the system.
• Compensation to customers directed to reduce load during grid stress will be subject to a FERC-approved compensation rate and jurisdiction of state authorities.
The proposed cost allocation framework aligns with the Ratepayer Protection principles endorsed by data centers, the White House and PJM governors, and respects state authorities, the Board noted.
“The federal government, PJM states and Large Load customers have emphasized that new Large Loads should bear the costs they cause,” the Board letter stated. “Because PJM does not have jurisdiction to allocate retail costs directly to individual data centers, state action will be essential. PJM will support those efforts by providing information from the new Large Load Registry and other data available through its settlement and billing processes.”
The Board letter discusses recent progress in PJM’s work with stakeholders on necessary holistic market reform while continuing to hold capacity auctions to restore the three-year forward time frame that the auctions were designed for.
Going forward, PJM will continue to procure capacity and seek to maintain the established Reliability Requirement.
These actions will take place alongside the holistic review already underway of PJM’s markets, informed by the recently released Powering Reliability Through Market Design white paper.
