FERC Halts PJM Data Center Auction Over Cost Allocation Flaws

Key points

• FERC rejected elements of PJM’s backstop procurement plan, specifically regarding cost allocation, transmission owner exit rules, and collateral requirements for load-serving entities.
• PJM delayed its planned auction, which was set to begin September 30, to address FERC’s concerns and avoid a formal hearing process.
• FERC approved an offer cap of $555/MW-day but required PJM to use updated load forecasts to determine costs and targets.
• FERC rejected PJM’s proposal to allow cooperatives and municipal utilities to opt out of the procurement, deeming it discriminatory.
• PJM aims to acquire 6.8 GW of new capacity for the 2028/29 delivery year to meet reserve margin targets.

Background

This development follows a period of aggressive data center load growth in the PJM region, which spans 13 Mid-Atlantic and Midwest states. PJM failed to meet reserve margin targets in its last two base capacity auctions. Earlier in 2026, PJM stakeholders advanced this backstop plan, and FERC had previously intervened in other PJM interconnection disputes, such as the Oklo nuclear project removal. The current delay adds to broader regional tensions regarding grid reliability and the financial impact of large technology loads.

How outlets are covering it

Utility Dive reports that FERC Chairman Laura Swett called the proposal a 'mess' and emphasized that the commission would not accept a 'deeply flawed' mechanism with billion-dollar implications for consumers. PJM spokesman Jeffrey Shields stated that the agency provided a 'clear path' to resolve issues and that PJM intends to work quickly to address remaining concerns. In contrast, Energy-Storage.News highlights the perspective of NRDC’s Lang-Ree, who argues that the federal rollback of EPA rules increases the responsibility of states to protect communities from backup generator emissions. TD Cowen, cited by Yahoo Finance, warns of 'acute' uncertainty for stocks like CEG, NRG, and TLN due to the delay. While Utility Dive focuses on the regulatory dispute, Energy-Storage.News emphasizes the need for state-level action to manage curtailment and clean energy requirements.

Why it matters

The delay in PJM’s backstop auction creates uncertainty for the reliability of the grid serving 13 states and the District of Columbia. It highlights the tension between federal market design and state-level regulation regarding data center costs and environmental impacts. The outcome will determine how costs are allocated to consumers and whether large loads must secure their own capacity, potentially influencing future data center development and investment in clean energy infrastructure.

What to watch

PJM is expected to submit a revised plan to FERC to address the rejected elements, potentially avoiding a formal hearing. States, particularly Virginia, Ohio, Pennsylvania, and Illinois, are expected to develop regulatory frameworks for interruptible service tariffs and clean energy incentives. The next standard capacity auction for the 2029/30 delivery year is scheduled for early December, with results from the backstop procurement expected to precede it.