PJM Takes A Step Forward In Dealing With Capacity Shortfall: Important FERC Filing Coming Soon

It is a busy time for PJM. The Regional Transmission Organization, which coordinates wholesale electricity markets in 13 states and the District of Columbia, serving over 67 million people, has emerged as patient zero for fears that rapidly expanding demand—spurred by newly surging data center proposals and longstanding struggles to connect new generation resources—could spike consumer costs and threaten reliability. But PJM and its stakeholders have been busy working to find solutions, taking an important step on June 30.

First, some background. In December 2025, PJM announced its 2027/2028 capacity auction results. As explained in PJM’s Auction Report, that auction failed to procure resources sufficient to meet PJM’s reliability requirement—a 20% reserve margin—coming in 6,632 MW short. That is a big deal: the reserve margin is set to maintain an acceptable level of risk for loss of load (i.e., blackouts). In a February 2026 report on the shortfall, PJM described it as a “transition gap” driven in part by an “unprecedented surge in data center load.” In short: the permitting and construction timelines for bringing new resources online could not meet the pace of expected load additions. PJM’s Independent Market Monitor (Monitoring Analytics, LLC) put out its annual state-of-the-market report in March, which pointedly identified “clear warning signs for the capacity market” associated with data center load growth and quantified price impacts.

With data centers and energy costs an issue of intense public interest, a high-profile response came quickly. In January, the White House and the Governors of all 13 PJM-served states (a bipartisan group) signed on to a set of six principles and urged PJM to act expeditiously to address the emerging challenges. Among those principles was a call for a “Reliability Backstop Auction” to be held by September 2026.

PJM and its stakeholders have spent 2026 working on a number of tracks to address the challenges of the moment, including interconnection reforms. 

In April, PJM formally kicked off a “Critical Issue Fast Path” process (building on a prior set of workshops) with stakeholders focused on a Reliability Backstop procurement. PJM initially proposed a one-time procurement with two phases: a bilateral contracting phase to match buyers and sellers and a central procurement for residual needs. PJM presented its proposal in mid-April and solicited feedback from stakeholders. A separate process focused on “Connect and Manage”—essentially a framework to allow load customers to connect before the system has the capacity to serve them—was rolled into the Reliability Backstop Procurement process.

Feedback and stakeholder engagement on the Reliability Backstop Procurement and Connect and Manage proposals have been robust. Numerous and diverse stakeholders responded and put forward alternative or amended approaches that have been debated in meetings throughout the spring.

That brings us to June 30, when PJM and stakeholders voted on 24 different proposals, 13 on a Reliability Backstop Procurement and 11 on Connect and Manage. Only one proposal for the Reliability Backstop Procurement—put forward by the Data Center Coalition and a group of utility companies—cleared a two-thirds sector-weighted majority threshold that PJM used to gauge stakeholder support, and none did for Connect and Manage. That proposal backs PJM’s bilateral matchmaking phase and proposes a central procurement built on a “registry-based subscription model,” under which load-serving entities and large loads would tell PJM, in advance, how much capacity to procure on their behalf.

Indeed, the bilateral matchmaking phase, which is intended to provide a structure to facilitate independent negotiation and contracting between load and capacity resources, is effectively underway. An RFP for interested developers, asset owners, and load (including data centers) was issued on June 9. Responses are due by July 21.

The June 30 stakeholder votes are advisory to the PJM Board, which will now get to work on finalizing proposals to be filed with FERC as early as this month. The clock is ticking because PJM intends to finalize commitments from a Reliability Backstop Procurement before going into the December 9 capacity auction for 2029/2030.

A wide array of stakeholders will be watching for PJM’s upcoming FERC filings, which could reshape the playing field for the data center pipeline in the region and impact energy prices and reliability. Those filings will trigger yet more process, but the expedited pace is likely to continue. The stakeholder process has already sharpened the issues and fleshed out options. This is not an easy problem to solve—as the struggle to coalesce around a single proposal shows—but the work done in PJM will keep shaping policy here and may inform how other regions confront similar pressures.

Meanwhile, the drama in PJM has caught FERC’s attention. In May, FERC scheduled a technical conference to “discuss [PJM] governance and stakeholder process, with a particular focus on identifying and evaluating actionable reforms to improve PJM’s ability to address system needs in a timely and efficient manner.” That notice has been supplemented with panelists and an agenda. This effort will be a slower burn, but more changes to PJM could be coming. 

Oh, and PJM’s capacity auction for 2028/2029 also opened on June 30. It will close July 7 and results will be reported July 14. PJM knows the scrutiny this auction will receive.