PJM Interconnection, the operator of the largest electric grid in the U.S., announced major regulatory proposals this week to tackle a growing imbalance between electricity supply and skyrocketing power demand, driven largely by artificial intelligence (AI) and data center expansion.
Serving more than 65 million people across 13 Mid-Atlantic and Midwest states plus Washington, D.C., the regional transmission operator plans to file a pair of emergency proposals with the Federal Energy Regulatory Commission (FERC) before the end of the month. The measures aim to bolster power generation, insulate residential ratepayers from rising costs, and stave off potential grid instability.
At the core of PJM’s plan is a one-time “reliability backstop procurement” capacity auction scheduled to run from Sept. 30 through Oct. 21, with results set for release in December. The emergency auction seeks to acquire 6.8 gigawatts (GW) of generation to plug a critical supply shortfall left open after PJM’s most recent annual capacity auction.
Despite record-high prices that capped out at /MW-day), the previous auction failed to reach PJM’s mandatory 20% reserve margin. To entice developers to build new power generation, PJM intends to raise the price cap for the emergency auction to $555/MW-day, offering long-term 15-year commitments for resources that can go operational by June 1, 2032.
PJM projects that demand from massive industrial consumers — primarily data centers — could surge by 70 GW by 2038. One gigawatt is roughly enough to power 750,000 homes.
To prevent existing consumers from footing the bill for heavy energy users, PJM’s board directed staff to remove new large-scale loads that fail to bring or contract for their own power generation from future auction demand forecasts. Equity analysts at Jefferies noted this shift should help lower capacity prices over time for everyday ratepayers.
Additionally, PJM proposes establishing a mandatory registry to track the location, electricity usage, and operational schedules of data centers. Under a new Interim Resource Adequacy Service framework, data centers that do not supply their own power will face mandatory curtailment — either lowering consumption or switching to on-site backup generators — during severe grid stress to avoid rolling blackouts. Because PJM lacks direct authority to shut off end-use power, implementation will require coordination with local state utility regulators and transmission owners.
While energy analysts acknowledge the proposals as a necessary attempt to plug immediate supply gaps, many doubt whether they solve the broader crisis. Julia Hoos, head of USA East at Aurora Energy Research, called the target ambitious but noted it “is nowhere near close enough to what’s needed if all this large load shows up,” pointing out that skyrocketing grid interconnection costs continue to stall new power plant construction. Similarly, Joseph Bowring, PJM’s independent market monitor, warned that interconnecting massive consumers without adding proportional supply upfront could ultimately increase wholesale energy costs and compromise overall grid reliability.