The U.S. Department of Energy this week called on the PJM Interconnection to overhaul its reliability backstop procurement plan to prevent cost shifts onto existing utility customers from data centers and other large loads, according to a filing Wednesday with the Federal Energy Regulatory Commission. The DOE urged PJM to submit a revised proposal by Oct. 29 in response to FERC's decision last month that the grid operator's backstop procurement plan required changes, including fixes to flaws in its cost-allocation framework. The agency's "statement of position" appears to be the first one it has filed at FERC in at least five years.
PJM's reliability backstop procurement proposal emerged from a fast-track stakeholder process and seeks to address a pending capacity shortfall, largely driven by data center demand forecasts. The grid operator failed to acquire enough capacity in its last two base capacity auctions to meet its reserve margin targets. PJM plans to acquire 6.8 GW of new capacity to make up for a shortfall from the capacity auction for the 2028/29 delivery year, though the grid operator may reduce the target to account for new supply expected to be added to its system, which spans 13 Mid-Atlantic and Midwest states and the District of Columbia. The backstop procurement originally scheduled to begin Sept. 30 was put on hold at the last minute after FERC said that parts of PJM's proposal—those dealing with cost allocation, transmission owner exit rules, and load-serving entity collateral requirements—may be unjust and unreasonable.
The DOE said PJM should adopt FERC's recommended revisions to its backstop procurement plan to advance the Ratepayer Protection Pledge's principles. "Under the Ratepayer Protection Pledge, large electric energy loads—not American households or other business ratepayers—must fund the electric energy generation and related infrastructure that such new large load projects require," the department stated. Utility companies in PJM's footprint that signed the voluntary pledge include American Electric Power, AES, CenterPoint Energy, Dominion Energy, Exelon, FirstEnergy, and PPL. The department agreed with FERC that PJM should allocate the backstop procurement's costs based on updated load forecasts.
Without up-to-date and project-level information, PJM cannot reliably reconcile its base forecast with load adjustments, avoid omissions and double counting, revise the reliability backstop procurement target when forecast load fails to materialize, or attribute demand growth to the appropriate zone and load-serving entity, the DOE warned. The department said a capability to continuously track whether a project enters into service—and therefore benefits from the capacity and system investments procured to serve it—or is delayed, reduced, or cancelled, can help assign costs for new generation to the customers responsible for those investments. PJM's tariff may omit large loads already included in the grid operator's baseline demand forecast, leading to flawed cost allocation, according to the DOE. Instead of waiting for a five-month hearing process to play out, PJM intends to file a proposal at FERC to revise its backstop procurement plan by Oct. 29, with a special Members Committee meeting scheduled for Oct. 22 to consult with its members on the substance of the upcoming filing.