The PJM Interconnection will conduct a one-time backstop capacity auction in September to fill a 6.8-GW gap from its most recent capacity auction for the delivery year beginning in mid-2028, according to a proposal the grid operator's board issued Monday. In addition, new data centers and other large loads that don't supply their own electricity will face curtailment when grid demand approaches emergency levels under a separate proposal. The board expects PJM will submit both proposals to the Federal Energy Regulatory Commission by the end of this month.

The backstop auction aims to acquire 6.8 GW minus any bilateral contracts secured before the auction takes place, addressing PJM's failure to reach a 20% reserve margin in its last base capacity auction. If FERC approves the plan, the auction would run from Sept. 30 through Oct. 21, with 15-year commitments finalized before PJM holds its base capacity auction for 2029/30 in early December. Eligible resources must come online by June 1, 2032. PJM will cap the total cost of accepted supply offers at $555 per MW-day, up from a temporary $325 per MW-day ceiling in its last base capacity auction. The grid operator estimates that large loads could expand by 70 GW by 2038 across its 13 Mid-Atlantic and Midwest states plus the District of Columbia. Costs from the backstop auction will be shared by load-serving entities in a way that's "structurally consistent" with how PJM allocates costs from its base capacity auctions.

"Existing consumers should not bear higher capacity costs caused by new large loads that do not bring, or otherwise contract for, the new supply necessary to serve them," the board stated. The board said it will instruct PJM staff to remove any incremental new large loads without their own power supplies from demand forecasts used in future auctions. Under the proposed Interim Resource Adequacy Service framework, large loads that don't bring new power supplies must cut their consumption or shift to on-site backup resources when PJM's system nears emergency conditions, starting June 1. Utilities and other distributors will be required to establish the IRAS rules, which need approval from state or local utility regulators. PJM will also create a large load "registry" including each facility's location, ramp schedule, capacity supply, and other details.

The proposals build on fast-track stakeholder processes PJM conducted this year and reflect an effort to shift responsibility for procuring new generation onto large loads themselves, according to Julia Hoos, head of USA East at Aurora Energy Research. She noted the procurement target is ambitious but "nowhere near close enough to what's needed if all this large load shows up." Removing data center loads without their own power from the capacity auction's demand forecast should push capacity prices lower over time, Jefferies equity analysts said. However, Joseph Bowring, president of Monitoring Analytics, PJM's independent market monitor, warned that data center load would remain in capacity auctions, which increased capacity costs by $29.4 billion over the last four auctions. He said PJM's IRAS proposal will raise wholesale energy costs and reduce reliability by connecting customers without adding generation to serve them.

Analysts see ongoing challenges ahead for the grid operator. "At the end of the day, the real-world challenges to building new generation fast enough haven't been fixed," Hoos said, adding that prices will stay high until underlying issues are resolved. She pointed to rising interconnection costs as a key risk, noting that a power plant project in Ohio by Competitive Power Ventures withdrew from PJM's Reliability Resource Initiative after receiving an $878 per kW interconnection cost estimate—a figure that "a few years ago, that was closer to the total cost to construct than the cost of just the interconnection." FERC's response to the proposals will likely "influence utility capital investment, data center development timelines and the allocation of reliability risks and costs," research firm ClearView Energy Partners said Tuesday.