America’s Biggest Power Grid Is Running Out of Time to Fix Itself

It takes a lot today to bring together leaders of all political persuasions in agreement on anything. But in the operations of America’s largest power grid, they’ve found it.

Here is what some of the most important power players in America are saying about one of its most important power operators:

“Perhaps it simply has grown too big to function.” — FERC Chairman Laura Swett, May 12, 2026

“PJM needs real reform, and they are running out of time to protect consumers from their inaction.” — Pennsylvania Gov. Josh Shapiro, Dec. 17, 2025

“I have been crystal clear: We cannot build a 21st-century economy on an energy market that blocks new supply.” — Maryland Gov. Wes Moore, Jan. 16, 2026

“Perhaps no region in America is more at risk than in PJM.” — Energy Secretary Chris Wright, Jan. 16, 2026

“This analysis sends a clear warning: electricity demand and supply are moving out of balance, and the status quo is not sustainable.” — Pennsylvania PUC Chairman Steve DeFrank, Sept. 14, 2026

The PJM Interconnection—which oversees power connections to about 67 million Americans across 13 states, including “Data Center Alley” in Virginia and sees additional data center proposals seemingly every day—may be viewed as less of an organization than a group of angry cats.

The regional transmission organization (RTO) is guided by the wildly competing priorities of more than 1,000 members in five voting sectors. Any two sectors voting together can block the Members Committee from approving any rule change. The dysfunction has grown in recent years as forecasts of power demand have risen sharply, and it’s reached the point where the Federal Energy Regulatory Commission (FERC) is demanding that it develop a plan to change its governance structure.

PJM has been accused of being too slow to connect new power plants while data centers and other large customers keep arriving, and the price paid for capacity in its auctions has risen more than 1,000 percent in three years. Rates have increased, customers have become irate, and government leaders say they’ve had it. Laura Swett, the current FERC chair, told PJM’s stakeholders face-to-face at a July 23 FERC technical conference on the organization’s governance that if they could not agree on credible reforms by the end of September, the commission would use the full extent of its legal authority to impose them.

In other words: Fix it, or we’ll fix it for you.

Getting PJM’s members to fix anything assumes their attention is on PJM. At some of the biggest companies in the room, it has been elsewhere.

Take FirstEnergy, whose 10 utilities stretch from the Ohio-Indiana border to New Jersey and Maryland and which sits in PJM’s transmission-owner sector. This spring, a grand jury in Summit County, Ohio, returned a 22-count indictment against the company’s former CEO, Charles “Chuck” Jones, and its former senior vice president of external affairs, Michael Dowling. The charges include bribery, telecommunications fraud, tampering with records and evidence, obstructing justice and engaging in a pattern of corrupt activity. The case, brought with Ohio Attorney General Dave Yost’s office, is the latest chapter in the House Bill 6 scandal, the fight over a 2019 nuclear bailout law that already produced a federal racketeering conviction for former Ohio House Speaker Larry Householder in 2023.

Swett’s deadline for PJM to offer a reform plan arrives Sept. 30. What happens next will have an impact on a wide swath of the country.

The same day, PJM is scheduled to open a one-time auction for new power supply to cover a shortfall its regular auction could not fill.

The result could shape electricity bills, data center expansion and industrial investment across a region that serves about 67 million people.

It follows a July capacity auction that reached its $325-per-megawatt-day price ceiling and still came up 6,831 megawatts short of PJM’s reliability requirement for the year beginning June 2028. The auction bought 138,318 megawatts of accredited capacity and demand response. Another 10,864 megawatts was committed through separate utility arrangements. Only 525 megawatts of new generation and uprates cleared.

Those numbers describe a market that has raised the price of keeping plants available without bringing enough new supply into service. PJM’s proposed backstop would offer contracts lasting as long as 15 years and pay up to a weighted average of $555 per megawatt-day. Its central question is whether a longer commitment can finance projects quickly enough to matter before the reliability gap widens.

At the same time, the Federal Energy Regulatory Commission is pressing PJM to rewrite the rules for connecting large loads and to overhaul the way its members govern the organization. The resulting decisions will determine whether data centers can add demand ahead of dedicated supply, who pays for new plants and transmission, and how quickly the regional operator can change course when its members disagree.

PJM’s immediate test is regulatory. The backstop auction is a proposal in FERC Docket ER26-3380-000; PJM requested an effective date of Sept. 29 and a bid window from Sept. 30 through Oct. 21. PJM expects to announce selections in December, if the plan proceeds.

An operator with no power plants

PJM’s name is less familiar than the utilities that send bills, but its control room directs the wholesale grid across all or parts of 13 states and the District of Columbia. It dispatches generators, coordinates high-voltage transmission, administers energy and capacity markets, studies connections and plans regional upgrades. It does not own the power plants or transmission lines it directs. Utilities and other companies own and build those assets; state and local authorities decide many permits; FERC reviews PJM’s federal tariffs.

That division of labor makes PJM one of the most consequential organizations in American commerce. Its footprint includes Northern Virginia’s data center concentration, Mid-Atlantic population centers, Pennsylvania’s industrial and gas-producing regions, Ohio’s manufacturing base and major nuclear fleets. When PJM changes a forecast, clears an auction or assigns the cost of a transmission upgrade, the effect can reach businesses and households that have never heard its name.

The capacity auction is a useful window into that power. PJM buys a commitment to be available in a future delivery year. A generator that clears receives capacity revenue in addition to whatever it earns selling electricity; demand response can also clear by committing to reduce consumption when called. The market is intended to retain existing resources and invite new ones. The auction price is not a household electricity rate, and PJM’s estimate of the auction’s gross value is not the same as the final cost paid by every customer. Utilities, retail suppliers and self-supplied customers have different contracts and hedges, and state regulators oversee how many wholesale costs reach retail bills.

Still, the price signal has become difficult to ignore. PJM’s regional clearing price was $28.92 per megawatt-day for 2024-25, then $269.92 for 2025-26. It reached temporary price caps in the next three auctions. The 2028-29 auction’s $325 clearing price produced an estimated $16.4 billion in gross auction value, according to PJM. Without the ceiling, PJM calculated, the regional price would have been $554.72 and the total about $29.7 billion. The ceiling held the bill down; it did not make the shortage disappear.

Customers have felt it. In New Jersey, Gov. Mikie Sherrill declared an affordability emergency in February. The Southern Maryland Electric Cooperative told its members that capacity charges have “skyrocketed” since 2024. Illinois’ Citizens Utility Board called the 2025 price spike “unacceptable” and “preventable.” Pennsylvania Gov. Josh Shapiro was blunter: “I sued PJM because it is unacceptable for them to do nothing as consumers pay sky-high utility bills while getting nothing in return.”

PJM’s own report puts the combined reserve margin for the latest auction and separate utility commitments at 14.7 percent, against a 20 percent target. It shows that PJM could not buy the amount of dependable capacity specified by its reliability model. For a grid that must balance supply and demand every second, a persistent shortfall reduces room for plant failures, heat waves and forecast errors.

PJM got a look at how thin that room can be in July, when a line fault caused about 3.8 gigawatts of data center load to switch to backup power at once, the largest such event in PJM’s history.

Why the market stopped keeping pace

The load side of PJM’s ledger is changing faster than the supply side. Its January forecast projects summer peak demand growth averaging 3.6 percent a year for a decade, with a 2036 peak of 222,106 megawatts. Data centers account for much of the new pressure in several zones, and their 24-hour demand differs from loads that rise mainly on hot afternoons. Industrial reshoring, electrification and other uses add to the forecast, but the distribution of new demand is uneven. A gigawatt proposed in one utility territory can require generation and transmission beyond that territory.

Forecasts are not completed buildings. Some data center proposals will slip or never materialize, and utilities can overstate or double-count prospective customers. Underforecasting has a different cost: transmission and generation can take years to develop after a customer asks for service. PJM must plan before it knows which projects will be built. Its auction shortfall reflects that uncertainty as well as the physical shortage of resources available to clear.

Supply has its own clock. PJM warned in 2023 that as much as 40 gigawatts of generation could retire by 2030, a scenario that included announced closures and resources at risk from economics or policy. Meanwhile, an interconnection agreement does not build a plant. Developers still need land, permits, equipment, financing and customers. PJM says study work has accelerated after FERC approved a shift to clustered, readiness-based interconnection reviews in 2022, but the projects emerging from that process are not equivalent to operating megawatts.

Winter Storm Elliott showed why counting steel alone is inadequate. During the December 2022 cold snap, simultaneous generator outages reached roughly 46 gigawatts at their peak, according to PJM’s event review. PJM asked about 65 million people to conserve power from 4 a.m. on Christmas Eve until 10 a.m. Christmas Day. Gas supply and equipment failures exposed the risk that resources expected to be available can fail together under stress. PJM subsequently changed how it credits resources in the capacity market, with closer attention to performance during the hours when the system is most at risk. Lower accreditation did not physically remove generation. It made some of the prior cushion less credible.

Construction lead times compound the problem. Gas turbines, transformers and major transmission can take longer to obtain and build than a one-year capacity commitment can support. A developer weighing a multibillion-dollar project against one year of auction revenue may seek a separate long-term deal instead. Data center companies and generators are doing exactly that. Those contracts can bring supply, but they can also leave the regional market with fewer projects willing or able to serve everyone else.

Monitoring Analytics, the outside firm that serves as PJM’s Independent Market Monitor, works independently of PJM’s staff and members. Its job is to guard against the exercise of market power in PJM’s markets and to investigate and report on how those markets perform.

The monitor has challenged the idea that high prices alone certify a healthy market. Its assessments of recent auctions cite structural market power and noncompetitive outcomes. PJM’s own account emphasizes fast-growing demand, retirements and slow construction. The two concerns can operate together: a tight physical market can be expensive and vulnerable to concentrated supplier power. A backstop contract could attract new plants while also creating a second channel for paying them outside the ordinary annual auction.

A backstop measured in years, not days

PJM’s proposed Reliability Backstop Procurement targets the capacity missing from the 2028-29 auction. It would reduce the initial target for qualifying new resources secured through bilateral contracts or otherwise added to the system, guarding against paying twice for the same supply. Eligible offers would compete on terms that include price, delivery date and reliability value. The maximum weighted average price is $555 per megawatt-day, and awards could run for up to 15 years.

An annual capacity auction can signal scarcity. It cannot compress a turbine factory’s order book or a state’s siting process. A 15-year revenue stream may help a developer secure financing, but the requirement that resources be online by June 1, 2032, narrows the field to projects far enough along to build. If few credible projects qualify, the procurement could clear little despite a generous ceiling. If it awards too broadly, customers could pay for capacity that arrives after the most urgent need.

The filing drew protests from both directions. Consumer advocates from Maryland, Delaware, the District of Columbia, Illinois and New Jersey asked FERC to reject it, and the Market Monitor protested. NRG argued the $555 ceiling is too low to attract enough supply.

The cost-allocation rule may prove as consequential as the winning bids. PJM would assign the backstop’s costs to zones and then to load-serving entities, leaving retail allocation to the states. In its July 27 decision, PJM’s board said existing customers should not bear higher capacity costs caused by new large loads that do not bring their own supply. That approach aims to protect existing households and businesses from subsidizing a new data center’s capacity requirement. But a load-serving entity may have multiple customer classes, and state retail tariffs determine how a wholesale charge is ultimately collected. A federal market rule cannot by itself settle every local bill.

The numbers behind that argument are specific. Maryland’s Office of People’s Counsel estimates the backstop could cost Maryland customers up to $562 million. In Northern Virginia, where data centers made up about half of the Northern Virginia Electric Cooperative’s peak load in 2024, a co-op executive warned that the growth “will harm the average residential” customer. Ohio’s Buckeye Power created a separate rate class for data centers and told members they “will not be asked to shoulder the costs.”

The proposed backstop is also tied to a harder choice about service. In a separate filing, PJM has proposed an Interim Resource Adequacy Service for new loads of 50 megawatts or more that do not bring sufficient supply, starting June 1, 2027. Those customers could face curtailment before traditional firm customers as emergencies approach. This is a material change for a data center developer promising continuous service to a cloud or AI customer. On-site backup equipment and contractual rights would become part of a project’s economic model, not an afterthought.

The principle extends beyond data centers. A semiconductor plant, an advanced manufacturer or another large user needs to know when power will be available, how firm that service will be and who funds the lines and plants required to deliver it. If rules are vague, developers may postpone projects or site them elsewhere. If the grid promises firm service without adequate supply, other customers bear reliability and cost risks. The goal is to give investors an answer that the system can actually honor.

FERC is asking who gets to decide

FERC’s demands reach beyond the backstop filing. In June, the commission ordered six regional grid operators, including PJM, to justify or reform their rules for connecting large electricity users. PJM’s docket puts the pace and terms of data center and industrial connections under direct federal review. The commission had already directed PJM in December 2025 to develop clearer transmission service options for loads co-located with generation. Together, those proceedings ask whether a large customer can connect quickly without quietly transferring costs or reliability obligations to everyone else.

Herding Cats

PJM’s governance is under separate pressure. Its Members Committee represents five sectors: generation owners, other suppliers, transmission owners, electric distributors and end-use customers. An independent board oversees the operator, but the sector voting system and divided federal filing rights can slow changes when billions of dollars are at stake. The same companies that own plants and wires, buy power and pay market charges help write the rules under which they operate.

At a July conference, Swett pushed PJM and its stakeholders to agree on meaningful reform by the end of September. PJM has circulated proposals that would give its board broader authority to bring market and transmission-planning changes directly to FERC under Section 205 of the Federal Power Act. Other elements under discussion would make some stakeholder votes advisory, lengthen board terms, give the Organization of PJM States filing rights on resource adequacy and add state-appointed representatives to the board’s nominating committee. The precise terms remain contested.

A Section 205 filing lets a utility or grid operator propose a rate or rule change for FERC review. Section 206 lets FERC act when an existing rate or rule is unjust or unreasonable, but the process and burden differ. Giving PJM’s board a more direct filing path could reduce the time spent waiting for a member consensus. Giving states a formal path could better connect regional planning to retail costs. Neither change would ensure that a proposed rule is good, or that a plant can be built faster than its permits and equipment allow.

PJM, a group of members and consumer advocates each posted governance term sheets for the Sept. 24 Members Committee meeting and scheduled a special meeting for Sept. 30. The public materials do not, by themselves, establish that members approved a final package on Sept. 24. FERC’s deadline arrives as PJM seeks permission to launch the backstop. One proceeding decides who can change the rules; the other tests whether a rule change can produce enough supply.

The fight is not an abstract quarrel about bylaws. A generator may want long, high-priced contracts to support construction. A transmission owner may want to retain control of planning and cost recovery. A utility may want certainty that a new data center pays for the network it requires. Consumer advocates want to prevent the costs of a private development from spreading to residents and small businesses. States want growth and affordable power, sometimes in the same county. Each has a plausible claim on a different part of the system. PJM must produce a workable regional decision from those conflicting claims, then defend it to FERC.

The transmission bill follows the power

New generation is only useful if electricity can reach the customers counting on it. PJM’s Regional Transmission Expansion Plan identifies upgrades needed for reliability, changing load and plant retirements. Transmission owners generally build and own the approved lines and substations, then recover their investment under federally regulated rates. The resulting question is often geographic: should one zone pay for a line that supports a data center cluster, or should costs be spread because the line strengthens the broader grid?

A May 7 complaint filed with FERC by the Maryland Office of People’s Counsel challenges the way PJM allocates regional transmission costs associated with large-load growth. If a utility forecasts a very large new customer, PJM may plan upgrades for a network shared by customers far beyond the project. The developer’s own interconnection payment may cover only part of the wider system response.

Virginia shows how quickly those questions turn political. A pending dispute over $1.5 billion in Dominion Energy transmission costs pits Gov. Abigail Spanberger’s administration, which wants data centers charged directly, against Microsoft.

The same issue shadows the backstop. Assigning capacity costs to incremental large loads is a proposed answer to the complaint that existing customers should not finance their competitors for scarce power. Yet new generation and transmission can benefit several customers over decades. Drawing a defensible line between a project-specific cost and a regional benefit is hard engineering and hard politics. FERC can approve a tariff, but states still have to implement retail charges that survive scrutiny from businesses and voters.

Recent operations show the stakes of that allocation debate. On Sept. 16, during unseasonably warm weather and planned maintenance outages, PJM asked the Energy Department for emergency authority under the Federal Power Act. DOE’s order, issued Sept. 17 and effective through Sept. 18, let PJM dispatch specified units and, as a last resort immediately before or during its highest emergency alert level, direct backup generators at large loads to run. That request concerned a short-lived operating threat, not the 2028-29 planning shortfall. It showed how limited reserve headroom can bring a future-looking market debate into a control room in the present.

The next several years

PJM’s next ordinary capacity auction, for the 2029-30 delivery year, is scheduled for December and is the last covered by the price cap. Its outcome will show whether the shortfall was a temporary gap or a continuing feature of a system where demand outruns supply. The backstop could add long-term commitments before then, but even selected projects must still be built and accredited. FERC’s decisions on large-load connections, co-location and governance could change which customers receive firm service and who pays for it.

There is no single clean lever. Faster interconnection studies help projects reach a decision but cannot guarantee construction. Higher capacity prices can retain plants and signal investment but also raise bills and may reward existing suppliers. A backstop contract can support financing but commits customers for years. Curtailment can protect the wider grid but weakens the service promise to a new industrial customer. Better governance can shorten debate but cannot replace technical analysis or public accountability.

The United States is asking its power system to support a new wave of computing and manufacturing while continuing to serve homes, hospitals and existing businesses. PJM is where those claims meet at scale. Its Sept. 30 procurement, if FERC allows it to proceed, will test whether the region can turn a price signal into physical supply. FERC’s governance and large-load cases will determine whether the operator has the authority and rules to manage the demand that follows. The results will be measured over years, in plants completed, lines energized, customer bills and the projects that choose to build inside PJM’s borders.

The first useful verdict will be narrower than success or failure. Watch how many eligible megawatts are actually offered, when bidders promise to deliver them and whether PJM reduces its target for supply already under contract. Then watch whether state tariffs place the new charges on the customers whose plans caused them. A large award with distant completion dates would leave the near-term reliability problem largely intact.

A small award with credible early projects could do more immediate work, even if the headline number disappoints. The ordinary December auction will provide a second check on whether investment is reaching the broader market. PJM’s challenge is to make those separate commitments add up to a grid that can serve new industry without making existing customers its involuntary financiers.