PJM proposes to buy about 6,800 MW of new power supply through a one-time backstop purchase and to charge the cost to utility zones where data centers and other large loads are driving demand growth. Owners in fast-growing zones face higher capacity costs on future bills, while owners with batteries or flexible loads may be able to sell capacity into the purchase.
Key Takeaways
PJM Interconnection plans an emergency purchase of power supply to cover a 6,831 MW shortfall for 2028 to 2029, the gap its last auction left open.
Its October 29 filing at the Federal Energy Regulatory Commission (FERC) would charge the cost to utility zones in proportion to how much large-load demand, mostly data centers, they add.
PJM would pay up to a weighted average of $555 per MW-day, well above the $325 cap in its regular auction, under contracts of up to 15 years.
New demand response and distributed energy resources can compete to supply this capacity, which opens a door for buildings with batteries or flexible loads.
Bidding would run in March 2027 and results would post May 10, if FERC accepts the plan.
A Shortfall Gets a Price Tag
$555 per megawatt-day. That is the most PJM Interconnection proposes to pay, on a weighted-average basis, for the power supply it needs to cover a gap in its plans for 2028 and 2029. PJM runs the grid for 67 million people in 13 states and Washington, D.C. Its July capacity auction, the annual market that pays power plants and other resources to be available on the hottest and coldest days, cleared at its $325 cap and still came up 6,831 MW short of the amount PJM says it needs for reliability.
PJM’s answer is a one-time Reliability Backstop Procurement, which it calls “a safety net to close the reliability gap.” The plan would sign contracts of up to 15 years with new resources that can be running by June 1, 2032. PJM blames the shortfall on demand from large new loads, mainly data centers, growing faster than new supply.
FERC largely accepted the plan on September 29 but suspended it for five months over three issues: how costs are assigned, what collateral buyers must post and what happens when a utility leaves PJM. The U.S. Department of Energy (DOE) filed in support of FERC on October 7, its first FERC filing in at least five years, arguing the original method would shift costs onto existing customers. PJM filed its amended plan on October 29.
Why the Gap Opened
PJM’s capacity market was designed to attract enough new supply through rising prices. It has hit its ceiling three years running. The auction for 2027 to 2028 cleared at $333.44 per MW-day and the auction for 2028 to 2029 at $325, both under a price cap and floor that PJM set with the governors of its 13 states and FERC. Demand response, customers paid to cut use on peak days, supplied 5% of what cleared.
Demand forecasts keep climbing. PJM’s forecast peak for 2028 to 2029 rose by about 2,000 MW over the prior year as utilities added data center loads. PJM’s independent market monitor told members in August that data center load growth added a combined $29.4 billion to capacity costs across four auctions and accounted for $10.48 per megawatt-hour of wholesale costs through July.
The backstop is meant to buy what the auction could not. Winning resources must offer their capacity into future auctions at any price for the life of the contract, and those that fail to deliver can face shortfall charges for up to three years. PJM would rank bids by how soon they can deliver and by lowest cost over the contract.
How the New Cost Formula Works
The original plan divided costs using a snapshot of each zone’s load at one point in time. FERC found that approach would miss forecast growth from data centers and bill today’s customers for capacity bought to serve tomorrow’s demand.
The amended plan ties the bill to growth. Each utility reports how much large-load demand it expects to add between the actual 2026 summer peak and the 2028 to 2029 forecast. PJM assigns costs to each zone in proportion to that growth, and the companies that buy power for customers in each zone, called load-serving entities, pay their share. Those costs then flow into retail bills, including commercial accounts.
A load-serving entity is the utility or retail supplier that buys wholesale power and capacity on a customer’s behalf. When its bill from PJM goes up, the increase reaches commercial accounts through the capacity line on their electric bills or through supply contract pass-throughs.
The target can shrink. PJM will subtract capacity that large customers secure on their own through signed contracts with suppliers, along with certain utility resource plans. Google’s agreement with Voltus to pay homes and businesses in PJM for 1 GW of reduced peak demand is one example of a large customer bringing its own capacity.
The amendment also lowers credit requirements for those buyers, keeps a utility that exits PJM responsible for its share through the end of the contracts and removes an opt-out that certain municipal utilities and cooperatives had.
The amendment also tightens an exemption: to qualify for an opt-out tied to reducing peak demand, a utility must now file a peak-shaving plan covering at least five years.
The schedule is tight. Bidding would open March 1, 2027, and close March 28; PJM would set the final target April 28 and post results May 10. The 6,831 MW target will be recalculated and reduced by any capacity that large customers have already secured through their own contracts.
What It Means for Owners: Implications
For most commercial owners, the backstop shows up indirectly, as part of the capacity charge on future bills. The amended formula means the size of that charge will depend on where a building sits. Zones that add data centers quickly would carry more of the cost; zones with little large-load growth would carry less.
The price matters. A cap of $555 per MW-day is about 70% above the $325 the regular auction paid, and contracts would last up to 15 years. Capacity charges already rose roughly tenfold in parts of PJM after 2024, and owners on gross or modified gross leases absorb them directly in operating expenses.
Not everyone agrees the backstop is the right tool. The Institute for Policy Integrity at New York University School of Law told FERC in August that the auction is “more costly and less effective than other tools PJM has at its disposal” and will not shield other customers from data center-driven costs. The amended formula is PJM’s attempt to answer that concern.
Opportunities
Sell capacity. PJM’s fact sheet says new demand response and distributed energy resources are eligible to participate, with documentation. A portfolio of buildings with batteries, controllable HVAC or onsite generation could, through an aggregator, compete for long-term contracts that pay for availability.
Cut your share. Capacity costs reach individual buildings through each account’s demand during the grid’s busiest hours. Lowering peak use with storage, pre-cooling or load shifting reduces that share whatever the backstop costs.
Check supply contracts. Many commercial accounts buy power from retail suppliers under fixed-price contracts. Ask whether new capacity or regulatory charges can be passed through, how they would appear on invoices and when.
Site with the formula in mind. For new development and acquisitions, the large-load growth forecast of each utility zone becomes a factor in operating cost projections.
Risks
Uncertain cost. The final target, the clearing price and FERC’s ruling are all unknown. Budget a range, not a single number.
Long tail. Contracts of up to 15 years mean today’s decision can influence capacity costs into the 2040s.
Concentration. If a zone’s growth forecast proves too high, its customers could pay for capacity that serves loads that never arrive. The formula relies on utility forecasts, which have shifted sharply as data center projects come and go.
Rule changes. FERC could accept, reject or modify the amendment. PJM’s earlier timeline has already slipped once.
What to Watch
Three numbers will matter most: the recalculated target, the price bids clear at compared with the $555 cap and each zone’s share of the cost. FERC’s ruling on the amended filing and each utility’s large-load growth report will decide the third. PJM plans to post results on May 10, 2027, which is early enough to shape budgets for the 2028 to 2029 delivery year. Owners in fast-growing PJM zones, such as Northern Virginia, should ask their energy advisers to model the backstop in 2028 and 2029 budgets, and should ask aggregators whether their flexible loads can bid in March.
Frequently Asked Questions
What is the PJM Reliability Backstop Procurement?
A one-time purchase of new power supply to cover a 6,831 MW shortfall for 2028 to 2029 that PJM’s regular capacity auction did not fill. Contracts would last up to 15 years.
Who would pay for it?
Under PJM’s October 29 amendment, costs would be assigned to utility zones in proportion to their forecast growth in large-load demand, then passed to customers through the companies that buy power in each zone.
Can a building participate?
PJM says new demand response and distributed energy resources are eligible with documentation. Most buildings would participate through an aggregator.
When will it happen?
If FERC accepts the plan, bidding runs March 1 to 28, 2027, and results post May 10, 2027.
Sources
American Public Power Association. “Google and Voltus Announce One Gigawatt Bring Your Own Capacity Agreement in PJM.” Oct. 23, 2026. https://www.publicpower.org/periodical/article/google-and-voltus-announce-one-gigawatt-bring-your-own-capacity-agreement-pjm
American Public Power Association. “PJM Files Amended Reliability Backstop Proposal at FERC.” Oct. 30, 2026. https://www.publicpower.org/node/31581
Illinois Retail Merchants Association. “Resources for Businesses Facing Higher Capacity Charges.” 2025. https://irma.org/resources-for-businesses-facing-higher-capacity-charges/
Institute for Policy Integrity. “Comments to FERC About PJM’s Proposed Backstop Auction.” Aug. 21, 2026. https://policyintegrity.org/projects/update/comments-to-the-federal-energy-regulatory-commission-about-pjms-proposed-backstop-auction
MGRID. “DOE Makes Its First FERC Filing in Five Years on PJM’s 6.8 GW Backstop.” Oct. 9, 2026. https://mgrid.org/2026/10/09/doe-makes-its-first-ferc-filing-in-five-years-on-pjms-6-8-gw-backstop-and-pjm-must-refile-by-october-29/
MGRID. “PJM Refiles Its 6,831 MW Backstop Procurement for a March 1 Launch.” Oct. 31, 2026. https://mgrid.org/2026/10/31/pjm-refiles-its-6831-mw-backstop-procurement-for-a-march-1-launch-and-bills-large-load-growth-since-summer-2026/
PJM Inside Lines. “FERC Accepts PJM Reliability Backstop Proposal.” Sept. 30, 2026. https://insidelines.pjm.com/ferc-accepts-pjm-reliability-backstop-proposal/
PJM Interconnection. “PJM Capacity Auction Procures 138,318 MW of Generation Resources.” July 14, 2026. https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/2026-releases/20260714-pjm-capacity-auction-procures-138318-mw-of-generation-resources.pdf
PJM Interconnection. “Reliability Backstop Procurement Fact Sheet.” 2026. https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/fact-sheets/reliability-backstop-procurement-fact-sheet.pdf
Utility Dive. “Data Center Load Drives PJM Wholesale Costs, Market Monitor Says.” Aug. 27, 2026. https://www.utilitydive.com/news/data-center-pjm-wholesale-market/828917/