PJM Proposes 14.9 GW Backstop Procurement for Data Centers
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- PJM Interconnection proposed a one-time, two-phase backstop procurement for 14.9 GW of new generation to address projected capacity shortfalls, with an initial bilateral contracting phase from September through March followed by central procurement.
- PJM Interconnection will act as a confidential intermediary to facilitate bilateral contracts between power suppliers and large loads — including data centers — without being a counter-party, aiming to improve risk-sharing and cost efficiency.
- PJM Interconnection would conduct a central procurement in March for any remaining unmet capacity needs, with winning bidders paid via a 'contract for differences' model tied to base capacity auction revenues.
- Utilities and states may push back on the 14.9 GW target due to affordability concerns, with Jefferies analysts expecting caution over over-procurement costs passed to residential customers.
- Eligible resources in the procurement include new generation projects and capacity expansions, with supply bidders able to offer contract terms from two to 15 years.
- PJM Interconnection aligned its proposal with the White House and PJM-state governors’ principles, emphasizing cost allocation to procuring loads and a return to competitive markets post-procurement.
Why it matters: The 14.9 GW target reflects the scale of demand growth driven by data centers, but cost allocation risks sparking political and regulatory friction, especially if utilities must pass expenses to residential ratepayers despite the principle that new loads should bear their own costs.
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