FERC rejects PJM's plan to curtail new data centers, days after delaying its 6,831 MW backstop

Federal regulators on Oct. 9 accepted PJM Interconnection's plan to define and track data centers and other customers using 50 MW or more, but threw out the rest of the grid operator's proposal for handling them, including a new service that would have let PJM cut power to new large loads early in a supply emergency.

The Federal Energy Regulatory Commission approved PJM's definition of a Large Load and a Large Load Registry, effective Monday, Oct. 12. It rejected the Interim Resource Adequacy Service, the rules for loads to "bring your own new capacity," and a plan to leave eligible new large loads out of the demand PJM buys capacity for in its auctions starting with the 2029/2030 delivery year.

The order came 10 days after FERC accepted PJM's other near-term fix, a one-time purchase of up to 6,831 MW of new capacity, but suspended it until Feb. 28, 2027. Between them, the two rulings leave PJM with neither tool working as planned against a capacity shortfall that it says begins in the 2027/2028 delivery year, "particularly due to data center load growth and the pace of data center interconnection," as the Oct. 9 order puts it.

"While we recognize the imminent capacity shortfall in PJM, we find that two key aspects of PJM's proposal—IRAS and BYONC—are either outside of the Commission's authority or have not been sufficiently demonstrated to be just and reasonable and not unduly discriminatory or preferential," the commission wrote. "We do not take this decision lightly."

Under the definition FERC accepted, a Large Load is customer load with a cumulative peak of 50 MW or more at a single electrical site. Affiliated facilities within a one-mile radius count as one site. Load-serving entities will have to report the large loads they serve to PJM, which the commission said will help the grid operator "better forecast load growth and to plan and manage its transmission system."

PJM has 30 days from the Oct. 9 order to make a compliance filing that keeps the definition and the registry and strips out the rejected pieces.

For load coming online after June 1, 2027, a load-serving entity would have had to designate new capacity at least equal to the new large load's peak demand. In years when PJM was short of capacity, it could then direct local utilities to reduce load tied to new large loads that weren't covered by new capacity. PJM said those cuts would come after it declared the first stage of an energy emergency and "generally" before it called on customers paid to reduce their use in demand-response programs.

FERC found that several provisions "appear to place obligations directly on Eligible New Large Loads, which are, for the most part, retail customers." It said others appear to dictate which retail customers get curtailed, and that the compensation terms appear to set a retail rate. Retail service is regulated by the states, not FERC.

The commission also said PJM had not shown why utilities serving new large loads should be treated differently from those serving an equivalent amount of other load growth. PJM's capacity market, it noted, has historically bought capacity for all such load alike, "regardless of retail customer class or whether the load is new or existing."

The commission flagged a reliability problem as well. A mandatory national standard, EOP-011-4, allows firm load to be cut involuntarily only once an emergency reaches its most severe stage, EEA3. PJM's plan would have started those cuts at EEA1. "It appears that PJM's proposal ignores the plain language of mandatory Reliability Standard EOP-011-4," the order said.

FERC separately found PJM hadn't justified locking in the capacity value of bring-your-own resources for the life of each arrangement. And because the remaining pieces were "inextricably linked," it said, the auction change fell with the curtailment service.

FERC left the door open to a revised filing. It pointed to a non-firm transmission service like one it raised in a separate proceeding on co-located load in PJM, which customers would choose voluntarily, as "a potential avenue to achieve some of the aims" of the rejected plan. It also handed part of the job to the states. "States have a crucial role to play in this challenge by designating which retail customers must be curtailed when the system is stressed," the commission wrote.

Commissioner David Rosner concurred, writing that if PJM refiles, it must justify curtailing these loads on a mandatory basis before customers who volunteered for demand response. "To be clear, in an emergency, data centers not serving critical functions should be shut off before ordinary customers (Hint: homes, hospitals, and schools should never be curtailed before data centers)," he wrote.

The Sept. 29 order dealt with PJM's other answer to the shortfall. The Reliability Backstop Procurement would buy new capacity equal to the 6,831 MW shortfall in the 2028/2029 base residual auction, adjusted down for qualifying new supply already serving new load and for utilities that opt out, under commitments of up to 15 years. PJM proposed capping the weighted-average cost of accepted offers at $555/MW-day. PJM has described the purchase as a one-time measure to "support Interim Resource Adequacy Service," the program FERC rejected 10 days later.

FERC accepted the plan but suspended it for five months, to Feb. 28, 2027, subject to refund, and set a paper hearing on three issues: cost allocation, exit rules for transmission owners and collateral requirements for load-serving entities. It urged PJM to make a new filing "without delay." Initial briefs are due 45 days after the order, though FERC said it expected to grant a motion to pause the briefing if PJM refiles within 30 days.

PJM had planned to open bidding on Sept. 30, close it Oct. 21 and announce results days before the auction for the 2029/2030 delivery year opens on Dec. 9. The day after the order, it said the procurement "will not begin on Sept. 30 based on the requirements of FERC's order. Actual timing is to be determined."