DOE presses PJM on ratepayer protections from large load costs

“A capability to continuously track whether a project enters into service... can help assign costs for new generation to the customers responsible for those investments,” DOE said in a rare filing.

Dive Insight:

The PJM’s reliability backstop procurement proposal grew out of a fast-track stakeholder process and aims to address a pending capacity shortfall, largely driven by data center demand forecasts. PJM failed to acquire enough capacity in its last two base capacity auctions to meet its reserve margin targets.

The grid operator intends to acquire 6.8 GW of new capacity to make up for a shortfall from the capacity auction for the 2028/29 delivery year, according to a fact sheet on the auction process. PJM may reduce the target to account for new supply that is expected to be added to its system, which spans 13 Mid-Atlantic and Midwest states and the District of Columbia.

However, the backstop procurement originally slated to begin Sept. 30 was put on hold at the last minute after FERC said that parts of PJM’s proposal — those dealing with cost allocation, transmission owner exit rules and load-serving entity collateral requirements — may be unjust and unreasonable.

The agency established a hearing process set to run through February to address those issues, but said PJM could propose its own fixes using guidance FERC included in its order.

In its filing, the DOE supported FERC’s decision, particularly on the agency’s concerns about how the proposal would allocate costs.

“Under the Ratepayer Protection Pledge, large electric energy loads — not American households or other business ratepayers — must fund the electric energy generation and related infrastructure that such new large load projects require,” the DOE said.

Companies committing to the pledge agreed to protect consumers from price hikes driven by large load energy demand and related infrastructure requirements, the department said. Utility companies in PJM’s footprint that signed the voluntary pledge include American Electric Power, AES, CenterPoint Energy, Dominion Energy, Exelon, FirstEnergy and PPL.

The DOE said PJM should adopt FERC’s recommended revisions to its backstop procurement plan to advance the Ratepayer Protection Pledge’s principles.

“DOE shares the Commission’s concerns that PJM’s proposed [reliability backstop procurement] cost allocation model may be unjust and unreasonable,” the department said, noting that FERC found it may not allocate costs to the consumers who caused them.

DOE agreed with FERC that PJM should allocate the backstop procurement’s costs based on updated load forecasts.

“A capability to continuously track whether a project enters into service — and therefore benefits from the capacity and system investments procured to serve it — or is delayed, reduced, or cancelled, can help assign costs for new generation to the customers responsible for those investments,” the DOE said.

Without up-to-date and project-level information, PJM cannot “reliably reconcile its base forecast with Load Adjustments, avoid omissions and double counting, revise the [reliability backstop procurement] target when forecast load fails to materialize, or attribute demand growth to the appropriate zone and load-serving entity,” the DOE said.

PJM’s tariff may omit large loads already included in the grid operator's baseline demand forecast, leading to flawed cost allocation, according to the DOE.

PJM needs adequate data to identify the large load projects reflected in its forecasts and to monitor their development, the DOE said.

PJM didn’t immediately respond to a request for comment.

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