Aerial view of large data center buildings near Ashburn in Loudoun County, Virginia, with two electrical substations between them and rows of rooftop equipment in the foreground, seen from an aircraft · Theodore Christopher, via Wikimedia Commons · CC0

Article · 2026-10-01 · 8 min read · Electric power markets · Stocks

FERC accepts PJM's backstop power purchase, suspends it five months

Tuesday's order accepts a one-time purchase of up to 6,831 megawatts of new supply, with commitments of up to 15 years and an average cap of $555 per megawatt-day, and finds most of it just and reasonable, but sets it to take effect on 28 February 2027, subject to refund, while the cost split, the exit rules and the buyers' collateral go to briefing; PJM did not open the bidding planned for Wednesday 30 September.

By the desk. Researched and written by an AI model from the sources listed at the end; nothing here restates another publication's text.

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What the Commission did

The Federal Energy Regulatory Commission on Tuesday 29 September accepted the Reliability Backstop Procurement of PJM Interconnection, a one-time purchase of new power supply outside the grid operator's regular capacity auction, and in the same order suspended it for five months: the rules take effect on Sunday 28 February 2027, 'subject to refund' and to the outcome of further proceedings. It found most of the design just and reasonable, the test the Federal Power Act sets for any rate, but said three parts may not be: how the cost is divided; the exit rules for a transmission owner (a utility that owns high-voltage lines) leaving PJM; and the collateral, in cash or letters of credit, demanded of load-serving entities (the utilities and retail suppliers that buy power for customers). Those three go to a paper hearing, argued in written briefs with sworn statements as evidence, and a separate investigation, docket EL26-108, asks whether the backstop rules already in PJM's tariff are still just and reasonable. ^{[1, 4]}

Accepted and suspended is the formula for a rule that is on file but cannot yet be used. The Federal Power Act requires 60 days of notice before a utility changes a rate and lets the Commission defer the change for no longer than five months beyond the date it would otherwise take effect. PJM filed on Friday 31 July and asked for an order and an effective date by 29 September, 60 days later; the order adds the full five months, the most the law allows. If the case is unfinished by then, the rules take effect anyway, and for a rate increase the law lets the Commission require the money to be tracked and refunded, with interest, to the extent it later finds it not justified. The order gives its reason in one sentence: the filing 'raises issues of material fact that cannot be resolved based on the record before us'. ^{[1, 2, 4]}

PJM had said it would open bidding on Wednesday 30 September and close it on Wednesday 21 October if the Commission accepted the plan without significant changes. It did not open the window: the process 'will not begin on Sept. 30 based on the requirements of' the order, PJM said, and 'Actual timing is to be determined.' Every milestone will be reviewed, it added. The Commission pointed to a quicker route, a fresh proposal from PJM itself: 'we encourage PJM to swiftly submit a new FPA section 205 filing without delay,' the order says, a filing that 'could expedite a potential RBP auction.' ^{[1, 3, 5]}

Why PJM went outside its auction

PJM, the largest grid operator in the United States in Reuters' words, serves 13 states and the District of Columbia, 67 million people by Commissioner David Rosner's count. Besides its markets for electricity itself, it runs a capacity auction about three years ahead, in which power plants and other resources are paid to promise they will be available in a delivery year running from 1 June to 31 May. In December 2025 the auction for 2027/2028 cleared significantly below the reliability requirement for the first time in its history, 6,623 megawatts short; the largest driver was 5,250 megawatts of forecast growth in demand, nearly 5,100 of it from data centers, the order says. The auction for 2028/2029, held from 30 June to 7 July 2026, came up 6,831.3 megawatts short, PJM's filing says, and both cleared at their price caps. ^{[1, 2, 6]}

PJM's tariff already contains a backstop auction, proposed more than 20 years ago and never used: it is triggered only after three auctions in a row clear more than 1 percent below the reserve margin (the cushion of supply planned above expected demand), and even then needs the Commission's approval to run, the order notes; the last two cleared more than 5 percent below. In January the White House National Energy Dominance Council and the governors of all 13 PJM states asked for a backstop auction 'commencing no later than September 2026' with '15-year price certainty for new capacity resources', its cost going to load-serving entities with data centers that had not brought their own new capacity or agreed to be cut off when supply runs short. PJM's case is that a commitment of up to 15 years, against the single year the regular auction awards, gives a new project revenue certainty that can lower its cost of financing. ^{[1, 2]}

The plan would buy up to 6,831 megawatts, the 2028/2029 shortfall, less new supply already contracted to serve new demand and less demand in areas allowed to opt out; the order calls that relatively small next to PJM's 149 gigawatts of existing supply. Only new resources may offer (generators, batteries, or customers paid to cut their use) that have never cleared PJM's auction and are expected in service by 1 June 2032, for terms from 2028/2029 at the earliest to 2042/2043 at the latest. Each winner is paid its own bid, and the average across all winners may not exceed $555 per megawatt-day, the cap the Commission accepted this year for the 2028/2029 auction, which instead cleared at a lower temporary cap of $325 per megawatt-day. Winners must also offer into the regular auctions at a price of zero, so the same capacity is not bought twice, and the two payments are netted: if a winner's bid is above what the regular auction pays, the customers carrying the cost pay the difference, and if it is below, the seller pays it back, PJM's filing explains. ^{[1, 2, 3]}

What stands and what goes back

For whoever builds, most of the terms stand. The Commission found just and reasonable the eligibility rules, the $555 average cap, paying each winner its own bid, the zero-price offers, the absence of location limits and market-power screens, a charge of 20 percent of the winning price on each committed megawatt not yet running, for up to three years before the commitment is cancelled, and sellers' collateral equal to three years of that charge. It rejected the argument of Constellation, NRG and others that zero-price offers would depress prices in the regular auction and bring early retirements, noting that the Commission has consistently allowed such rules 'to avoid double procurement, even at the risk of price suppression.' It kept the cap over NRG's request to drop it or reset it to $866 per megawatt-day. ^[1]

What goes back is mostly about who pays. PJM would divide the cost among utility areas by each area's forecast growth in demand from 2026/2027 to 2028/2029, keep those shares fixed for 15 years, and leave each state to decide which customers inside an area pay. In the worked example in PJM's filing, built on its 2026 load forecast, the AEP Ohio area carries 1,527.0 of the 6,831.3 megawatts, 22.35 percent, followed by the Northern Virginia Electric Cooperative with 1,302.6, ComEd with 887.1, PPL with 820.5 and Dominion with 743.1. The Commission said the forecast adjustments behind those shares may be inconsistent and may leave out large new loads PJM had already built into its base forecast. It suggested comparing each area's actual demand in 2026/2027 with the latest forecast for 2028/2029, with the newest forecasts also setting the target, and found that the opt-out for cooperatives and municipal utilities may be unduly discriminatory. ^{[1, 2]}

The other two issues are also about the bill. PJM would make a transmission owner that leaves PJM during the 15 years, unless it strikes its own agreements with the plants, pay for the remaining commitments before it exits; the Commission said the buyers are the load-serving entities, not the owners of the wires, and asked whether those in the departing owner's area should pay instead. PJM would also require load-serving entities to post $1.5 million in cash or letters of credit for each megawatt allotted to them, about 50 percent of the contracts' value at the cap by PJM's reckoning, 45 days before the first delivery year. The Commission said PJM gave no quantitative support for the 50 percent and little flexibility, and asked what the rate should be and whether 45 days is enough. The Northern Virginia Electric Cooperative told the Commission its requirement could reach about $1.95 billion, more than its total assets; Utility Dive reported the figure as roughly $2 billion. ^{[1, 5]}

A rebuke, a delay or a path

No commissioner dissented, but the four who wrote separately did not sound alike. Chairman Laura Swett said the plan reached the Commission 'on the last possible statutory day' for bidding to open on 30 September and called it 'a deeply flawed, eleventh-hour procurement mechanism with billion-dollar implications for consumers.' Commissioner David Rosner wrote that 'the downside risk of inaction far outweighs the risk of an imperfect solution.' Commissioner Lindsay See said PJM 'did not adequately ensure that the procurement's costs will be allocated to the customers who drive its need,' and Commissioner David LaCerte likened the filing to a 'half-baked cake' and wrote of PJM: 'They're on the clock.' Commissioner Judy W. Chang, also on the order, wrote no statement. PJM said it 'welcomes FERC's acceptance' and that the Commission identified 'three discrete issues' while providing 'a clear path to resolving those issues expeditiously.' ^{[1, 3]}

Reports framed it differently too: RTO Insider's headline said FERC 'Conditionally Approves PJM Backstop Procurement, Delays Implementation'; Reuters reported that FERC 'directed' PJM 'to postpone and revise' its proposal so that large users such as data centers cover the costs; Utility Dive's headline led with the chairman's word 'mess', and its report said FERC had decided 'to only partly approve it.' The parties, as the order records them, also split on the need itself. The independent market monitor said 4,017 megawatts of data center demand, 42 percent of the forecast growth in it, had been cancelled or delayed by Monday 21 September, which by its count would cut the shortfall from 6,831 to 3,055 megawatts; PJM answered that its forecast still predicts steep growth. Consumer advocates from Delaware, the District of Columbia, Illinois, Maryland and New Jersey said the $555 cap should be substantially lower and the Ohio Consumers' Counsel set it against the $325 clearing price of the 2028/2029 auction, while NRG said a project of its own costs substantially more than the cap. ^{[1, 5, 6, 7]}

What settles it next

The dated steps, from the order and PJM: an update to PJM's Market Implementation Committee on Wednesday 7 October; a new PJM filing, for which the Commission says it would expect to grant a pause in the briefing if the filing arrives within 30 days of the order, by Thursday 29 October on the desk's arithmetic; failing that, initial briefs 45 days after the order and replies 20 days later, Friday 13 November and Thursday 3 December by the same arithmetic; a Federal Register notice of the new investigation, whose publication date becomes the date from which refunds can run in it, with a decision expected within five months of the order; and Sunday 28 February 2027, when the suspended rules take effect. PJM had planned to announce backstop results to sellers a few days before its regular auction for 2029/2030 opens on Wednesday 9 December, and warned in July that a delay to the bidding window could mean delaying that auction too. ^{[1, 2, 3]}

Who it reaches

The independent generators that sell capacity in PJM, all four of which filed in the case. Vistra, whose quarterly report lists 10,924 megawatts cleared in PJM's 2028/2029 auction, questioned freezing the cost shares and protested that charging every load-serving entity by default would be unjust; cost allocation is now in briefing. Constellation lost its objections to the zero-price offers and to excluding existing plants that gain new rights to deliver capacity. NRG, which reported about 6,839 megawatts cleared and about $811 million of expected capacity revenue for 2028/2029, and wrote that the market changes 'could have material impacts on the PJM market', saw the cap kept. Talen asked that contracts between large customers and existing plants signed before the January 2026 principles be recognized, which the order did not rule on; on Tuesday 29 September it reported selling, for cash in advance, the rights to about $1.5 billion of PJM capacity revenue from part of its fleet for 2027/2028 and 2028/2029, about 6.5 and 6.0 gigawatts, while keeping the duty to perform. ^{[1, 8, 9, 10]}

Under PJM's plan the bill lands first on the utility areas with the most forecast growth. AEP, whose AEP Ohio area carries the largest share in PJM's worked example, argued that the obligation should follow the load-serving entity serving the large customer rather than the utility area it sits in. Dominion's area carries 743.1 megawatts in the example and, by the market monitor's count, 51 percent of the cancelled or delayed data center demand; Dominion argued with the Northern Virginia cooperative that PJM's way of crediting new contracted supply leads to double payments. On the data center side, Amazon asked that the shares be updated as demand actually arrives and that contracts signed by the date of PJM's filing be counted; the order said fixed shares based on accurate forecasts may be just and reasonable. Equinix said the collateral demanded of buyers would raise rates; that collateral is now in briefing. ^{[1, 2]}

Sources

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