The Mid-Atlantic electric grid operator is implementing measures to curb surging data center electricity demand.
Facing mounting pressure over soaring electricity costs, the organization managing the Mid-Atlantic’s electric grid has outlined plans to curb the outsized impact of data centers. PJM Interconnection, which oversees the grid across 13 states and Washington, D.C., is requesting approval from federal regulators to implement several structural changes. Among the most significant is a requirement forcing data centers to supply their own power or risk being disconnected during periods of peak demand.
PJM functions as air traffic control for electricity, forecasting supply and demand while coordinating electron flow through transmission lines. The organization does not own power infrastructure or profit from electricity sales; its governing members instead include utility companies, consumer advocates, and power marketers. It operates an annual capacity auction to determine upcoming energy needs across its vast service area, calculating the backup capacity required for peak conditions such as the hottest and coldest days of the year. Power operators like Dominion Energy submit bids demonstrating their emergency supply capabilities, and PJM selects the lowest-cost options that satisfy the threshold. When more energy capacity is offered, PJM pays less to participating power plants. However, demand currently outstrips supply, according to Claire Lang-Ree, an energy sustainability advocate at the nonprofit Natural Resources Defense Council. Recent auctions have set record-high prices, which utilities frequently pass on to customers. Compounding the issue, PJM maintains a notoriously lengthy process for reviewing energy projects seeking grid interconnection, historically delaying new power plants. The organization is actively working to streamline that process alongside improved long-term transmission planning.
The latest proposals target two central challenges driven by surging data center demand: reliability and cost. Lang-Ree noted that the plan emerged from a rigorous, highly monitored 18-month process that incorporated input from state governments and the White House. The first element creates a secondary auction specifically tailored to data centers to procure energy covering the region’s shortfall. “The present trajectory of rapid load growth, tightening supply and rising capacity costs is not sustainable,” PJM Board Chair Paula Conboy wrote in a recent letter to stakeholders. “The region needs substantial new investment in supply, and the central affordability question is how the costs of that investment should be allocated.” Lang-Ree explained the mechanism: “PJM doesn't have enough power plants, in the future, to cover all expected demand plus a reserve margin. So what PJM is going to do is take that roughly 6-gigawatt shortage and say, ‘OK data centers, you're in charge of buying this new supply.’” She added that the objective is to ensure data centers “pay their fair share of the new power plants built to serve them, because data centers are the ones that are driving that capacity shortfall.”
The second proposal would effectively bar new “large load” customers from participating in the primary capacity auction unless they have secured or generated their own power sources. This could involve installing on-site solar panels and battery storage, or more likely, entering power purchase agreements with projects elsewhere within the PJM region. Data centers that fail to bring their own power could face interruptions or complete disconnections during emergencies. Lang-Ree welcomed the measures as positive news for consumers. However, because PJM’s auctions occur several years in advance, elevated power bills are likely to persist through at least 2030. Furthermore, the actual financial benefits will depend heavily on how individual states choose to implement the changes.
PJM lacks the jurisdiction to directly assign costs to individual data centers, making state-level coordination critical. “State action will be essential,” Conboy wrote in her board letter. In Virginia, for example, the State Corporation Commission approves Dominion Energy’s rates and would be responsible for ensuring costs are properly allocated to data centers. (The SCC recently directed Dominion to develop a policy charging data centers for the cost of related transmission infrastructure.) To support these efforts, PJM plans to assist state officials by launching a new database to track the location and energy consumption of data centers and other large-load customers. The organization is now asking the Federal Energy Regulatory Commission to approve the proposals within the next two months.