US Department of Energy presses PJM Interconnection on ratepayer cost protections for large new data center loads and grid connection costs.

The U.S. Department of Energy on Wednesday urged the PJM Interconnection to revise its reliability backstop procurement plan to prevent cost shifts onto existing utility customers from data centers and other large loads. The DOE filed a "statement of position" with the Federal Energy Regulatory Commission following FERC's decision last month that PJM's backstop procurement plan needed changes, particularly to address flaws in its cost-allocation framework.

PJM must file a proposal by October 29 in response. "PJM should implement the cost allocation and other reforms identified by the Commission to ensure that the costs of serving new data centers or other large electric energy loads are not unfairly shifted to PJM's existing ratepayers," the DOE said in its position statement—apparently the first FERC filing it has made in at least five years.

Rather than wait for a five-month hearing process, PJM intends to file its revised proposal by the October 29 deadline. The grid operator plans to hold a special Members Committee meeting on October 22 to consult with members on the filing's substance, according to PJM spokesman Jeffrey Shields. A separate special Transmission Owners Agreement–Administrative Committee meeting will also be scheduled.

PJM's backstop procurement proposal addresses a pending capacity shortfall, largely driven by data center demand forecasts. The grid operator failed to acquire enough capacity in its last two base capacity auctions to meet reserve margin targets and intends to acquire 6.8 gigawatts of new capacity for the 2028/29 delivery year, though this target may be reduced to account for new supply expected to be added to its system, which spans 13 Mid-Atlantic and Midwest states and the District of Columbia.

The backstop procurement, originally scheduled to begin September 30, was halted after FERC flagged that parts of PJM's proposal—dealing with cost allocation, transmission owner exit rules, and load-serving entity collateral requirements—may be unjust and unreasonable. FERC established a hearing process running through February but invited PJM to propose its own fixes using guidance included in the order.

The DOE supported FERC's concerns about cost allocation. "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. 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 allocate backstop procurement 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 department stated.

Without current, project-level information, PJM cannot "reliably reconcile its base forecast with Load Adjustments, avoid omissions and double counting, revise the backstop procurement target when forecast load fails to materialize, or attribute demand growth to the appropriate zone and load-serving entity," according to the DOE. PJM's tariff may omit large loads already included in its baseline demand forecast, leading to flawed cost allocation. The agency emphasized that PJM needs adequate data to identify the large load projects reflected in its forecasts and monitor their development.