PJM Interconnection’s latest Base Residual Auction (BRA) again failed to secure enough generation to meet its required reliability margin, marking the second consecutive year of a significant shortfall. The auction cleared 138,318 MW of UCAP, 149,182 MW including FRR, leaving the system 6,831 MW below the reserve level PJM says is needed to maintain reliability. The resulting 14.7% reserve margin falls well short of PJM’s traditional 20% target, underscoring persistent supply‑side weakness even as peak demand continues to rise.
Scarcity conditions were severe enough that the auction once again hit the FERC‑approved price cap of $325/MW‑day, rather than clearing at a competitive market price. Without the cap, PJM reports that prices would have reached $555/MW‑day across most of the footprint (RTO) and $777/MW‑day in northern Illinois, reflecting tightening conditions across the region. Even at the capped level, the auction added $16.4 billion in capacity costs, with industrial customers facing steep increases and overall charges reaching decade‑high levels. Yet for the second straight year, PJM still missed its margin goal.
The auction’s structural imbalance is driven in large part by rapid load growth from hyperscale AI and data‑center development, while new generation additions remain miserly, with only 525 MW of new resources, including 208 MW of uprates, down from the previous auction’s added 774 MW. Over at least the last three years, PJM’s cost allocation rules have foisted the majority of rising capacity, physical interconnection, and transmission expansion costs onto residential and small‑business customers rather than onto the massive, billionaire-owned technology firms driving the demand surge, forcing FERC to deal with the issue. The agency finally did so across all major grid regions—PJM, NYISO, ISONE, CAISO, SPP, and MISO, with its June 18 "DOE‑initiated Large‑Load Interconnection ANOPR," seeking to ensure that all regional grid operators adopt standardized methods for modeling large load additions.
Even so, many industry insiders, including a number of PJM states’ governors, believe that PJM stakeholder processes have resulted in something approaching chaos, or, as FERC Commissioner David LaCerte characterized it last week at a utility and transmission industry trade meeting, “continued to just grind into gridlock” as quoted by Ethan Howland in Utility Dive. His comment came a few weeks after FERC Chair Laura Swett Laura Swett stated to a shocked audience at PJM’s annual meeting that the nation’s largest grid operator may be “too big to function” and that it had created an “unacceptable governance structure.” PJM is scheduled to hold a technical conference on July 23 to “explore” ways to reform its governance processes and create so-called “fast-path or time-bound review procedures for critical issues.”
However, as I wrote on Energy Central nine months ago, PJM had already sought and failed to create a new class of electricity demand within its footprint, via its “Non-Capacity-Backed Load (NCBL)” proposal for new, large loads of 50 megawatts or more. Released on August 29 of 2025, the grid operator's proposal took a fast path to nowhere, panned by the Data Center Coalition, a trade organization representing some of the largest players including Google, Meta, and Microsoft, because it exceeded PJM’s jurisdiction and undermined the integrity of its market framework. Even PJM's own Independent Market Monitor (IMM), Monitoring Analytics, gave it a no-go, while major power generator Exelon stated at the time “Nothing in the NERC reliability framework permits an RTO to pre-arrange routine load shedding of a designated customer class as a substitute for resource adequacy.” After withering criticism from a variety of stakeholders on both its initial and updated proposals, PJM itself declared the proposal DOA, saying {PJM] "Removed the mandatory NCBL requirement and recognizes that voluntary NCBL is better facilitated thru existing PRD and DR programs."
However, on November 10, 2025, IMM issued new guidance to PJM about coping with the data center issue: "The current tight/short conditions in the PJM Capacity Market are almost entirely the result of large data center load additions, both actual historical and forecast...The current supply of capacity in PJM is not adequate to meet the demand from large data center loads and will not be adequate in the foreseeable future." And IMM added: "Demand side options, including DR and PRD, are not equivalent to new generation. If there were to be a demand side option, the new large data centers would have to agree to be interrupted whenever capacity is needed to serve the other loads that paid for capacity, at a reasonable energy price and not limit interruptions to emergencies or to the limited run hours of backup generation. Those non-limited interruptions could be frequent given that current forecasts for additional new large data center load are approximately 30,000 MW.3 Demand side resources are not subject to market power mitigation and thus large new data center loads if defined as demand resources could exercise market power in the capacity and energy markets."
Here we are, nine months later, still far from a solution for a grid region in chaos.
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