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Oct 26, 2026 · Research · 2 min

PJM’s proposed backstop cost allocation

The October 22 draft allocates costs by large-load growth. PJM plans to file revised terms with FERC on October 29.

PJM Interconnection, which runs the grid for 67 million people, plans to file a new cost split by October 29 for its emergency purchase of new power supply.4,5 The draft it showed members on October 22 bills the utility zones where big new customers such as data centers are coming. Each zone’s share is set once and then fixed for 15 years.2,6

Transmission towers running back across a dry field toward low hills at dusk.

The bill

PJM runs an auction that pays power plants to be ready for peak demand. Its last one bought 6,831 megawatts less than PJM says the grid needs.1 The purchase PJM calls the backstop would buy that gap on contracts of up to 15 years. Across all contracts, PJM would pay no more than $555 per megawatt-day on average.1

If the whole gap cleared at that cap, the bill would be about $1.4 billion a year, by our arithmetic. PJM will update the target with its latest forecast, so read that as a scale, not a quote.1,7 PJM’s auctions counted 9,481 more megawatts of data center load for mid-2028 than for mid-2026. Divided over those megawatts, the bill would be about $146,000 a year for each megawatt of new data center load.8

The Federal Energy Regulatory Commission, or FERC, accepted most of the backstop on September 29. It objected to how PJM measured each zone’s growth, from forecast adjustments that might miss real data centers.9 The new draft counts each utility’s big new customers with signed service agreements. Utilities report them by name a week before bidding opens.6

A utility assigned a share posts collateral of 40 percent of its discounted payments. In PJM’s example that is $680,000 per megawatt, about 3.4 years of payments.10 A state or its retail regulator may name which companies serving customers in the zone carry the share. If none is named, PJM spreads it over every one of them.11

How a zone’s share is set, and what happens after.

The freeze

FERC did not object to fixing the share. It said a fixed share “may provide greater certainty” to the utilities paying it.12 Others did object. Amazon asked FERC to make PJM update the split as load actually arrives. American Electric Power and Vistra also questioned the 15-year freeze.13

Data center plans move. PJM’s independent market monitor counted 4,017 megawatts of planned data center load cancelled or delayed in the year to September 21. That is 42 percent of the growth PJM forecast. Dominion Energy’s zone accounts for 51 percent of it.3 That count ran against the old forecast. The new draft counts only customers with signed service agreements, which may prove steadier.6

Dates from FERC’s September order to the backstop results.

What to watch

Pallara represents no applicant. Not legal advice.

Receipts

Every fact above, with the document it came from. A rule not yet adopted is marked proposed.

  1. 1

    The 2028/2029 auction cleared 6,831 MW short; the backstop is a one-time procurement with commitments of up to 15 years; PJM proposed $555/MW-day as the maximum willingness to pay, on a MW-weighted average over all delivery years; by our arithmetic, 6,831 MW x $555 x 365 = $1.38 billion a year

    OrderFERC order 196 FERC ¶ 61,245, dockets ER26-3380 and EL26-108, pp. 1, 7, 21-222026-09-29

  2. 2

    The zone's assigned share of the Final RBP Target MW "shall remain constant throughout the fixed, 15-year term"

    ProposedPJM, updated tariff redline, Attachment DD §18.3(a)(ii), p. 362026-10-22

  3. 3

    The Market Monitor: the 2028/2029 data center forecast used Load Adjustments received before September 5, 2025; since then, 4,017 MW of data center load, 42% of the forecasted increase between 2026/2027 and 2028/2029, was cancelled or delayed as of September 21, 2026; Dominion accounts for 51% and AEP-Ohio 29%

    OrderFERC order 196 FERC ¶ 61,245, pp. 44-45 and n.1692026-09-29

  4. 4

    PJM plans to submit a new section 205 filing addressing cost allocation, transmission owner exit responsibilities and utility collateral for the backstop by October 29, 2026, and asks FERC to hold the paper hearing in abeyance

    FiledPJM, Motion for Abeyance, FERC dockets ER26-3380 and EL26-108, pp. 1-22026-10-13

  5. 5

    PJM serves 67 million people

    OrderFERC order 196 FERC ¶ 61,245, Rosner concurrence2026-09-29

  6. 6

    Cost allocation will be based on Large Load growth between the 2026/2027 and 2028/2029 delivery years; electric distributors provide firm customer-level Large Loads (service agreements); zones with Large Load growth are assigned pro rata by their share of total Large Load MW; each distributor reports the quantity and identity of incremental Large Load no later than seven days before the procurement commences

    ProposedPJM, Special Members Committee consultation, slide 5; updated tariff redline, Attachment DD §18.3(a), p. 362026-10-22

  7. 7

    The initial target will be updated to use the most recent reliability requirement and load forecast for 2028/2029, minus capacity that cleared

    ProposedPJM, Special Members Committee consultation, slide 42026-10-22

  8. 8

    PJM included 11,993 MW of data center load in the 2026/2027 auction and 21,474 MW in the 2028/2029 auction, as the Market Monitor states; by our arithmetic, 21,474 - 11,993 = 9,481 MW, and $1.38 billion / 9,481 MW = $146,000 a year per MW. A scale only: utilities' Large Load reports will differ from this count

    OrderFERC order 196 FERC ¶ 61,245, p. 45 n.1682026-09-29

  9. 9

    FERC accepted the backstop and suspended it; PJM's filed split used the difference in forecasted Load Adjustments; relying on Load Adjustments may not reasonably capture actual large load growth, so the method may be unjust and unreasonable

    OrderFERC order 196 FERC ¶ 61,245, pp. 39, 632026-09-29

  10. 10

    Proposed utility collateral of 40% of the discounted total payment obligation; at a weighted-average clearing price of $555/MW-day, $0.68 million, equivalent to 3.4 years of total payment obligations; posted 45 days before each delivery year (the filed version set $1.5 million per MW)

    ProposedPJM, Special Members Committee consultation, slides 7-9; updated tariff redline, Attachment DD §18.8, p. 522026-10-22

  11. 11

    Each distributor reports the state or retail regulator's allocation to suppliers (LSEs); if none is reported for a zone, PJM allocates the zone's charges to all load in the zone by each LSE's share of the zone's daily unforced capacity obligation

    ProposedPJM, updated tariff redline, Attachment DD §18.3(b)(iii), p. 372026-10-22

  12. 12

    FERC: a snapshot of load growth "may be just and reasonable, because it reasonably assigns costs to those responsible for the near-term capacity shortfall"; a fixed snapshot over the term "may provide greater certainty to the LSEs" bearing the costs

    OrderFERC order 196 FERC ¶ 61,245, pp. 63-642026-09-29

  13. 13

    Parties argued fixing the allocation for 15 years conflicts with a one-snapshot basis; the backstop's contract terms end in the 2042/2043 delivery year (n.144); AEP called it unreasonable absent adjustment over time; Vistra questioned why it must be frozen; Amazon urged FERC to require PJM to update the allocation periodically to reflect actual incremental load growth

    OrderFERC order 196 FERC ¶ 61,245, pp. 40-412026-09-29

  14. 14

    Proposed 2027 timeline: bid window opens March 1 and closes March 22; final target and supply determined April 21; results posted May 3

    ProposedPJM, Special Members Committee consultation, slide 162026-10-22

  15. 15

    Large Load means a cumulative peak of 50 MW or more at a single electrical site, with affiliated facilities within one mile counted as one site; FERC found the definition just and reasonable, accepted it in part effective October 12, rejected the tariff sheets for language tied to the rejected parts, and ordered a compliance filing within 30 days (Monday, November 9, under 18 CFR 385.2007)

    OrderFERC order 197 FERC ¶ 61,019, docket ER26-3515, PP 16, 27, n.49, ordering paragraphs (A)-(B)2026-10-09

  16. 16

    FERC extended initial briefs in EL26-108 from November 13, 2026 to January 11, 2027, and reply briefs from December 3, 2026 to January 26, 2027

    OrderFERC, Notice Addressing Motion to Hold Proceeding in Abeyance2026-10-23

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