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On Friday Eastern Time, PJM Interconnection submitted a backup auction plan to the Federal Energy Regulatory Commission (FERC), proposing a one-time reliability backup auction to be held from September 30 to October 21 to fill the 6.8-gigawatt capacity shortfall from the previous base residual auction. The plan aims to ensure the grid meets a 20% reserve margin target for the delivery year beginning in mid-2028, a level designed to limit unexpected outages to no more than once per decade.

PJM failed to secure sufficient capacity in the previous base residual auction to achieve the above reserve margin, with the shortfall driven primarily by rapid growth in data center load forecasts and insufficient additions of corresponding power supply. PJM estimates that demand from data centers and other large loads could grow by up to 70 gigawatts by 2038.

The plan includes two parts: a backup auction and a streamlined process for bilateral transactions between data centers and power suppliers. If bilateral contracts are reached before the auction, the capacity target for the backup auction can be reduced accordingly. PJM stated that through the auction, it will pay up to $20 billion for new power plants built by 2027 to supply data centers. The Natural Resources Defense Council (NRDC) commented on this on Friday.

The costs of the backup auction will be allocated based on each PJM zone's proportional share of the procurement target, then distributed to utilities and other load-serving entities within the zones. PJM proposes setting the overall auction price cap at $555 per megawatt-day, higher than the $325 per megawatt-day cap in the previous base residual auction.

PJM noted that the success of the plan depends on states taking measures to protect their retail customers from cost shifts. In its filing to FERC, PJM stated: "The backup auction framework relies on PJM states to refine rules for cost allocation purposes, clarifying which retail loads (including 'large loads' as defined by each state) should bear the costs of resources procured through the backup auction."

PJM plans to announce the backup auction results by December 2, followed by the base residual auction for the 2029/30 delivery year.

Additionally, PJM spokesperson Jeffrey Shields stated that PJM plans to submit another proposal to FERC on August 7, allowing grid operators to curtail large loads without their own power sources when approaching emergency conditions. The rule would apply to data centers placed into service after June 1, 2027. Under the previously named "connect and manage" Interim Resource Adequacy Service Proposal, PJM will establish a registry of all large loads, which "will provide critical data transparency for determining curtailment priorities for retail customer loads," PJM said in the latest plan summary.

Tom Rutigliano, senior advocate for climate and energy at NRDC, said in a press release: "Requiring future data centers to bring their own power may be the best move to stabilize the grid. Now, PJM needs to complete the follow-up work, supporting states in managing existing data center demand, promoting rapid deployment of energy storage, and accelerating interconnection of new generation projects."