Federal Energy Regulatory Commission (FERC) Chairman Laura Swett said Thursday that if PJM Interconnection fails to agree to governance and stakeholder reform measures by the end of September, FERC will implement reforms on its own. Swett issued the warning during a FERC technical conference on PJM governance issues.

"PJM is facing a serious legitimacy crisis," Swett said at the conference. "Some transmission owners are openly discussing completely withdrawing from the regional transmission organization (RTO). In short, market participants have lost confidence in PJM's ability to make decisions."

PJM's new President and CEO David Mills (who officially took office in May after serving as interim head for several months) noted that because PJM failed to attract significant new generation resources in its last two capacity auctions, the grid operator is ready to make major changes to its operations. Mills said: "We are fully committed to meeting the challenge," including capacity market reform.

Potential reforms discussed at the conference included: enhancing board independence, establishing a formal role for states in PJM, granting states the right to submit proposals to FERC (i.e., "filing rights"), while expanding PJM's own filing rights.

According to Swett, after collecting post-conference comments, FERC plans to hold a dispute resolution forum with PJM stakeholders in September to develop governance reform proposals. If no agreement is reached by the end of that month, FERC will implement reforms on PJM itself.

Capacity market exposes governance weaknesses

The technical conference came about two years after PJM's capacity prices spiked, as data center demand growth outpaced increases in electricity supply on PJM's system (covering 13 Mid-Atlantic and Midwestern states plus the District of Columbia). The price spike led to utility rate increases of20% or morefor some customers and drew strong attention from governors and policymakers in various states.

Jodi Moskowitz, PSEG's Vice President of Regulatory Affairs, Deputy General Counsel, and RTO Strategy Officer, said at the conference that PJM's struggles in responding to rapid changes in supply-demand balance have exacerbated governance issues that had been latent for years.

Two issues highlighted at the conference included: PJM members can effectively fire grid operator board members, and its stakeholder process can be lengthy and ultimately fruitless. PJM uses sector-weighted voting in its stakeholder process, where a measure must receive a two-thirds majority of sector-weighted votes to pass. Under this system, members are divided into five classes: electric distributors, end-use customers, generation owners, other suppliers, and transmission owners.

The RTO Governance Research Network noted incommentsfiled with FERC that one consequence of this voting system is that two sectors can join forces to block measures they dislike, a situation that has occurred repeatedly on controversial issues.

During the conference, representatives from American Electric Power and others said stakeholders should play an advisory role, similar to the model used by the Midcontinent Independent System Operator (MISO). Under that process, the PJM board would hear stakeholder input, but final decision-making authority would rest with the board. Asim Haque, PJM's Executive Vice President of Government and Member Services, said that currently PJM members dominate the stakeholder process, which can cause priorities to go off track.

FERC Commissioner David LaCerte argued that PJM's failure to use the authority it has and its failure to engage with states reflect the organization's culture. "They created this cultural quagmire through past actions that weakened the board and created fear among board members of being fired, leading them to be afraid to exercise authority," LaCerte said. "They don't engage with states because they don't want to deviate from stakeholder expectations." LaCerte said the solution appears to be making the stakeholder process advisory in nature. Haque said: "I don't think we can continue doing things the old way."

States seek expanded role

States want a greater role in PJM. Kelsey Bagot, Chair of the Virginia State Corporation Commission, said states currently meet with the PJM board three times a year, but the meetings are not very productive. Unlike all other RTOs, PJM states lack filing rights under Section 205 of the Federal Power Act, which would allow them to submit proposals to FERC.

Jacob Finkel, Deputy Policy Secretary to Pennsylvania Governor Josh Shapiro, said PJM states have proposed two avenues for engaging with the grid operator: a group composed of state utility regulators, and a separate group of policymakers. Finkel said states are open to other options as long as state voices are heard and respected.

Utilities support reform

Representatives from AEP and PSEG said both utility companies support major reforms at PJM. AEP said earlier this year it wasconsidering leaving PJM. Stacey Burbure, AEP's Senior Vice President of Transmission, Regulatory Engagement and Compliance, said AEP supports giving states a greater role, moving to an advisory stakeholder structure, and expanding PJM's filing rights. She said the company is not wedded to any particular proposal. "Our focus is: Is the problem solved? Does it create a governance structure that drives solutions?" she said.

PSEG's Moskowitz said PJM's sector-weighted voting process "has not adequately aligned voting interests with accountability." She added that while an advisory stakeholder process is not her preferred option, PSEG is open to moving to that model and to increasing state participation. "We want PJM to have the tools and be empowered to act to achieve better outcomes," Moskowitz said.

Who does PJM serve: members or the public interest?

Some participants called for explicitly requiring PJM's board and staff to work in the public interest. Joseph Bowring, President of Monitoring Analytics, PJM's Independent Market Monitor, said: "The staff's goal should be clearly to serve the public interest, not to serve member interests. Is their goal to satisfy members, or when a member says 'I want a certain rule,' is their job to make it happen, or to say 'we don't think that's in the public interest'?"

Jameson Tweedie, Delaware's Ratepayer Advocate, said the most substantive reform for PJM would be to "firmly and explicitly establish the public interest in PJM's mission and operating documents, and to implement it through PJM's actions in the board and stakeholder processes."

Consensus emerges on key issues

Jon Gordon, Senior Director at Advanced Energy United, a clean energy business trade organization, told Utility Dive that the conference seemed to show consensus on some issues, such as giving states a greater role and enhancing board independence. "I was somewhat surprised by how much consensus there was on these difficult issues," he said. "There are some differences at the margins, but most people seem to agree that the PJM board should have more independence and be less controlled by members — I think we all recognize that members have been focused on their own interests rather than the broader interests of ratepayers."

Mark Christie, a former FERC member and former member of the Virginia State Corporation Commission, said onsocial mediathat he is "cautiously optimistic" about the possibility of fundamental changes to PJM governance. But he believes stakeholders are unlikely to reach agreement on reforms, and ultimately FERC will have to develop a reform plan for the grid operator.

Mona Dajani, Global Co-Chair of Infrastructure, Energy and Real Estate at Cooley law firm, said in an email to Utility Dive that the most important takeaway from the conference was not any single proposal, "but rather the recognition that governance itself has become a strategic asset. In an era of unprecedented AI-driven demand growth, the ability to make timely decisions is no longer an administrative issue; it is becoming a prerequisite for reliable markets, efficient capital allocation, and grid resilience."