PJM is to present its initial design for a reliability backstop procurement (RBP) intended to award multiyear capacity commitments for resources able to enter service within five years to serve large loads.
The two-phase procurement would begin with a window where PJM and its consultant Charles River Associates (CRA) would moderate bilateral contracts between large loads and new resources that could provide them with capacity. If there still is a need for more capacity, a centralized procurement would be opened for each zone where PJM identifies a shortfall. Unlike the bilateral phase, where the contracts would be between individual large loads and resource owners, the centralized procurement would see PJM as the counterparty to capacity sellers.
A PJM paper outlining the proposal stated bilateral contracts are seen as superior by providing “more efficient risk-sharing and tailored cost structures.” While the proposal will be aired at the first meeting of the Critical Issue Fast Path (CIFP) process initiated to draft the RBP framework, the concept has been discussed since the 2025 CIFP aimed at addressing rising large load growth.
Several reliability backstop workshops have been conducted over the winter, leading to the PJM Board of Managers opting to open the latest CIFP. (See “PJM Selects ‘Expedited’ CIFP Process for Backstop,” PJM MRC/MC Briefs: March 25, 2026.)
The RBP is intended to be a one-time action to alleviate a 50- to 60-GW capacity shortfall expected over the next decade. PJM noted its Board of Managers instructed staff to engage with stakeholders in a holistic review of the RTO’s markets and the incentives they collectively send.
“PJM is viewing the reliability backstop procurement as a one-time, transitional procurement of capacity designed to begin to address the unprecedented load growth in the region. PJM does not believe the reliability backstop procurement is a long-term fix for its resource adequacy issues,” PJM wrote.
The PJM paper states the proposal would meet the objectives of the 13 governors of PJM states and National Energy Dominance Council in a statement of principles published in January. The principles included a request that PJM conduct a backstop auction by September to meet rising data center load. (See White House and PJM Governors Call for Backstop Capacity Auction.)
The RBP “seeks to get net-new generation online in the PJM footprint [and] allocate costs to the load that is purchasing the capacity and has a strong focus on establishing a one-time procurement to allow for a broader review of investment incentives in PJM, with a focus on returning to competitive markets for resource adequacy as soon as possible thereafter,” PJM wrote.
The amount to be procured through the centralized procurement would be based on the 2026 Load Forecast estimates for the amount of large load expected to come online between the summers of 2026 and 2029, excluding fixed resource requirement entities. It would award capacity commitments between two and 15 years, selecting bids based on cost, inclusive of network upgrades. The resource owner would bear the risk of effective load-carrying capability (ELCC) class ratings changing over the term of the commitment.
Resource eligibility would be limited to new capacity, defined as those that have not been committed in a Base Residual Auction (BRA) prior to the RBP, and projects capable of entering service before June 1, 2031. Submissions that would bring deactivated resources back online would be eligible, along with demand response, distributed energy resources and projects already in the interconnection queue that would transfer capacity interconnection rights (CIRs) from a deactivating unit to a new resource. Uprates, delayed retirements, surplus resources and projects to switch a resource’s fuel type would be disqualified.
Resources that do not begin operations before the in-service date listed in their bid would be subject to a penalty set at 120% of the RBP clearing price. This would apply only for years when PJM is enforcing its embryonic Connect and Manage system, under which PJM would identify a MW value of curtailable large loads in each zone.
The paper said PJM considered an auction design where bids would include all of a resources’ costs, including energy and ancillary services, but opted for procuring only capacity to reduce complexity and impacts rippling to other markets.
“Containing commitments to the capacity space still provides an amount of revenue certainty to new resources while simplifying implementation and avoiding unintended consequences, such as degraded performance incentives, in other market areas,” PJM wrote.
PJM still is deciding how it would set the maximum price for the RBP, with an eye toward avoiding influencing the bilateral phase.
The proposal would expand the credit and collateral requirements for EDCs with RBP commitments to include a multiplier accounting for the multiyear terms. The paper includes an example where the collateral requirement for a 100-MW commitment at $400/MW-day price and 15-year commitment would have a collateral requirement of $15.5 million.
PJM plans to request formal submissions of information from resource developers and large consumers that might participate in the RBP, asking about the circumstances under which they would participate in either the bilateral contracting or central procurement systems.
The information, which would be confidential, may include the zone they plan to build in, possible in-service dates, their MW size, preferred contracting type, price expectations, desired commitment term and existing supply agreements. The request would be opened before PJM finalizes its proposal.
