The White House and governors in PJM states have released a plan to get more generation built in the RTO, which saw its recent capacity auction clear short of the target as data center demand proved too much to meet. (See PJM Capacity Auction Clears at Max Price, Falls Short of Reliability Requirement.)

“Under President Trump’s leadership, the administration is leading an unprecedented bipartisan effort urging PJM to fix the energy subtraction failures of the past, prevent price increases, and reduce the risk of blackouts,” White House spokesperson Taylor Rogers said Jan. 16.

The most immediate idea is to run a special auction that would procure generation for data centers, which they would pay for. Trump and the White House’s National Energy Dominance Council (NEDC) said they’ve reached agreement with several states to advance more than $15 billion of new generation projects and a “coalition of leading technology companies has committed to funding” the new capacity.

“This initiative will ensure we usher in the age of artificial intelligence with new power plants funded by the technology companies, not taxpayers, securing the steel of Pennsylvania, the manufacturing of Ohio and the ships of Virginia,” NEDC chair and Interior Secretary Doug Burgum said in a statement.

The plan is to run a reliability backstop auction to procure the new capacity and give it 15-year contracts paid for by data centers. PJM’s tariff allows for a backstop capacity auction, but only after its main capacity auctions fall short for three years, so implementing it would require a rule change.

“PJM is reviewing the principles set forth by the White House and governors,” PJM said in a statement. “The PJM board’s decision, resulting from a multi-month stakeholder process on integrating large load additions, will be released later today. The board has been deliberating on this issue since the end of that stakeholder process. We will work with our stakeholders to assess how the White House directive aligns with the board’s decision.”

PJM released its proposed reforms on the afternoon of Jan. 16, just hours after the governors met with the NEDC at the White House to sign their deal. (See PJM Board of Managers Selects CIFP Proposal to Address Large Load Growth.)

The NEDC and governors also called on the RTO to improve load forecasting, queue management and to return to “market fundamentals” with long-term capacity market reforms that should go into effect in time for the base residual auction scheduled for May 2027. They suggest extending the price cap that has been in place for another two capacity auctions.

The governors agreed to use their powers to ensure that state regulators assign the costs from the backstop auction to data centers that have not otherwise procured supply or have agreed to flexible operations.

Pennsylvania Gov. Josh Shapiro (D) said in a statement that he’s been working to get power prices under control for two years and welcomed the deal with the White House and fellow governors.

“I sued PJM when they refused to act and secured a price cap that saved consumers tens of billions of dollars on their energy bills,” Shapiro said. “Since then, I’ve been working with my fellow governors and federal energy officials to push PJM to make needed reforms, and I’m glad the White House is following Pennsylvania’s lead and adopting the solutions we’ve been pushing for — including the extension of the price cap that I insisted be included today.”

Former FERC Chair Mark Christie welcomed the commitment for data centers to pay for the capacity they need to connect to the grid.

“In the Susquehanna case and the PJM co-location 206 proceeding initiated when I was chairman, that is exactly the principle I advocated, so I am glad the president and the governors are endorsing it,” Christie said. “Now I am interested to see the details of how PJM can or will implement this type of emergency auction for a 15-year PPA.”

The NEDC and governor’s proposals endorse the idea of “bring your own generation” with a special procurement auction and that all makes sense, said PJM Independent Market Monitor Joe Bowring.

“One question, is, how will those costs from the procurement be assigned to data centers and … is that literally a 15-year contract with the data centers that they have to pay regardless, or is there any risk that some of that cost will be shifted to load?” Bowring said. “So, I mean, this is an example of a question that you know is yet to be answered. But at a high level, it’s a positive, but there are a lot of details to be worked out.”

Based on the governors’ commitment on cost allocation, PJM likely will assign the costs of the special auction to load serving entities and let the state regulators figure which data centers ultimately pay, he added. The question is who would cover the stranded costs if those data centers were to go away before the 15-year contracts expire, Bowring said.

Speaking at the American Enterprise Institute a couple of days before the PJM deal was announced, NEDC Senior Director of Power Peter Lake (the former Texas Public Utilities Commission chair) highlighted the issue around mismatched time scales in the two industries.

“Consuming electricity is not new to America, but it’s the timing that is unique, both in a challenging way, but also it presents an opportunity,” Lake said. “The speed which with which these large consumers of electricity come to market is certainly a new paradigm.”

Building major industrial facilities in the past often had similar time frames to building power plants: four to six years; and they both last for decades. Data centers take 18 to 24 months to be developed and then the chips used in them become obsolete much quicker than a factory’s assembly line.

“The technology inside the data center might be obsolete before the power plant is even built,” Lake said. “If you think of the value of the data center and the GPUs, that’s how fast the innovation is going, which is a good thing. We want the innovation. … We want to accelerate that. That’s the beautiful part of AI and all the wonderful things it can bring to enhance our lives, but that is such a staggering shift.”

That dynamic makes predicting data center load difficult, Bowring said.

“To me, the best way to manage the forecast is make the data center responsible for paying for whatever capacity they need,” he added. “So that gives them incentive to be as serious as possible building the data center. And if they incur the cost and then go walk away, then those costs stay with them.”

While Bowring sees the increased attention to the reliability crisis in PJM as generally a good thing, nothing in the deal announced will negate the impact the growth in data centers already has had on consumers in PJM.

“We would not have this crisis but for data center load,” Borwing said. “So regardless of retirements, regardless of the economics of power plants, regardless of even PJM’s interconnection queue process difficulties — shall we say, holding all that constant, we would not have these problems, not be short, but for data center load. Data center load is forcing PJM to be short, and it’s imposed $23 billion worth of costs on customers.”

The gap in between supply and demand is about 13,000 MW, but any backstop auction could be rounded up to a more even 15,000 MW, Bowring said.

The White House and politicians are not this involved in wholesale power markets, but Grid Strategies President Rob Gramlich noted in an interview that under President Bill Clinton there was a coordinated effort to deal with the fallout from the California energy crisis by getting new contracts in place to keep power flowing.

The situation needs fixing, but the documents released about the plan are sparse on details and those will be important, Gramlich said.

“There’s a bigger picture than this tries to address, that FERC didn’t address and didn’t have before the commission, which is new load came into the region and started buying up power from existing generation capacity,” Gramlich said. “And I think the states and consumers in the region thought that those power plants in the PJM region were there to serve them. They thought they could count on them, but unfortunately for them, those power plants had not committed their power under any contract.”

Gramlich has argued for years that power plants in the region needed long-term contracts, a position he came to after dealing with the California energy crisis, in which state rules requiring utilities to buy entirely from the spot market made things much worse.

State regulators and others in PJM did not heed his warnings largely because there were no counterparties big enough to take on the major, long-term contracts that hyperscalers have announced recently. Still other wholesale power markets with restructured states like Texas have had more long-term contracting than PJM, he added.

“The fact that the large buyers are willing to say they’ll pay their fair share and willing to work with the bipartisan group of governors, and with the federal government to reach a conceptual proposal here, I think is very noteworthy,” Gramlich said. “And PJM does have the ability to do backstop auctions that are separate from its capacity market. So, I think there’s potentially a workable concept there.”

A big question is how the cost allocation and retail side of these reforms are handled. Gramlich indicated it ultimately might require an expansion of federal authority.

Everyone agrees PJM is struggling to add new generation and that some sort of intervention is required, but Aurora Energy Research’s USA East head Julia Hoos sounded a note of caution.

“This type of ‘out of market’ action can quickly add new generation, but may be financially disastrous for existing generation, which ultimately hurts reliability in the entire region,” Hoos said.

The separate auction is likely to reduce price signals for existing units and could affect the financial health of coal plants in PJM, which the Trump administration likes to keep open.

“Investor confidence to build new power generation in PJM has been low for years,” Hoos said. “Prices were low for almost a decade and generators were shutting down, and no one was intervening to keep them online. Now that prices are high, PJM and lawmakers are intervening to keep them low. Understandably, developers willing to build new generation in PJM saw that as a substantial risk. Now, this action means that any existing generation is likely to see significantly lower prices, confirming those fears.”

In a thread on X, LS Power CEO Paul Segal made similar points to Hoos and cautioned that the special auction needs to be treated as a bridge.

“Bottom line: shifting toward ‘pay your own way’ is directionally right,” Segal wrote. “Just don’t confuse a one-off auction (or a permanent cap) with the solution. The durable fix is stable rules + earlier signals + faster pathways to connect + true cost-causation — so competition can do its job.”