Governors, Feds Push PJM to Address Rising Costs from Data Centers

Governors of states in the PJM Interconnection regional footprint recently reached a statement of principles with federal officials at the White House on a plan to speed up construction of new power generation projects to meet rising data center demand while ensuring that the costs are paid by developers and not consumers.

Pa. Gov. Josh Shapiro was one of the bipartisan group that met to sign the statement urging PJM to quickly take several actions, including keeping a price cap for future capacity auctions, and holding a one-time auction for data center owners to bid on 15-year power purchase agreements for new generation. PJM typically holds one-year capacity auctions for power commitments. It would also require operators to commit to their power needs, providing some direction on future demand, and to pay for new generation that is built, even if they do not use it.

PJM, which manages the electric grid for 13 Mid-Atlantic states including Pennsylvania, has been struggling to modernize its regulations to address rapidly rising demand for power, much of it from new data centers being built in the region, as new generation has not come online fast enough. Over the past two years, utility customers have seen their bills spike as PJM’s last three auctions for firm capacity power that will be available at peak demand times have skyrocketed in price.

The price hikes would have been worse had Shapiro reached a two-year agreement with PJM for a price cap and floor on capacity auctions. It has saved PJM customers some $18 billion. If the cap is extended by PJM, as called for in the statement of principles, Shapiro said it would save an additional $27 billion over two years, with $5 billion in savings in Pennsylvania

PJM officials were not invited to the White House meeting, but later the same day announced a series of actions it plans to take in 2026 to address data center and other large load additions while keeping rates affordable for the 67 million customers the wholesale grid serves.

The proposals include improved load forecasting improvements; an increased role for states; avenues for new large load customer to supply their own generation or connect to the grid subject to outages at peak demand time, and immediate initiation of a backup procurement process to address short-term reliability needs. The PJM board did not make a decision on extending the price cap, which is not in place for the June 2026 auction, but said it will seek additional feedback.

“This decision is about how PJM integrates large new loads in a way that preserves reliability for customers while creating a predictable, transparent path for growth,” said David Mills, PJM interim president. “This is not a yes/no to data centers. This is ‘How can we do this while keeping the lights on and recognizing the impact on consumers at the same time?’” Some of the PJM proposals would require approval by the Federal Energy Regulatory Commission, which has issued an order for the grid operator to develop a data center connection plan.