By Kennedy Maize
Confusion and skepticism are trending over the Trump administration’s plan to radically intervene in the way the giant PJM Interconnection buys electricity to supply distribution utilities in order to aid power-gobbling data centers. Skepticism is in the lead.
Just as various analysts were teasing out the details and implications of the administration’s intrusion into PJM’s operations, the regional transmission organization struck back, unveiling its own approach to treating the data center infection. The overall issue became more confusing, while making the administration plan more problematic.
Either plan would require approval by the Federal Energy Regulatory Commission. That’s not likely to happen soon. At FERC’s January 22 open meeting, Chairman Laura Swett said, “A lot more work has to be done.” Commissioner Judy Chang said that “the supply challenge is tricky. PJM and the commission face a lot of difficult decisions.” She said she hopes to see “real progress” by the end of 2026.
The administration is driven by a historic rise in electric prices arriving as the nation turns its political attention to the upcoming national Congressional election this fall. The administration aims to lower or cap consumer prices but doesn’t want to do anything that might interfere with its self-proclaimed race with China to develop artificial intelligence. As Politico put it, “The White House has zeroed in on energy prices as a political and economic pressure point heading into this year’s midterms.”
The White House plan, announced Jan. 16, responded to direct pressure from the governors of three PJM member states: Democrats Josh Shapiro of Pennsylvania and Wes Moore of Maryland, and Republican Glenn Youngkin of Virginia (who left office the day before the announcement of the new policy and was replaced by Democrat Abigail Spanberger).
The plan calls for PJM to hold an “emergency” capacity auction for data centers only, where generators would bid to supply the data centers with fixed-priced power for 15 years. The power would flow from the generators to the data centers through the PJM grid. This would be in addition to PJM’s regular capacity auctions. PJM’s existing price caps, known as the “price collar’ would continue. The administration would order PJM to scrap its stakeholder process and mandate that grid interconnection studies be done in “150 days or less.”
The PJM counter plan the following day offers four basic reforms: “Significant load forecasting improvements and increased role for states; avenues for new large loads to bring their own new generation or enter into a connect and manage framework subject to earlier curtailment; creation of an accelerated interconnection track for state-sponsored generation projects; immediate initiation of a backstop generation procurement process to address short-term reliability needs.”
PJM said it would “seek additional feedback from its stakeholders before deciding whether to extend the price floor and ceiling, also known as a ‘price collar,’ that was in place for the last two auctions to the 28/29 and 29/30 auctions in light of the holistic market review it has asked the PJM Staff to perform in 2026.”
Commenting on the White House plan, energy analyst Arushi Sharma Frank of Washington’s Center for Strategic & International Studies noted that it “extends the existing price cap on existing generation for two more auctions, effectively freezing scarcity revenues for the legacy fleet.” Frank said the 15-year contracts “will fundamentally alter who bears the risk of building out the American grid and keeping current power plants (thermal and non-thermal) open….Participants are potentially ‘short’ on power today, but ‘long’ on liability tomorrow.”
Frank added that RTO (regional transmission organization) “markets were designed to facilitate bilateral contracting and unitary pricing, not to host separate government-mandated procurements for a specific asset class.”
Travis Kavulla, former Montana utility regulator and newly ensconced policy chief at home battery power purveyor Base Power, also raised the price cap extension. “The price cap that’s been in effect for the past two auctions has seen capacity exported from the PJM market to more lucrative contracts in MISO” he wrote. “It has caused capacity owners to talk about literally tearing generators out of the ground and relocating them to Texas. It has dampened the forward investment climate generally in PJM, because it has made the whole thing look like a hot mess.”
Kavulla asked of the data center-only show, “How will this auction be coordinated with and promote rapid interconnection, which frankly remains even more of a barrier and an economics hot mess than the generation-supply problems.”
Jon Gordon of Advanced Energy United, a diversified Washington trade association whose members include data center developers Microsoft, Google, and Meta, said, “The line for energy projects to connect to the power grid in the Mid-Atlantic has basically had a ‘closed for maintenance’ sign up for nearly four years now, and this proposal does nothing to fix that—or any of the other market and planning reforms that are long overdue. More short-term Band-Aid remedies aren’t a substitute for durable fixes.”
Veteran economist Ahmad Faruqui looked at the impact of the administration plan on the wires element of the PJM system. He commented that more generation “will not, however, fully insulate ratepayers. Increasing rates are not usually driven by the cost of adding generation. It’s the wires. If a utility builds a $50 million substation for a data center and spreads that cost to the legacy rate base, residential bills can rise despite low-cost generation. This is where state regulators must hold the line, with tariffs that require large data centers to pay demand charges covering specific infrastructure costs (including substations).”
FERC’s Chang also pointed to the importance of the wires.”We need to assign grid costs in a fair manner,” she said. The grid “is the ultimate bottleneck that will continue to frustrate us regardless of how quickly we deal with the supply.”
Whatever finally emerges from the White House or the PJM proposals likely won’t have an impact on electric prices in the PJM region before the November election. Neither auction could take place sufficiently before then to impact consumer prices.