PJM Board Backs Backstop Auction for Data Center Interconnection

The PJM board of managers has called for a backstop auction mechanism and price collar extensions in its plan to manage surging data center grid connections.

The board of managers for PJM Interconnection, the nation's largest grid operator, has endorsed key reforms to manage the explosive growth of data center connections, formally calling for a backstop auction mechanism. This auction would act as a market-based tool to ensure that necessary grid upgrades for new data center load are funded and built in a timely manner. The board also urged stakeholders to consider extending a price collar on capacity auctions, aiming to shield ratepayers from extreme price volatility driven by this unprecedented new demand.

These recommendations are part of PJM's formal interconnection reform plan, designed to clear a massive backlog of power generation and demand projects waiting to connect. The proposed auction mechanism matters because it directly addresses the financial and logistical logjam caused by data centers, which require vast, immediate power but often face years of delay. For electric utilities and ratepayers, the price collar is a critical consumer protection measure, attempting to balance the need for new infrastructure with affordable electricity for all customers on the grid.

For energy developers, data center operators, and state regulators, the implication is a more structured but complex path to interconnection. The forecast is for intense stakeholder debate over the specific design of the auction and the appropriate level of the price cap. Decision-makers must engage deeply in the upcoming stakeholder process to shape the final rules. The next imperative for PJM is to refine these proposals into actionable market rules that both accelerate grid modernization and maintain the reliability and affordability of the entire system, ensuring the backbone of the digital economy is powered sustainably and fairly.