PJM's Board of Managers has decided how the grid will handle the data centers it cannot yet supply. In a decisional letter dated January 16, closing the Critical Issue Fast Path process on large load additions, the Board set out a package that keeps new large loads inside the capacity market, encourages them to bring their own new generation, and makes those that do not subject to curtailment before pre-emergency demand response when the system is short. It also directed PJM staff to start a reliability backstop procurement immediately.
The Board framed its decision around one result. The 2027/2028 Base Residual Auction, held in December, cleared short of the reliability requirement for the first time in PJM's history, 5.6% below the target reserve margin. The Board called that outcome a clear signal that current trends are not acceptable.
Where the process started
The fast path began last summer with a PJM staff concept that went further. In an August 2025 presentation, PJM proposed a new Non-Capacity-Backed Load service for new large loads. Such load would not be subject to capacity auction charges, and PJM would direct it to curtail during pre-emergency conditions, which could include switching to on-site generation. Participation would ideally be voluntary, but PJM said it could assign the obligation if needed to maintain the reliability requirement. Supply and demand response contracted by large loads would be credited.
The Board's decision keeps the curtailment priority but drops the idea of taking new load out of the capacity market.
The five components
The letter lists the main elements. First, large load additions are defined as individual additions of 50 MW or more at a single point of interconnection, consistent with PJM's existing large load adjustment process.
Second, load forecasting is to be tightened. The Board directed staff to implement improvements on state review of large load additions, duplicate requests, additional third-party review and transparency. Anything not in place for the 2026 forecast should be ready for the 2027 forecast.
Third, the Board encourages voluntary Bring Your Own New Generation, under which load-serving entities, large loads and states offset load additions with new generation measured on an effective load carrying capability basis. An Expedited Interconnection Track for such generation should be in place by August 2026. The Board noted proposals by the governors of Pennsylvania, Virginia, New Jersey and Maryland, together with the Data Center Coalition, Exelon and PPL, to facilitate this approach, while observing that those are state matters outside FERC's jurisdiction.
Fourth, the connect-and-manage framework. Where a load-serving entity's forecast load additions outrun new generation to offset them, the incremental demand would be subject to curtailment before PJM deploys pre-emergency demand response. The Board said it is reasonable for certain large loads, including data centers, to move to backup generators or curtail for a limited number of hours a year to prevent a larger outage for residential and other customers. PJM does not have authority to direct individual retail loads, so transmission owners and load-serving entities will decide which loads are curtailed, under an allocation framework PJM will design. Load shed prioritization should be in place by the end of 2026.
Fifth, an immediate reliability backstop procurement. The tariff currently allows such a procurement only after three consecutive short auctions. The Board directed staff to accelerate it, citing FERC's recent co-location decision, and asked staff to consider cost allocation that assigns costs to load-serving entities that are short because of load growth in their areas.
The Board also ordered a holistic review in 2026 of investment incentives in PJM's markets, and sought feedback on a price collar for the 2028/2029 and 2029/2030 auctions.
Why the Board kept load in the market
The letter explains the most contested choice directly. The Board said the system is expected to tighten so much that excluding connect-and-manage load would be unlikely to push capacity prices below point "A" on the demand curve. Removing such load would instead let large new loads avoid capacity costs altogether, shifting those costs to existing customers. The capacity market is designed for system-wide adequacy, the Board said, recognizing that PJM may need to direct curtailments.
That reasoning addresses an obvious fairness problem with the original concept. A data center outside the capacity market would pay nothing toward the capacity it relies on in normal hours. Keeping it in the market and making it curtailable first in emergencies means it pays and accepts lower priority.
What the Board would not do
The Board said it is not taking action to restrict interconnection of new load, whether through a dedicated load queue or other limiting measures, and that it does not support approaches that seek to limit or eliminate data center growth. It cited McKinsey's view that PJM is the largest data center market today and expected to remain so at least until 2030, and it said it expects the data center community to play a constructive role in addressing reliability and affordability.
It also stressed affordability for the 67 million people in PJM's footprint, and pointed to the role of states in managing higher wholesale costs at retail.
The backstop coalition
The Board said a framework proposed during the process by a coalition of Constellation, Talen, CPower, Google, Amazon and Microsoft warrants further consideration. Any backstop procurement should specify price, term and quantity and procure for the full reliability requirement. The Board added that over the long term it does not want PJM to be the procuring authority for long-term commitments, and views the backstop as transitional.
What it means
For data center developers in PJM, the decision sets a clear trade. Bring new generation and get an expedited interconnection path. Do not, and accept curtailment risk ahead of demand response in the hours the grid is short. Either way, pay capacity costs.
For existing customers, the decision prevents an explicit cost shift but does not lower prices. The Board itself expects the system to stay tight enough that the capacity price remains high. The backstop procurement and the market review are the tools meant to bring new supply. Until they do, curtailment rules for new loads are the safety valve.