Energy Department Presses PJM to Shield Ratepayers From Data Center Backstop Costs

The U.S. Department of Energy put unusual weight behind a Federal Energy Regulatory Commission order that has already frozen PJM Interconnection's plan to buy emergency capacity for data centers and other large loads. In a statement of position filed at FERC on Wednesday, 7 October, DOE said PJM should rewrite the cost-allocation pieces of its reliability backstop procurement so that new large loads, not existing households and businesses, pay for the generation built to serve them.

PJM told Utility Dive it intends to file revisions by 29 October. The filing appears to be DOE's first statement of position at FERC in at least five years, Utility Dive reported on 8 October. On 29 September FERC accepted PJM's reliability backstop proposal, suspended it for five months and opened a paper hearing on three elements: cost allocation, transmission-owner exit rules and load-serving entity collateral. The Commission found other parts of the package just and reasonable, including eligibility, selection, the price cap and the exclusion of Fixed Resource Requirement entities from cost allocation.

DOE sided with FERC on cost allocation and tied the rewrite to the administration's Ratepayer Protection Pledge. "PJM should implement the cost allocation and other reforms identified by the Commission to ensure that the costs of serving new data centers or other large electric energy loads are not unfairly shifted to PJM's existing ratepayers," DOE wrote, according to Utility Dive. The department said PJM's proposed allocation may be unjust and unreasonable because it may not assign costs to the customers who caused them.

Jeffrey Shields, a PJM spokesman, told Utility Dive on Thursday that the grid operator plans to file a revised proposal at FERC by 29 October rather than wait out the five-month hearing. Capacity shortfalls and data center forecasts are no longer the disputed facts inside PJM. Even if PJM files on 29 October, two other issues remain live: how transmission owners may exit the arrangement and what collateral load-serving entities must post. For data center developers, the practical stakes are interconnection timing, capacity charges and whether host utilities will sign power deals that pass through backstop costs. The 22 October members meeting will show how far cost causation goes in the draft.