FERC Delays PJM Reliability Backstop Auction as Capacity Concerns Persist

Regulators Seek Changes Before Procurement Moves Forward

The Federal Energy Regulatory Commission (FERC) has partially accepted PJM Interconnection’s proposed Reliability Backstop Procurement (RBP) but suspended its implementation for five months, delaying what was intended to be a one-time auction to secure additional generating capacity ahead of the 2029/2030 delivery year. FERC was critical of several key aspect’s of PJM’s plan, and directed the ISO to make changes and submit further filings for final approval.  The backstop auction was designed to address a 6,831 MW capacity shortfall identified in PJM’s 2028/2029 Base Residual Auction, where growing electricity demand—particularly from large data center developments—outpaced available supply. Under FERC’s order, the proposal is accepted subject to refund and additional review, with a new effective date of February 28, 2027.

Cost Allocation Remains the Central Issue

While FERC agreed that PJM faces legitimate reliability concerns, regulators raised questions about several aspects of the proposal, including how procurement costs would be allocated, treatment of transmission-owner exits, and collateral requirements for load-serving entities. Commissioners emphasized that customers driving new demand growth should bear the associated reliability costs rather than existing residential and commercial ratepayers. FERC encouraged PJM to quickly submit revisions that address these concerns and suggested using updated load forecasts to better align cost responsibility with the areas experiencing the most significant demand growth.

Impact on Upcoming Capacity Auctions

The delay creates uncertainty for PJM’s next Base Residual Auction, scheduled to begin in December 2026. PJM had originally planned to conduct the backstop procurement this fall and announce results before the December auction, allowing additional resources to be committed to the system. With the procurement now postponed, market analysts expect PJM may once again face a capacity shortfall similar to the one seen in the 2028/2029 auction, which cleared at the temporary capacity price cap of $325/MW-day. The inability to secure additional resources before the December auction could keep capacity prices elevated and reinforce concerns about tightening reserve margins across the region.

Data Center Growth Continues to Drive Reliability Planning

The backstop procurement emerged from PJM’s broader effort to manage rapid load growth from data centers and other large industrial customers. PJM has repeatedly warned that demand growth is accelerating faster than new generation can be added to the system, creating reliability challenges throughout its 13-state footprint and the District of Columbia. The RBP was intended to serve as a temporary bridge while new generation projects are developed and interconnected. FERC’s order signals support for addressing the supply gap but also underscores growing regulatory focus on ensuring that the costs of serving new large loads are assigned according to cost-causation principles rather than broadly socialized across the customer base.

What Comes Next

PJM has indicated it will work quickly to address FERC’s concerns and develop revisions that allow the procurement to move forward. The commission established both a paper hearing and a Federal Power Act Section 206 proceeding to examine the disputed elements of the proposal, while also leaving open a path for PJM to submit a new Section 205 filing that could accelerate resolution. For energy market participants, the ruling reinforces two key themes shaping PJM today: increasing pressure on resource adequacy as demand grows and heightened scrutiny over how the costs of reliability investments are allocated among utilities, large-load customers, and traditional ratepayers.