PJM Interconnection's Reliability Backstop Procurement was designed to buy about 6.8 GW of new generation to close a capacity shortfall driven by data center demand. It did not open on September 30 as planned. The Federal Energy Regulatory Commission (FERC) accepted the proposal on September 29 but suspended it for five months, to take effect on February 28, 2027, and found that its cost allocation, transmission owner exit rules and collateral requirements for load-serving entities may be unjust and unreasonable.
The order runs to hundreds of pages, and much of it turns on a single question: who pays for capacity bought to serve data centers that have not yet been built? The case of the Northern Virginia Electric Cooperative (NOVEC) shows what is at stake.
The design
According to PJM's fact sheet, the initial procurement target is the 6,831 MW shortfall from the capacity auction for the 2028/2029 delivery year. PJM proposed to buy new generation under contracts of up to 15 years, with a maximum willingness to pay equal to a MW-weighted average of $555/MW-day. FERC accepted that offer cap. Only new generation, new demand response and distributed resources are eligible, and they must begin commercial operation by June 1, 2032.
The target would be reduced to account for bilateral contracts between large loads and new generators, integrated resource plans and other showings of new supply. PJM began a bilateral matchmaking process with a request for proposals on June 9, with first responses due July 21.
Costs would be allocated first to utility zones based on their pro rata share of the procurement target, and then to the load-serving entities within each zone. Those shares were derived from forecast load growth, which in PJM is now dominated by data centers.
NOVEC's numbers
NOVEC is a member-owned cooperative serving Northern Virginia, one of the densest data center markets in the world. A report from the Virginia State Corporation Commission staff dated October 1, 2026 puts NOVEC's contracted data center demand at 7,513 MW, second in the state only to Dominion Energy Virginia's 11,997 MW.
In its protest, summarized in the FERC order, NOVEC said its share of the initial backstop target was 1,303 MW, about 19% of the total. Because of how PJM proposed to credit new supply against forecast load growth rather than against each zone's target, NOVEC said it would need to procure about 1,619 MW to fully offset that share.
Collateral was the bigger problem. NOVEC estimated its highest possible collateral requirement at about $1.95 billion, which it said would exceed its total assets and disrupt its ordinary business operations, and it was uncertain whether it could even secure $2 billion. NOVEC argued that the collateral obligation itself, rather than the backstop charges, was the most significant obstacle to meeting its obligations, and that a shorter collateral period, such as three years, would mitigate the risk. FERC agreed that the load-serving entity collateral rules may be flawed "because they do not strike a reasonable balance between protecting PJM's markets and its members against the risk of default and ensuring that market participants have adequate flexibility to manage their collateral requirements."
NOVEC also pointed to an inconsistency in the opt-out rules. Electric distributors that are not regulated by states could opt out of the procurement, which meant one Virginia cooperative, ODEC, could opt out while NOVEC, which is state-regulated, could not.
A forecast that moved under the target
The deeper argument was about forecasts. The Joint Consumer Advocates noted in their protest that PJM's large load forecasts had fallen by more than half since April, from 14.8 GW to 6.8 GW. Others argued that even if regional totals were right, getting the location of load growth wrong would put costs on the wrong zones.
Amazon argued that allocating capacity costs on a snapshot of forecast load growth would diverge from actual cost causation over time, and urged FERC to require PJM to update the allocation periodically to reflect actual incremental load. AEP argued that the obligation should follow the large load customer whose growth creates the need, not the distributor in whose zone the customer happens to sit. Vistra questioned why the allocation needed to be frozen for 15 years.
NOVEC added a warning about consequences. It said the backstop would raise the costs of data center loads, which would either lead marginal data center projects to withdraw or cause data centers to relocate to areas not assessed backstop charges.
FERC's order offered PJM an alternative: allocate costs based on updated load forecasts, and use the most up-to-date load and resource forecasts to set the initial target. If a transmission owner leaves PJM before costs are recovered, those costs should fall on the load-serving entities in the zone rather than on the transmission owner.
Why it matters
FERC Chairman Laura Swett was blunt in her concurrence. "This commission will not be forced into accepting a deeply flawed, eleventh-hour procurement mechanism with billion-dollar implications for consumers," she wrote.
The fight over the backstop is a preview of the broader cost allocation question that runs through every large load debate in PJM. Capacity bought for data centers is a shared resource once it is on the system, but the need for it is concentrated in a few zones. A static allocation rewards data centers that arrive later than forecast and punishes zones whose forecasts ran too high. A dynamic allocation protects existing customers but makes the contracts harder to finance.
PJM said it intends "to work quickly to address the commission's remaining concerns" and that it remains focused on solutions that "appropriately allocate costs to the customers driving those costs." Timing is now to be determined, with the regular capacity auction for the 2029/2030 delivery year still scheduled for early December.
For utilities serving data center clusters, the NOVEC numbers set a benchmark. A distributor with several gigawatts of contracted data center load may face backstop obligations worth billions of dollars, and the rules that decide how those obligations pass through to data center customers will matter as much as the auction price itself.