PJM's Backstop Bill Lands Where Data Centers Are. NOVEC Shows How Heavy It Is

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? 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. 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.

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. NOVEC is a member-owned cooperative serving Northern Virginia, one of the densest data center markets in the world. 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. 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.

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. The fight over the backstop is a preview of the broader cost allocation question that runs through every large load debate in PJM.