PJM weighs proposals to manage data center impact on electricity affordability and reliability

by Peter Hall, Pennsylvania Capital-Star
November 24, 2025

The regional power transmission network and electricity market manager that serves Pennsylvania and 12 other states faces a mid-December deadline for a plan to manage the impact of data centers and other large energy consumers on electricity prices and reliability.

PJM Interconnection’s members committee, consisting of about 800 local utilities, generators and other energy industry interests, voted on proposals for new rules for data centers and how the cost of building new generating and transmission capacity will be shared among consumers.

The outcome of the Critical Issue Fast Path process, in which PJM has prioritized the rulemaking, will have long term effects on the affordability and reliability of electricity supplies across the network, which spans from New Jersey to Illinois and Pennsylvania’s northern border to North Carolina.

“We’re trying to ensure that there’s enough supply, that the lights are going to stay on and there are no additional rate increases,” said Jon Gordon, director of Advanced Energy United, a group that represents the sustainable energy industry. “Nobody wants, from a policy standpoint, to shut the doors on data center development.”

The path PJM will take, however, remains unclear following the 7-hour meeting last Wednesday where stakeholder groups presented the proposals. Although the votes are only advisory for PJM’s board of managers, which will make the final decision, none reached the two-thirds majority threshold to be approved. 

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“PJM opened this conversation about the integration of large loads and greatly appreciates our stakeholders for their contributions to this effort,” a PJM spokesperson said. “The stakeholder process produced many thoughtful proposals, some of which were introduced late in the process and require additional development.”

The board of managers expects to act on the proposals in the next few weeks, the spokesperson said.

The nine-member board must choose a proposal or a combination of proposals and submit the final plan to the Federal Energy Regulatory Commission next month. The deadline, Gordon said, is driven by a desire to have the changes in place before next summer’s capacity auction, which establishes the price generators will receive to have plants ready to meet the grid’s peak demands. 

PJM’s work to ensure grid and price stability in the face of growing demand comes as Pennsylvania lawmakers restated their energy policy goals for the coming year. 

As part of the agreement to settle the commonwealth’s monthslong  budget impasse, Democrats agreed to withdraw from the Regional Greenhouse Gas Initiative, which former Gov. Tom Wolf joined by executive order in 2019. Republicans said the agreement would “unleash the promise of Pennsylvania” through the development of its natural gas resources. 

RGGI would have required carbon dioxide emitters to purchase credits designed to encourage the use of renewable energy sources. Republicans said it amounted to a tax on electricity and a drag on the state’s economy.

“We had neither certainty or stability, and I truly believe that because of our regulatory climate here in Pennsylvania, we were continuing to lose energy development and the family sustaining jobs that go with it to our neighboring states,” House Republican Leader Jesse Topper (R-Bedford) said Tuesday. 

Democratic lawmakers called on colleagues in the General Assembly to support legislation to protect consumers by establishing permanent funding for energy assistance programs and enacting legislation to require accurate energy use forecasting, encourage renewable energy development and protect ratepayers from data center costs. 

“Pennsylvania needs good jobs. We need economic activity, and we support technological innovation, but we are all here today because at the heart of it are our constituents, working people who simply want to be able to keep the heat on and not worry every month what’s coming next,” House Energy Committee Chairperson Elizabeth Fiedler (D-Philadelphia) said in a news conference last Wednesday.

Corey Young, the director of Washington & Jefferson College’s energy policy center, said Pennsylvania should be free to benefit from data center development and the economic activity it brings. But he added the commonwealth has served as an energy exporter while neighboring states like Maryland and New Jersey have retired older polluting power plants.

He said any plan to deal with the impacts of data center growth should also include provisions for distributed generation, such as rooftop solar or community solar. But Pennsylvania has been slow to pass legislation that allows it. The state also faces opposition to existing provisions that make it more attractive, such as net metering that allows solar panel owners to sell excess energy back to the electricity grid.

Data center development across PJM’s territory has contributed to rising energy costs and peak demand that is forecast to grow by 20% over the next decade, according to PJM’s forecast.

In the last two PJM auctions, the capacity price has set records despite an agreement between PJM and the Shapiro administration to cap prices. As a result of the record-high price of $269.92 per megawatt-day established for 2025, consumers saw electric bills increase sharply this summer. The price for 2026 could bring additional increases for ratepayers between 1.5% and 5%, according to PJM. 

The coming auction in July will set the capacity price for 2027 and could bring another steep hike without the rules for large load additions, Gordon said.

“For PJM to get the generation in place to serve these massive loads and the transmission in place, there’s a massive cost associated with that,” he said.

Data centers, which provide the computing power to run websites and streaming services in addition to artificial intelligence products, can consume as much electricity as small cities. One planned by Amazon Web Services for a site adjacent to Talen Energy’s Susquehanna Steam Electric Station nuclear power plant in Luzerne County would use as much energy as 900,000 homes, according to Amazon.

Constellation Energy and Microsoft announced a power purchase agreement in which the software company will buy the entire 835 megawatt output of the former Three Mile Island nuclear plant when its remaining reactor is restored to service in 2027.

But other data center projects have been proposed without clear sources of electricity or agreements on how the cost of building new transmission lines will be shared. PJM’s independent market monitor has asked FERC to reject an agreement between Amazon and Philadelphia region electric utility PECO until the companies can show it won’t increase costs for retail electricity customers.

The proposals considered last week include PJM’s own plan to employ a model in which large load users commit to reducing their consumption based on real-time energy prices and consumption. The top vote getter was a modified version of PJM’s plan proposed by the Southern Maryland Electric Cooperative that included changes to the price at which large users would reduce energy consumption, penalties for failing to reduce demand and clarification on who has supervisory control over the order to cut power consumption.

Also considered was a proposal by the Data Center Coalition, which includes Amazon, Google, Microsoft and other data center operators, Pennsylvania Gov. Josh Shapiro and the governors of Maryland, New Jersey and Virginia. This plan would allow large users to plan their own generating capacity with expedited connections to the grid, expedited siting and permitting and priority connections for new power generation.

Monitoring Analytics, PJM’s independent market monitor, proposed rules that would not allow large-load additions until generating and transmission capacity is available and an expedited connection process for new generation. The rules would encourage data centers to build their own generation in order to get online faster, the proposal said, adding that it would also insulate retail consumers from costs associated with the projects. 

“If the data centers do bring their own generation but the data centers do not materialize, the system is better off and there is no harm from the incorrect forecast,” it said. “The ‘bring your own new generation’ option requires a financial and physical commitment to the reliability of the grid that eliminates the current concerns about the forecasting process.”

Gordon said the independent market monitor proposal “makes it impossible for consumers to be on the hook for data center proposals.”

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