PJM Board Deploys and Accelerates Reliability Backstop Procurement and IRAS Frameworks
To manage severe, systemic capacity shortfalls driven by surging AI data center demand, PJM Interconnection—the nation’s largest grid operator—has taken aggressive board-level action. On July 27, 2026, the PJM Board of Managers formally directed the implementation of a one-time Reliability Backstop Procurement (RBP) capacity auction and a novel large-load curtailment framework called the Interim Resource Adequacy Service (IRAS).
These proposals, filed with the Federal Energy Regulatory Commission (FERC) in late July 2026, represent a fundamental shift in grid management, explicitly designed to isolate existing ratepayers from the immense financial risks of the AI buildout.
The Accelerated Backstop Capacity Auction
Following a massive 6.8-gigawatt (GW) capacity shortfall in PJM's Base Residual Auction (BRA) for the 2028/2029 delivery year (which cleared at record-high capped prices), PJM's board authorized an emergency, one-time backstop capacity auction.
- Timeline: If approved by FERC, the auction is scheduled to commence on September 30, 2026, and run through October 21, 2026, with results released in early December 2026.
- Capped Offers Raised: To attract new merchant generation supply, PJM plans to cap acceptable supply offers in the backstop auction at $555/MW-day, a substantial increase from the temporary $325/MW-day administrative cap utilized in the 2028/2029 BRA.
- Cost Allocation: While costs will be structurally allocated to load-serving entities (LSEs) in a manner consistent with base capacity auctions, PJM's board explicitly noted that state regulators and LSEs must determine how these emergency costs are apportioned among retail rate classes.
Excluding Non-Power-Bringing Data Centers from Future Auctions
In a major structural change to prevent data center demand from artificially driving up capacity prices for ordinary consumers, PJM's board directed staff to exclude any incremental new large loads that do not bring their own dedicated power supplies from the demand forecasts used in future capacity auctions.
PJM estimates that large loads across its 13-state footprint could grow by 70 GW by 2038, representing an unprecedented strain. The PJM Board stated:
"Existing consumers should not bear higher capacity costs caused by new large loads that do not bring, or otherwise contract for, the new supply necessary to serve them."
Removing these loads from the capacity auction forecasts is expected to lower wholesale capacity prices over time. Julia Hoos, head of USA East at Aurora Energy Research, observed:
"The procurement target for the backstop auction is ambitious, but it’s nowhere near close enough to what’s needed if all this large load shows up... It’s an effort to plug the gap and then push the responsibility for procuring new generation onto the large loads themselves."
Data Center Curtailment: The IRAS Framework
For large loads that choose to connect to the grid without bringing dedicated generation, PJM is establishing the Interim Resource Adequacy Service (IRAS) framework (previously termed "connect and manage").
Under IRAS, scheduled to take effect on June 1, 2027:
- Emergency Curtailment: Participating large loads must agree to curtail their electricity consumption or switch entirely to on-site backup generators whenever PJM’s transmission system nears emergency conditions.
- Large Load Registry: PJM will create a centralized large load registry tracking each facility's physical location, ramp schedules, and capacity supply characteristics to provide "critical data transparency" for retail load-reduction priorities.
- Local Rules: Local electric distribution companies and transmission owners will draft the specific IRAS rules, which must be approved by state utility commissions.
Systemic Risks and Market Friction
The PJM Independent Market Monitor, Joseph Bowring, has raised concerns that the proposed frameworks do not fully insulate consumers. Bowring noted that leaving existing data center loads in previous capacity auctions has already increased regional capacity costs by $29.4 billion over the last four auctions:
"That number will accelerate in future auctions if PJM succeeds in increasing the maximum price in the auctions."
Additionally, the physical realities of building grid infrastructure are causing massive cost escalations. According to Aurora Energy Research, a planned merchant power plant project in Ohio by Competitive Power Ventures (CPV) recently withdrew from PJM’s fast-track Reliability Resource Initiative after receiving an astronomical $878/kW interconnection cost estimate:
"A few years ago, that was closer to the total cost to construct than the cost of just the interconnection... I wouldn’t be surprised if interconnection costs keep being a quiet project killer."