FERC rejects PJM's backstop cost allocation, leaving the 6.8 GW auction unscheduled

The 6.8 GW backstop reliability procurement PJM built to cover capacity it could not buy in its last two base auctions has lost its schedule after FERC rejected the operator's cost-allocation method. The offer window had been set to open Sept. 30 and run through Oct. 21, with selection from Oct. 22 through Dec. 2 and results ahead of the standard capacity auction for the 2029/30 delivery year in early December. PJM, through Shields, said it is reviewing FERC's order and intends to work quickly to address the commission's remaining concerns, staying focused on solutions that maintain reliability, allocate costs to the customers driving them, and protect consumers amid significant demand growth.

Utility Dive's account of the order has the FERC chair calling PJM's situation a "mess," and the decision splits the operator's design in two. The order carries an offer cap for the backstop auction of $555 per MW-day, applied on a MW-weighted average basis over the delivery period, and FERC balked at how the procurement's costs would be allocated, finding PJM failed to show the plan met the agency's "just and reasonable" standard and was not persuaded the costs would fall to the parties incurring them.

The commission proposed an alternative that allocates the backstop's costs from updated load forecasts, writing that this "could ensure that the load forecast information on which the allocation relies reasonably captures all forecasted load growth," and told PJM it "should employ the most up-to-date load and resource forecasts to inform the initial [procurement] target." The order also handles the exit case: if a transmission owner leaves PJM before the backstop's costs are recouped, they should fall to the load-serving entities inside a transmission zone rather than to the departing owner.

The procurement grew out of a fast-track stakeholder process aimed at a pending shortfall driven largely by data center demand forecasts, and PJM's own auction record supplies the urgency, because the operator fell short of its reserve margin targets in each of its last two base capacity auctions. Its fact sheet puts the backstop target at 6.8 GW for the 2028/29 delivery year, a number PJM may reduce to account for new supply expected to join a system that spans 13 Mid-Atlantic and Midwest states and the District of Columbia. If the target holds and the auction clears at the cap, the backstop would pay out roughly $3.8 million a day, and while the cap sets the price ceiling, the allocation method decides who pays the bill, which is the half still open.

Read the alternative closely and the commission's objection is less about the size of the backstop than about the evidence behind it. The shortfall exists because load forecasts have outrun the supply stack, and building the allocation on freshly updated forecasts is a way of identifying the customers driving the cost before charging them for it. That reading goes beyond what the order says outright, but it fits the broader pattern: the data center buildout has turned the power schedule into a question of tariff design, and grid money has gone to equipment and lines that already exist, as in Washington's $1.9 billion SPARK package, which bought 23 GW on existing corridors.

For a developer or a lender in PJM's footprint, the backstop auction is primarily a price signal, establishing what the operator will pay for 2028/29 capacity it cannot otherwise procure, a figure against which projects in the territory can be underwritten. Until it runs, the only recent price data are the two base auctions that came in under PJM's reserve margin targets, and the December auction for 2029/30, which had been meant to follow the backstop results rather than precede them.

Supply is not arriving on a schedule that closes that gap. Days before the backstop order, FERC turned down a procedural request and kept Oklo's 750-MW Virginia project out of PJM's queue, a rejection that leaves the plant at least 18 months behind and hands five similar complaints the same reasoning. Whatever the 6.8 GW target becomes, it will be measured against supply that has cleared the queue, a threshold Oklo's project has not reached.

FERC's plate is full of variations on the same argument, adequacy disputes that resolve into questions of who pays. In August this publication reported ISO-NE's request for a review step on asset-condition transmission work, a filing aimed at spending New England ratepayers have long targeted, and SPP's Western adequacy stop-gap, which would run until June 1, 2027, drew four protests, including one from its own monitor.

PJM had intended to publish backstop results before the standard capacity auction for 2029/30 in early December, putting both procurements on one calendar, and preserving that order now depends on a revised allocation filing that satisfies the commission. Early December is where the next dated answer sits, and where it becomes clear whether the backstop still needs 6.8 GW or some smaller number.