PJM shifts data-center burden to states

PJM Interconnection has settled on a plan that would require states, utilities and large-load customers to decide how to serve new data centers, rather than spreading those costs broadly across its 13-state grid, according to PJM and reports published on August 5 and August 6. The proposal comes as power demand from data centers accelerates across the Mid-Atlantic and as regulators and utilities look for ways to keep household and business customers from absorbing the bill. Virginia regulators said this week that Dominion Energy must create a process to assign direct electric-service costs to data centers. (canarymedia.com) Public Service Enterprise Group, or PSEG, said it is also offering bilateral supply proposals for large sites in PJM. ### Why is PJM putting states and local processes at the center of this fight? PJM’s August 5 plan would require new data centers and other large loads to secure power through long-term arrangements with new supply resources or face limits on grid service, Canary Media reported. PJM is combining that approach with a bilateral contracting process that matches large-load customers with developers of new generation. The grid operator filed a related proposal at the Federal Energy Regulatory Commission on July 31 for a one-time reliability backstop auction to address a capacity shortfall tied to rapid load growth, including from data centers. (canarymedia.com) Utility Dive reported the auction could run from Sept. 30 to Oct. 2 if approved. ### What does the plan change for a developer trying to build a data center? Large-load developers in PJM would no longer be able to assume that standard utility service will be available on ordinary terms. (canarymedia.com) PJM’s bilateral process is intended to link those customers with new generation developers for long-term supply deals, while the backstop auction would procure capacity if bilateral arrangements fall short. (utilitydive.com) Canary Media reported that the structure leaves state regulators, local permitting bodies and utilities to decide whether and how to accommodate fast-growing data-center clusters. That pushes questions about siting, cost recovery and curtailment conditions into state and local proceedings rather than resolving them through a regionwide socialized approach. ### How does Virginia fit into the picture? Virginia regulators said on August 6 that Dominion Energy must create a process for assigning to data centers the direct costs of their electric service, according to E&E News. (insidelines.pjm.com) The report said Virginia residents have already paid billions of dollars for transmission lines tied to data-center growth in recent years, and the state is moving to shift more of those grid-extension costs onto the sector itself. (canarymedia.com) Virginia matters because Northern Virginia remains the country’s largest data-center market, and state policy there is often watched by utilities and regulators elsewhere. E&E News said federal regulators have also pressed PJM to move faster on reforms tied to large-load growth. ### Why are utilities now talking about bilateral supply deals? PSEG said it is offering data-center supply proposals through PJM’s bilateral contracting process, Utility Dive reported on August 5. (eenews.net) The report said PSEG CEO Ralph LaRossa told analysts the company was encouraged by potential changes to the utility business model in New Jersey as large-load demand grows. That approach gives utilities and power suppliers a way to structure dedicated arrangements for large customers instead of relying only on pooled grid procurement. (eenews.net) PJM said the bilateral process is designed to match large-load customers with developers of new supply resources for long-term contracts. ### What happens next at FERC and inside PJM? FERC is now reviewing PJM’s July 31 filing for the one-time backstop procurement. (finance.yahoo.com) Utility Dive reported that PJM’s proposed auction window is Sept. 30 through Oct. 2, and Reuters reported this week that the filing is intended to address a capacity shortfall driven by surging data-center demand. PJM has said the backstop procurement and bilateral contracting process are intended to move in parallel. (insidelines.pjm.com) The next concrete milestones are FERC’s decision on the filing and the opening of the bilateral contracting window for large-load customers and new supply developers. (utilitydive.com)