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Data Centres: Boom and Backlash
4AUG

PJM warns 13 governors on grid costs

4 min read
10:53UTC

PJM chair Paula Conboy told all 13 PJM-territory governors on 19 May that absent state cost rules before September's backstop procurement, data-centre grid costs may land on household bills.

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Key takeaway

PJM gave states until September to assign data-centre grid costs or watch them default to households.

PJM Interconnection, the regional transmission organisation that runs the electricity grid across 13 US states and Washington DC, put the question the whole boom has avoided into writing. In a board letter signed by chair Paula Conboy on 19 May 2026, PJM told governors that unless their states build frameworks to allocate data-centre costs before its centralised procurement runs in September 2026, those costs may land on "other consumers in the states, including residential consumers"⁠1.

The instrument is a centralised Reliability Backstop Procurement, brought forward to September because legal certainty on cost allocation may not arrive until 2027. PJM merged it with its Connect and Manage process under a single fast-track, its CIFP (Critical Issue Fast Path). Data centres that contract bilaterally for backstop power leave the mandatory connection pool; everyone left behind shares the reinforcement bill.

PJM set the September date for a reason. It already runs DOE (Department of Energy) curtailment authority over backup-equipped sites, filed its co-located load tariff on the same 18 May FERC (Federal Energy Regulatory Commission) deadline it was set, and watched FERC log 75 GW of new summer capacity while the grid still hit an emergency. The letter says the next reinforcement round cannot wait for a rulebook. Operators counter that they pay connection charges already, and that a backstop auction socialises a cost they did not ask other ratepayers to carry.

Deep Analysis

In plain English

PJM (Interconnection) is the company that manages the electricity grid for 13 US states, from Illinois to New Jersey. When a new data centre wants to connect, the grid usually needs upgrades: new wires, substations, and transformers. Under current rules, those upgrade costs are spread across all electricity customers, including ordinary households. PJM's board chair sent a letter to 13 state governors on 19 May warning that unless states write new rules to put those costs on the data centres themselves, households could see higher electricity bills. PJM wants states to act before its September procurement round, where the decision about who pays gets locked in.

Deep Analysis
Root Causes

PJM's Open Access Transmission Tariff was written for incremental load growth of 1-2 per cent per year. Its cost-allocation rules classify transmission upgrades as network reinforcements benefiting all customers, not project-specific facilities serving one customer.

A single 500 MW data-centre campus requesting interconnection today can trigger a regional reinforcement whose cost is then spread across millions of residential accounts, because the tariff has no carve-out for loads that individually exceed the total capacity added in some prior years.

The September Reliability Backstop Procurement emerged because FERC's Docket RM26-4-000, the proceeding that would create a new framework for loads above 20 MW, cannot deliver a binding rule before the summer reliability window closes.

PJM accelerated the backstop auction to force a binary choice: sign a bilateral contract now and own your cost, or remain in the pool and let cost allocation default to the existing socialised framework. States that fail to create their own frameworks before September effectively delegate that choice to the tariff structure.

What could happen next?
  • Consequence

    If no PJM-territory state publishes a cost-allocation framework before September, grid-reinforcement costs triggered by new data-centre interconnections default to the existing tariff structure, which spreads them across all residential and commercial ratepayers.

    Immediate · Assessed
  • Risk

    Hyperscalers that sign bilateral backstop contracts before September exit the shared cost pool, leaving smaller or less credit-worthy developers and their triggered reinforcement costs behind, potentially concentrating per-customer charges.

    Short term · Suggested
  • Precedent

    A state that writes a data-centre cost-assignment framework before September becomes the template for the remaining 12 states and potentially for FERC's RM26-4-000 rulemaking, creating a first-mover advantage in setting the national standard.

    Medium term · Suggested
First Reported In

Update #5 · Who pays when the grid bends for AI

PJM Interconnection· 2 Jun 2026
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