10JUN

PJM cuts backstop target to 9 GW

3 min read

10:06UTC

PJM restructured its September reliability backstop to a bilateral-first model targeting roughly 9 GW, down from 14.9 GW, per a Jefferies estimate published around 19 May.

← Back to Oregon bills data centres, not homes Jump to analysis ↓

IndustryDeveloping

Key takeaway

PJM shrank its September backstop to 9 GW, pushing data centres to contract their own firm power.

PJM Interconnection, the largest grid operator in the United States, serving roughly 65 million people across thirteen states, revised its September Reliability Backstop Procurement to a bilateral-first structure targeting roughly 9 GW, down from a prior 14.9 GW target, according to a Jefferies estimate published on or around Tuesday 19 May. ¹

The backstop is the mechanism by which PJM secures emergency capacity to keep the lights on when demand outpaces supply. A bilateral-first design pushes large loads to strike their own supply contracts before the grid steps in to procure the remainder centrally, which is how the target shrank by nearly six gigawatts. The change followed directly from the warning PJM's board sent thirteen state governors that grid-reinforcement costs would otherwise drift onto household bills .

For data-centre operators, the revision narrows the pool of capacity the grid will backstop on everyone's behalf and widens the share they must arrange themselves. It is a quieter version of the same cost-allocation fight Oregon settled by tariff: who lines up the power, and who pays when the grid has to fill the gap.

Deep Analysis

In plain English

PJM Interconnection is the company that runs the electricity grid serving 65 million people across 13 US states, from Illinois to New Jersey. Every year it buys a reserve of extra power capacity to cover emergencies, called the Reliability Backstop Procurement (a backup supply purchase). Think of it like buying extra emergency generators for the whole grid. In May 2026, PJM changed how it runs this process. Instead of a competitive auction where power suppliers bid against each other, it switched to a bilateral-first system, meaning it negotiates direct deals with individual generators rather than running an open competition. The target amount of backup power dropped from 14.9 gigawatts to around 9 gigawatts. This reduces the cost that might otherwise land on household electricity bills, but critics say it also reduces price transparency, because direct deals are private rather than openly priced.

What could happen next?

Consequence
PJM's bilateral-first backstop sets a precedent that competitive capacity auctions are politically unacceptable when data-centre load is the primary driver of reliability gaps, potentially reshaping how all 13 PJM-state utilities procure backup capacity.
Risk
Bilateral contracts' confidential pricing removes the cost-attribution transparency that PJM's 19 May governor warning was designed to establish, creating information asymmetry between generators and state regulators at the moment regulators most need cost data.

Source Landscape

This story draws on neutral-leaning sources

PJM's September backstop was originally sized at 14.9 GW to cover the reliability shortfall identified after the Section 202(c) curtailment event in May . At the previous backstop clearing prices of approximately $50-65 per MW-day, a 14.9 GW procurement would have generated annual capacity costs of $265-355 million, distributed across 13-state load.

The revised approximately 9 GW target reduces that cost burden to roughly $160-210 million annually, a meaningful reduction for residential ratepayers but still significant relative to the PJM warning to governors on 19 May that costs could default to households.

The bilateral-first structure also changes who bears the cost: bilateral contracts are typically confidential and not publicly cleared, meaning the actual per-MWh cost to load-serving entities is unknown to regulators and ratepayers until the contracts are filed. This opacity is exactly what PJM's governor-warning was designed to prevent.

Consensus view: Jefferies utility analysts characterise PJM's bilateral-first restructuring as a deliberate de-escalation of the September backstop's market-clearing mechanism: by prioritising bilateral contracts (direct generator-to-load agreements) over the competitive auction format, PJM reduces the clearing-price spike risk that made the original 14.9 GW target politically toxic for state regulators in the 13-state territory.

The revised approximately 9 GW target still covers the reliability gap PJM identified after the May curtailment , but at a scale that avoids triggering emergency cost-recovery provisions that would have landed directly on residential bills.

Counter-view: FERC Commissioner Mark Christie (Republican appointee) argued in a May 2026 dissent that bilateral-first procurement is a structural retreat that will set a precedent for future reliability procurements: once PJM concedes that competitive auctions are politically unacceptable for backstop procurement, it loses the price-discovery mechanism that makes the market work, and the bilateral contracts it signs instead will be priced at generator-discretion rather than competitive clearing.

Key tension: Whether PJM's bilateral-first model can clear the FERC RM26-4-000 co-location rulemaking on schedule by end of June, given that the bilateral structure sits in legal tension with FERC's requirement that transmission access be non-discriminatory.

Sources:Utility Dive

Mentions:PJM Interconnection →FERC →Oregon →Illinois →New Jersey →United States →FERC Docket RM26-4-000 →

First Reported In

Update #6 · Oregon bills data centres, not homes

Utility Dive· 10 Jun 2026

Read original →

Causes and effects

Caused by

PJM warns 13 governors on grid costs

PJM's 19 May governor warning was the policy event that drove the September backstop restructuring to bilateral-first.

Occurred 19 May 2026

Read story →

This Event

PJM cuts backstop target to 9 GW

The shrunken target shows PJM leaning on operators to contract their own firm power rather than the grid procuring it centrally, narrowing the volume households might end up paying for.

Different Perspectives

Data-centre developers and hyperscale operators

Hill County's rescission on 4 June, seven days after RCM Hill filed a $100 million taking suit, shows the Fifth Amendment threat is faster than any appellate route: the damages clock runs from the day the moratorium passed. Rural counties with no large-load permitting framework face a litigation bill that can exceed their entire annual budget.

Kenya and President Ruto

Kenya's suspension of the $1 billion Microsoft-G42 Olkaria project in early May applies raw-capacity logic at national scale: President Ruto stated the full 1 GW build would mean switching off half the country against a 3 GW installed base. A single hyperscale campus can consume a third of a Sub-Saharan grid with no equivalent constraint in Europe.

Denmark and Energinet

Energinet's 27 May extension of its large-load connection pause, with a 60 GW queue against 7 GW peak demand, demolishes the assumption that surplus renewable generation is a relief valve for compute demand. Denmark has more wind than it can use and still cannot connect data centres, because transmission pace is the binding constraint.

France and EDF

EDF's repurposing of the Bouchain former power-station site for SoftBank's Phase 1 campus gives France a replicable siting instrument, a brownfield nuclear connection bypass, that no other G7 grid operator can match. France's Choose France summit on 30 May secured the boom's largest European bet without a connection-queue fight or community moratorium.

SoftBank Group

SoftBank's EUR 75 billion France commitment on 30 May anchors at EDF's Bouchain nuclear baseload, bypassing the UK's four-times-US electricity cost premium (cited by OpenAI as reason to pause Cobalt Park) and Germany's grid-queue delays. EDF's supply relationship is bilateral; SoftBank never enters the French connection queue.

US residential ratepayers and state regulators

Portland General Electric's 4 June tariff is the first evidence that PJM's cost-transfer warning to governors on 19 May can run in reverse: Oregon households get a 1.3% bill reduction as data centres absorb their grid costs. The 12 other states carrying active cost-attribution bills now have a filed tariff with actual numbers to cite.