PJM Will Curtail Power to New Data Centers Starting in June 2027

PJM Interconnection’s board voted on July 27 to start curtailing power to large new data centers during grid emergencies, after the operator of the largest electricity grid in the United States said its latest capacity auction fell far short of what the region needs to stay reliable. The plan pairs a new curtailment rule for data centers with a one-time backstop auction meant to close the supply gap before it becomes a bigger problem.

PJM’s territory stretches from Virginia to Illinois and serves about 67 million customers, as TechCrunch reported. Its most recent capacity auction, covering the 2028/2029 delivery year, procured 6,831 megawatts less generation than the system’s 20 percent reserve margin reliability requirement calls for, PJM said in its own account of the board’s action. That shortfall, roughly 6.8 gigawatts, is what pushed the board to act on July 27, directing staff to pursue both an emergency supply auction and a new framework for managing the large loads adding to the strain.

New Data Centers Get a Curtailment Rule

Starting June 1, 2027, new large loads, meaning data centers and other facilities with at least 50 megawatts of cumulative peak demand at a single site, will face curtailment ahead of PJM’s existing emergency tools if they haven’t secured their own generation or a contracted power supply. PJM calls the framework Interim Resource Adequacy Service. During a capacity shortage, uncovered large loads would be cut before PJM turns to Pre-Emergency Load Management, the emergency tool it already uses to pay large customers to reduce demand under extreme grid conditions. Curtailed data centers would be compensated in a similar way, and PJM is building a registry of every large-load customer at or above the 50 megawatt threshold to track each site’s location, service territory, ramp-up schedule and whether it has arranged its own power. The specific rules utilities adopt to carry out the plan still need approval from state and local regulators.

The board tied the decision directly to who should pay for the shortfall: “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,” it said in explaining the plan.

A Backstop Auction to Buy Time

To cover the immediate shortfall, PJM will hold a one-time backstop capacity auction, with bidding open from September 30 through October 21 and results expected in early December, Utility Dive reported. The auction targets the roughly 6.8-gigawatt gap directly, and PJM raised the price cap for accepted supply offers to $555 per megawatt-day, up from a temporary $325 cap. Winning resources can lock in commitments of up to 15 years, but they have to come online no later than June 1, 2032, and PJM says the cost will be shared among load-serving entities in a way that is “structurally consistent” with how its regular base capacity auction allocates costs.

Why Data Centers Are the Target

PJM’s independent market monitor has pointed to data center growth as a major driver behind a run-up in wholesale electricity prices across the grid’s footprint, which have nearly doubled over the past year, TechCrunch reported. Forecasts cited in that reporting put data centers on track to use roughly four times as much electricity by 2035 as they do today. The new curtailment rule is meant to keep that growth from pushing costs onto existing households and businesses, and it creates pressure for new data centers to line up their own generation instead of leaning entirely on the grid.

Facilities that don’t secure their own supply will likely lean on diesel backup generators, which federal rules allow to run for up to 50 hours a year for demand response events and up to 100 hours a year for emergencies and maintenance, but which typically cost more to operate than grid power and pollute more. TechCrunch also reported this week that Vantage Data Centers faced scrutiny for coordinating with Virginia environmental regulators to cast doubt on a report estimating that diesel generators at one of its 96-megawatt Northern Virginia facilities could cause tens of millions of dollars a year in nearby health damages, a preview of the tradeoffs data center operators may face as they look for power outside PJM’s queue.

The curtailment rule and the backstop auction both still have steps to clear before they take effect: state and local sign-off for the former, final bidding for the latter. Together, though, they mark PJM’s clearest attempt yet to treat new data centers as a distinct category of customer that has to help solve the capacity problem it is creating, rather than as ordinary load growth.