Dive Brief:
- The PJM Interconnection may be “too big to function” and has an “unacceptable” governance structure, Federal Energy Regulatory Commission Chairman Laura Swett said Tuesday at the grid operator’s annual meeting in Baltimore.
- PJM, the largest U.S. grid operator, faces “a serious legitimacy crisis” as confidence in its decision-making has “completely eroded,” Swett said.
- The crisis comes as PJM needs to add generation to its system as soon as possible to serve data centers, according to Swett. “This is not a time for weak leadership or to be crippled by fear — this is a time for difficult, history-making decisions that are not for the faint of heart, decisions that may leave many unhappy, decisions that may make or break part of a nation,” Swett said.
Dive Insight:
PJM runs the grid and wholesale power markets across parts of the Mid-Atlantic and Midwestern regions. In its most recent capacity auction, held in December, PJM failed to acquire enough capacity to meet its reserve margin target, triggering warnings from FERC commissioners. The grid operator’s demand forecasts have spiked on expectations of data center development.
PJM added 2.8 GW of capacity in 2025 and 4.8 GW in 2024, according to a January staff presentation. As of January, 8.2 GW was being built in PJM and an additional 3.2 GW was under construction and partly in service, PJM staff said.
The 13 states in PJM, and the District of Columbia, have “fundamentally different regulatory structures, resource portfolios and politics,” Swett said. In some states, utilities own power plants while other states rely on competitive markets for their power supply, Swett said.
Despite those challenges, FERC expects PJM to run power markets that are “fair and efficient … and to maintain reliability through extreme weather, shifting fuel mixes and rapid technological change,” Swett said. “If this can’t be landed given PJM’s huge and diverse footprint, perhaps it simply has grown too big to function.”
Further, PJM’s governance process appears flawed, according to Swett.
“The current stakeholder process is slow where it must be fast, opaque where it must be transparent and vulnerable to vetoes and agenda control exactly when the region needs immediate action,” Swett said. “The status quo is unacceptable and has been for some time.”
Saying she has a “great appetite for aggression when the country’s future hangs in the balance,” Swett said FERC would hold a conference July 23 to identify flaws in PJM’s governance process and solutions for fixing them. “It will be a work session to build a record eyed toward actionable change,” Swett said.
PJM “appreciates” Swett’s interest in the grid operator’s stakeholder process, according to Jeffrey Shields, a PJM spokesman.
“We look forward to participating in the upcoming technical conference and continuing our work to strengthen grid reliability, including advancing the reliability backstop auction efforts to bring new generation online as quickly as possible,” Shields said in an email.
The PJM Power Providers Group, which represents independent power producers, also appreciates Swett's comments, according to Glen Thomas, president of the group, which goes by P3.
“P3 doesn't believe the PJM stakeholder process is fundamentally broken; however, there is certainly always room for improvement," Thomas said in an email.
Kent Chandler, a senior fellow at the R Street Institute, a public policy think tank based in Washington, D.C., and former member of the Kentucky Public Service Commission, said governance is “broken” in PJM, but he cautioned that FERC must be careful that entrenched interests are not allowed to further expand their control.
“States and consumer advocates have been asking FERC to overhaul PJM's governance for years, and have been rebuffed at every turn,” Chandler said in an email.
Also, fixing PJM’s governance issues wouldn't help with many of the region's current problems, according to Chandler.
“I'll be interested to hear more from the chairman about what she hopes to accomplish with the technical conference and beyond, including why, of all the conversations that need to be had (like load forecasting, generation interconnection, capacity and energy market efficiency, large load interconnection, local transmission spend, etc.) prioritizing governance is at the top of the list,” he said.
