Source: United States House of Representatives – Representative Don Beyer (D-VA)
U.S. Senators Chris Van Hollen (D-Md.) and U.S. Representative Don Beyer (D-Va.) were joined by 10 of their colleagues in urging PJM Interconnection, LLC (PJM), the grid operator responsible for coordinating electricity transmission in the region, to take steps to protect the reliable supply of electricity and prevent skyrocketing costs for consumers amid rapid growth in data center energy demand. In their letter to PJM Board of Managers Chair David Mills, they expressed serious concerns over PJM’s handling of mounting affordability and reliability challenges, pointing out that data centers have already resulted in over $16 billion in additional capacity costs to consumers in the past two years – with total capacity costs alone potentially reaching $163 billion by 2033 if new energy capacity is not added to the grid fast enough to meet soaring demand. They also criticized PJM for favoring corporate interests over consumers by weakening a proposed reform that would have required large energy users such as data centers to limit their usage during capacity shortages, which threatens to worsen existing electricity affordability and reliability issues. The lawmakers urged the grid operator to put forward strong protections and implement reforms that prevent customers from bearing the costs of increasing data center energy consumption.
Joining Senator Van Hollen and Congressman Beyer on this letter are Senators Tim Kaine (D-Va.). Cory Booker (D-N.J.), and Angela Alsobrooks (D-Md.); and U.S. Representatives Suhas Subramanyam (D-Va.), Glenn Ivey (D-Md.), Eleanor Holmes Norton (D-D.C.), Kweisi Mfume (D-Md.), Jan Schakowsky (D-Ill.), Sarah McBride (D-Del.), and Dwight Evans (D-Pa.).
“We write as Members of Congress representing tens of millions of Americans in states within the PJM Interconnection (PJM) territory to express our concern with PJM’s proposed approach to managing rapidly increasing energy demand and skyrocketing electricity costs for our constituents. The projected increase in energy demand within PJM in the near future, driven almost entirely by new large data center loads, is a serious concern for future grid reliability, and our constituents are already feeling the impacts on their wallets,” the lawmakers began. “Therefore, it is critical that PJM put forward innovative proposals to ensure that it can continue to fulfill its mission to provide affordable and reliable electric service that our constituents depend on, while charting a responsible pathway for data center grid interconnection that does not force our constituents to shoulder the financial and risk burden for wealthy megacorporations.”
“PJM must swiftly address the fact that data center energy demand is threatening to overwhelm the grid,” they wrote, going on to stress that there are steps that PJM can take to mitigate these risks – such as improving the process for connecting new energy generation sources to the grid and implementing strong “mandatory backstop” rules to prevent data centers from overwhelming the grid during periods of high demand. To that point, the lawmakers criticized PJM for weakening a key mandatory backstop rule it had proposed, favoring corporate interests that stand to profit from the increase in data center development at the expense of everyday consumers.
“Mandatory backstop rules that apply to all new large loads would help shield other users of the grid – including residential homes, schools, and businesses – from higher prices and interruptions in service. PJM, however, has since updated its draft proposal to remove this important mandatory backstop, opting instead for a system that will rely on the willingness of data centers to voluntarily curtail their demand for a certain number of hours per year,” they continued. “Without a strong system in place to manage data center load growth, PJM itself has warned that the result could be rolling blackouts affecting all grid users. These interruptions in service would not only be completely unacceptable given they are foreseeable, but also potentially dangerous for our constituents and severely detrimental to the overall economic security of our states. PJM should be doing everything in its power and utilizing all available tools to avoid such drastic measures as its foremost priority.”
In addition to urging PJM to reinstate a strong mandatory backstop in the grid operator’s proposed reforms, they called on PJM to also create a “large load queue” to ensure that facilities demanding large amounts of energy are connected to the grid only when they can be served reliably in order to ensure affordability for all consumers; improve its load forecasting and ensure accuracy in demand projections; and prioritize adding new energy generation capacity to the grid.
“It is not unduly discriminatory to identify and manage demand from new data centers given their incomparably large energy demands, how quickly data centers can come online, and their unique potential to impact the reliability of the electric grid as a collective class and to increase rates for all other customers. Conversely, it is unduly discriminatory to force our constituents to subsidize data center development through astronomical rates and costs. It is likewise unduly discriminatory to ask our constituents to tolerate interruptible electric service if PJM does not take action to address the impending imbalance of energy demand and capacity due to new data center loads,” they stressed.
Text of the letter can be viewed here and below.
Dear Chair Mills:
We write as Members of Congress representing tens of millions of Americans in states within the PJM Interconnection (PJM) territory to express our concern with PJM’s proposed approach to managing rapidly increasing energy demand and skyrocketing electricity costs for our constituents. The projected increase in energy demand within PJM in the near future, driven almost entirely by new large data center loads, is a serious concern for future grid reliability, and our constituents are already feeling the impacts on their wallets. Therefore, it is critical that PJM put forward innovative proposals to ensure that it can continue to fulfill its mission to provide affordable and reliable electric service that our constituents depend on, while charting a responsible pathway for data center grid interconnection that does not force our constituents to shoulder the financial and risk burden for wealthy megacorporations.
Data center energy demand has added over $16 billion in costs for our constituents in the last two PJM capacity auctions, and capacity costs alone could amount to $163 billion through 2033 as new data center demand growth exceeds available capacity, keeping prices at the market’s price cap. Capacity costs are only one component of what influences the price our constituents pay for energy; data center energy demand will also drive up wholesale costs in energy markets, and the costs from increased electric transmission buildout to serve data centers are already being passed onto our constituents. These troubling trends will continue unless PJM takes action to hold existing customers harmless from data center-related costs and ensure that reliability is not diminished.
PJM must swiftly address the fact that data center energy demand is threatening to overwhelm the grid. The CEO of the North American Electric Reliability Corporation recently characterized mounting challenges in the power sector, including the influx of new large loads, as “a five-alarm fire when it comes to reliability.” While PJM has been rightly pursuing solutions to better manage the changing power system – including implementing reforms to its interconnection queue and load forecasting process, improving its compliance with FERC Order 2023, and pursuing greater collaboration with states to ensure adequate generation is coming online to meet demand – more immediate reforms are necessary.
Firstly, it is critical that PJM continue to improve its generation interconnection queue process and finally eliminate the queue backlog, instead of continuing to rely on queue jumping proposals that undermine business certainty and the generation interconnection queue system as a whole. At the same time, given real-world time constraints on building and interconnecting new generation, it is clear that immediate demand-side solutions are key to addressing the reliability and affordability crisis. PJM’s Critical Issue Fast Path (CIFP) process on large load additions has the potential to leverage such solutions to address this critical issue.
PJM’s initial CIFP proposal put forward a mandatory backstop to prevent new large loads, primarily data centers, from potentially causing rolling blackouts by 2030. In this proposal, new large loads would have been forced to curtail their energy usage if there was insufficient capacity to serve said loads in order to avoid load shed events, or blackouts, on the grid under times of high demand on the system. Mandatory backstop rules that apply to all new large loads would help shield other users of the grid – including residential homes, schools, and businesses – from higher prices and interruptions in service.
PJM, however, has since updated its draft proposal to remove this important mandatory backstop, opting instead for a system that will rely on the willingness of data centers to voluntarily curtail their demand for a certain number of hours per year. Voluntary curtailment has a role to play in managing PJM’s rapid load growth, but we are gravely concerned that PJM’s current draft proposal will be inadequate to ensure the reliability and affordability of the electric grid. Without a strong system in place to manage data center load growth, PJM itself has warned that the result could be rolling blackouts affecting all grid users. These interruptions in service would not only be completely unacceptable given they are foreseeable, but also potentially dangerous for our constituents and severely detrimental to the overall economic security of our states. PJM should be doing everything in its power and utilizing all available tools to avoid such drastic measures as its foremost priority.
Furthermore, we are concerned that PJM decided to deprioritize its mandatory backstop proposal as a result of assigning far greater weight to the perspectives of a small group of influential and well-resourced stakeholders than to the reliability and affordability concerns of the over 67 million Americans PJM serves. PJM has cited stakeholder feedback in its decision to amend its CIFP proposal, and it is clear from the public comments PJM received in response to its initial proposal that the vast majority of identifiable opposition came from organizations with direct economic incentives tied to rapid data center development. This includes opposition from data center and digital infrastructure developers, energy companies, and utilities – all of whom stand to profit from soaring data center investment and energy demand. In contrast, PJM received comments from at least four statewide consumer protection advocates expressing significant concerns that PJM is not adequately considering affordability and reliability impacts on general ratepayers within the CIFP process. These concerns do not appear to have been addressed in any material way in PJM’s current proposal.
Given that billions of dollars of increased electricity costs and reliable grid service for our constituents are on the line, we urge PJM to immediately change course on its CIFP proposal. Instead, PJM must put forward solutions that prioritize grid reliability and affordability for residents and small businesses. A serious solution to this problem must at least include an enforceable backstop to prevent data center demand from bringing about a resource adequacy shortfall and an extension of the current capacity market price collar while the new rules take effect. We recommend that PJM explore proposals that include some combination of the following and hold existing customers harmless from energy cost increases driven by data centers:
- A mandatory backstop to ensure that resource adequacy is maintained for users of the grid that are not new large loads.
- Creating a “large load queue” to ensure that the interconnection of new large loads can be served reliably and keep prices affordable for all users.
- Improved load forecasting to ensure that PJM is not over-estimating the amount of new data center load or double counting mutually exclusive data center load.
- Ensuring prioritization for projects that bring their own new, additional capacity resources to the grid, such as new generation, battery energy storage systems, and demand response, so that they do not impact reliability and energy prices for other grid users.
If necessary, PJM should initiate a filing at the Federal Energy Regulatory Commission under Section 205 of the Federal Power Act (FPA) to request that the Commission clarify PJM’s authority to enforce these provisions. The Commission’s consideration of the recent advanced notice of proposed rulemaking put forward by the Secretary of Energy related to large load interconnection may also provide PJM with additional clarity. Nonetheless, we believe PJM already has the necessary authority to implement these changes to its tariff because PJM is responsible for the reliable operation of the system, including transmission and generation adequacy, provided at “just and reasonable” rates that are not “unduly discriminatory.”
It is not unduly discriminatory to identify and manage demand from new data centers given their incomparably large energy demands, how quickly data centers can come online, and their unique potential to impact the reliability of the electric grid as a collective class and to increase rates for all other customers. Conversely, it is unduly discriminatory to force our constituents to subsidize data center development through astronomical rates and costs. It is likewise unduly discriminatory to ask our constituents to tolerate interruptible electric service if PJM does not take action to address the impending imbalance of energy demand and capacity due to new data center loads.
We will be closely monitoring the next steps and outcome of the CIFP process and appreciate the Board’s attention to these critical issues, which are inextricably linked to the energy reliability and affordability our constituents both expect and deserve. As the ultimate decisionmakers within the CIFP process, we urge the Board to give full and fair consideration to the reliability and affordability implications of any final proposal, and to place the public interest at the forefront of its decision-making. Thank you again for your consideration in this process.