The Grid Moves the Bill Toward the Data Centers

VALLEY FORGE, Pa., Oct. 20 — WhoWho pays for the power that data centers need is being settled this fall, and the answer is moving toward the places where they are built. PJM Interconnection, which runs the grid for 13 states and the District of Columbia, proposes to charge the cost of an emergency purchase of new capacity to the zones where large loads are growing.

In Virginia, the governor wants guarantees that data centers pay for their own energy needs before regulators approve a $67 billion utility merger; the regulators’ staff says the deal should be denied as proposed.

PJM’s backstop is meant to buy new supply to close the 6,831.3-megawatt gap, in accredited capacity, that its July auction left for 2028–29, at a weighted average of levelized costs of no more than $555 a megawatt-day, under commitments of up to 15 years.The BackstopA one-time purchase from resources that have never cleared in PJM’s auctions and are expected in service by June 1, 2032. In PJM’s first filing, their commitments ran through the 2042–43 delivery year. The payments are settled as a contract for difference: the new resources must offer into later capacity auctions, and their backstop payments are made net of what those auctions pay, so a zone’s charge can be smaller than the headline price, or even a credit. Whichever zones are assigned that cost would carry it into the 2040s, with each state deciding how its share is divided among the companies that serve customers there; the zonal formula does not by itself make data centers, rather than other customers, pay.

The Formula

“Cost allocation will be based on Large Load growth between the 2026/2027 and 2028/2029 Delivery Years,” reads the proposal PJM posted for Thursday’s special meeting of its Members Committee. The utilities that run each zone’s distribution system would report their firm, customer-level large loads, those with service agreements, and the zones with that growth would share the cost in proportion to it.Large LoadSince Oct. 12, PJM’s tariff has defined one as a peak of 50 megawatts or more at a single site, with affiliated facilities within a mile counted together. PJM’s January forecast adjusted 14 zones, Dominion’s among them, for growth in data-center load.

That is narrower than PJM’s first filing, which divided the cost by forecast “Load Adjustments,” changes to the load forecast that could cover load of any size or type. In its Sept. 29 order suspending the purchase, the Federal Energy Regulatory Commission said that measure might not reasonably capture large-load growth and could leave some new large loads out. It suggested updated load forecasts or, in a footnote, “other measures of large load growth.” PJM has chosen the loads with signed agreements.

Commissioner Lindsay See, concurring, wrote that “customers that drive new costs should bear appropriate responsibility for them,” adding: “Existing customers should not be left paying costs attributable to new demand.”

Existing customers should not be left paying costs attributable to new demand.

A large customer can still shrink its zone’s share. “Customer level offsets will still be available to determine the final allocation,” PJM’s slides say; under the first filing, contracted new supply serving new load counted against a zone’s share, and such contracts must run at least five years. That keeps a premium on data centers that bring their own power.

It also lightens the collateral a utility must post, to 40 percent of the discounted total of its payments; at the assumed $555, PJM’s example comes to $0.68 million for each allocated megawatt. The first filing asked $1.5 million, meant to cover about half the commitments’ value, an estimate the commission found PJM had not supported with any quantitative measure.The Co-opNorthern Virginia Electric Cooperative argued to the commission that its highest possible collateral under the first filing, about $1.95 billion, would exceed its total assets.

It drops, too, the opt-out it had offered cooperatives and municipal utilities. The commission had said the exemption appeared unduly discriminatory, PJM’s slides note, “because cooperatives and municipal utilities serve Large Loads that are similarly situated to Large Loads served by other Load Serving Entities.”

The Gap

The gap is real by PJM’s own measure: its July auction left a reserve margin of 14.7 percent against a target of 20, at its price cap for the third auction running. The increase in forecast load from the auction before, 1,374.5 megawatts, was “largely due to additional Large Loads,” PJM’s report said. The shortage “does not necessarily mean that the PJM system will be unable to serve load reliably,” it added, only that reserves would be slimmer and the risk greater.

The record shows how quickly that turned. Every auction from 2018–19 through 2025–26 bought more reserve than its target, and the one for 2026–27 came within a fraction of a point; the last two fell more than five points short. The target has risen as well, to 20 percent for the last two auctions.The MeasureThe margin is installed capacity bought in the auction, plus that committed by utilities meeting their own requirement, in excess of peak load. The target is the margin PJM judges necessary to keep the expected loss of load to one day in 10 years. From 2025–26 PJM converts the figures with a new accreditation factor.

Not everyone accepts the size of the gap. PJM’s independent market monitor argued at the commission that 4,017 megawatts of data-center load, 42 percent of the forecast increase between 2026–27 and 2028–29, had been cancelled or delayed as of Sept. 21, about half of it in Dominion’s territory, the Sept. 29 order records. On that basis, it said, the shortfall would be 3,055 megawatts. PJM says it will update the target with the latest information. Billing by signed agreements, in the paper’s reading, meets part of that objection; PJM’s slides do not say what happens if a signed project is later cancelled.

Virginia

Virginia is having the same argument over one utility. On Monday the staff of the State Corporation Commission, which regulates Dominion’s Virginia utility, filed testimony concluding that the $67 billion Dominion–NextEra merger “as proposed in the Joint Petition should be denied by the Commission,” as quoted by WTVR. The staff would not oppose it if the companies accepted conditions, among them independent directors for Dominion Energy Virginia, limits on dividends, at least 10,431 Virginia employees for 10 years and another review seven to eight years after closing, WTVR and The Center Square reported.

Gov. Abigail Spanberger’s office filed testimony seeking a six-year freeze on residential base rates and projected average bill credits of about $29 a month for four years, compared with the companies’ $10 illustration for a residential customer using 1,000 kilowatt-hours monthly.The FreezeIt would cover base rates only; fuel charges and other adjustments would stay under the commission’s review. The companies first offered $10 a month for two years, then for four. The testimony would also raise the debt share of Dominion’s capital structure to 60 percent from 48, lowering its return, and her witness, Richard McCann of M.Cubed, called for a “probability of dispatch” method of allocating costs, Utility Dive reported. Ms. Spanberger wants guarantees that data centers pay for their own energy needs, WTVR reported. “Without enforceable commitments that meaningfully prioritize ratepayers, lower energy costs, protect Virginia’s utility workforce, and advance Virginia’s energy goals, the State Corporation Commission should reject this merger,” she said in a statement.

The office of the attorney general, Jay Jones, also filed testimony opposing the deal, and on Tuesday Mr. Jones said it would not address Virginia’s electricity costs, growing demand or strain on the grid, The Center Square reported. In a joint statement, Dominion and NextEra said the testimony “reflects a wide range of viewpoints and interests” and that they would “address the issues raised through the Commission’s established process.” Neil Nissan, a NextEra spokesman, said the deal would deliver “more than $2.1 billion in near-term direct customer and community benefits,” as quoted by WTVR. The companies proposed the merger in May, saying it would make building Virginia’s grid for rising data-center demand more cost-effective, Utility Dive reported.

The opportunity is for builders: the backstop would pay new resources a weighted average of no more than $555 a megawatt-day, under commitments of up to 15 years ending in the 2042–43 delivery year, against the $325 cap in PJM’s last auction. In a survey this spring, PJM found 397 potential supply projects from 87 entities, about 136 gigawatts in all, the commission’s order records.

PJM consults its members on Thursday and plans to file on Oct. 29; under its proposed timeline, bidding would open March 1 and close March 22, with results posted May 3. In Virginia, public witness hearings begin Nov. 5, written comments are due Nov. 12 and an evidentiary hearing begins Nov. 17; state law requires a ruling by Jan. 11, The Center Square reported. Between them, PJM’s filing and Virginia’s ruling will show how much of the build-out’s bill lands where the data centers are.