The Trump administration and a bipartisan group of governors on Friday called for the country's largest wholesale electricity market to conduct a one-time emergency auction aimed at providing data centers with new power sources.
They urged PJM Interconnection to hold the auction, allowing data center owners to bid on 15-year power purchase agreements. This represents a significant shift from the grid operator's standard procedures. A U.S. Department of Energy fact sheet indicated the auction could facilitate $15 billion in new power plant investments.
The Department of Energy stated data centers would be required to pay for new generation built specifically for them, regardless of whether they use the electricity.
PJM confirmed it is reviewing the proposal in a social media post. The grid operator said it will collaborate with stakeholders to assess how the emergency auction proposal aligns with a data center interconnection plan that PJM's board is scheduled to release today.
Jeffrey Shields, a spokesman for PJM, noted the grid operator was not invited to a White House event on Friday where the move was announced.
Any emergency auction would require approval from the Federal Energy Regulatory Commission. At her first open meeting as FERC chairman in November, Laura Swett said connecting data centers to the grid was her top priority alongside ensuring grid reliability at reasonable rates.
Capstone analysts commented in a client note after Bloomberg News first reported the initiative on Thursday. They stated the governors' and federal officials' statement lacks binding authority, describing it as policy signaling rather than imminent market reform.
The analysts suggested a timeline of six to twelve months before an auction could potentially be held, at the earliest.
PJM operates the grid and wholesale power markets across 13 Mid-Atlantic and Midwest states and the District of Columbia, serving approximately 65 million people. Typically, PJM ensures adequate power supplies through capacity auctions held years in advance of actual need.
Under this system, power plant owners receive payments to be available to produce electricity in future delivery years, which usually begin about three years after auctions. These forward auctions rely on estimates of future power demand.
Areas within PJM's footprint, such as northern Virginia, have experienced substantial data center development, driving increased electricity demand. Some of this demand is based on existing or confirmed load, while much relies on projections.
The rapid rise in demand, both real and predicted, has caused capacity prices to spike in PJM's last three auctions. Data centers' role in these price increases has become a central issue in affordability discussions within PJM.
According to a report released earlier this month by PJM's independent market monitor, existing and planned data centers accounted for $23.1 billion, nearly half, of the $47.2 billion in costs from PJM's last three capacity auctions.
Monitoring Analytics, the market monitor, has advocated for PJM to require data centers to obtain electricity exclusively from new power sources to prevent reduction of existing supplies. The monitor argues that unrestricted data center development threatens grid reliability and has expressed concerns about the speculative nature of load forecasts.
PJM's most recent auction, held in December for the 2027-28 delivery year starting June 1, 2027, saw record-high prices matching the previous two auctions.
Now, Trump administration officials and governors are seeking a separate emergency auction specifically for data centers. They also called for PJM to reinstate a price cap and floor on its annual capacity auctions. This temporary mechanism was originally developed through an agreement between PJM and Pennsylvania Governor Josh Shapiro, a Democrat.
According to the market monitor's estimate, the price floor/cap mechanism reduced capacity costs by $13.1 billion in the two auctions where it was applied. Currently, the mechanism is not scheduled for use in PJM's capacity auction for the 2028/29 delivery year, set to occur from June 30 to July 4.
Capstone noted that any changes to PJM's reliability backstop or capacity procurement framework would require tariff revisions, either proposed by PJM under Section 205 of the Federal Power Act or initiated by FERC under Section 206.
The Edison Electric Institute, a trade group for investor-owned utilities, expressed support for the auction initiative, as did some environmental groups.
EEI President and CEO Drew Maloney stated, "We support President Trump and the Governors' focus on swift changes to help lower energy costs for customers and get more power plants online. We look forward to working with FERC and the state commissions to be part of the solution."
In October, EEI urged PJM to support methods for adding more generation within its footprint, including through utility-owned power plants and increased procurement flexibility outside the grid operator's capacity market.
Paul Segal, CEO of independent power producer LS Power, said hyperscalers should pay for new capacity they require. "An emergency auction funded by large loads can be a useful bridge if it's truly competitive," he remarked. "That means no price-cap extensions, real performance requirements, and a competitive, technology-neutral process that prices grid access upfront and uses pathways suitable for new load."
The Sierra Club also endorsed the plan, stating it would help protect consumers from data center-related costs. Sierra Club Senior Advisor Jessi Eidbo said, "We have been working continuously with lawmakers, advocates, and PJM, to ensure that our communities aren't forced to pay Microsoft or Meta or any Big Tech company's power bills."
On Friday morning, share prices of independent power producers with plants in PJM declined. Constellation Energy's stock dropped 9.7%, Talen Energy fell 8.7%, Vistra Corp. decreased 7.4%, and NRG Energy dipped 3.3%.