Business
PJM's Watchdog Called Data Center Costs Irreversible
Monitoring Analytics called data center additions' impact on PJM ratepayers 'significant and irreversible,' with $21.3 billion in capacity costs locked in through May 2028. A February FERC ruling suggests some of the load that cleared those auctions never arrived.
PJM Interconnection wholesale electricity averaged $136.53 per megawatt-hour in Q1 2026, a 76% jump from $77.78 a year earlier. Monitoring Analytics, PJM's independent market monitor, called large data center load additions' cumulative effect "significant and irreversible."
The Q1 2026 State of the Market report, published in mid-May, found data center load forecasts drove $21.3 billion in costs across PJM's last three base capacity auctions. That figure is 45% of the $47.2 billion those auctions cleared in total. Those payments run through May 31, 2028, collected through the locational reliability charge billed to every electricity customer across PJM's 13-state footprint.
Total PJM wholesale costs reached $67 billion in 2025, up from $43.5 billion in 2024. Capacity costs drove the gap, rising 262% in one year and expanding from 6.5% to 16% of total market costs.
The December 2025 base residual auction alone assigned $6.5 billion in costs to data center forecasts, 40% of its $16.4 billion total.
The Widening Shortfall
PJM's 2026/2027 capacity auction cleared with a shortfall of roughly 210 megawatts against its reserve margin target. The 2027/2028 auction shortfall reached 6,520 megawatts, 31 times wider in a single auction cycle.
American Electric Power CEO Bill Fehrman warned in early May that AEP was considering leaving PJM and the Southwest Power Pool, citing the pace of generator interconnection. AEP's active project pipeline totals 190 gigawatts; 16 of its 63 gigawatts in contracted data center load sit in the PJM queue. The interconnection queue is the same bottleneck that made PPL's 28.3 GW pipeline mostly unavailable before 2030.
What the Mechanism Priced
FERC rejected an AEP request in February to sell 750 megawatts above its cap in an upcoming auction, finding AEP held "excess capacity because of its own business decisions." PJM's market monitor had separately found AEP overforecast large load additions by 751 megawatts, buying capacity to serve data centers that never arrived.
The locked-in $21.3 billion exposes a specific allocation problem in PJM's market design. Capacity auctions clear against load forecasts three years in advance, with no correction mechanism for residential and commercial customers if the demand never materializes. The AEP case implies the $21.3 billion was built at least partly on load projections that outran actual arrivals.
When PJM holds its next base residual auction for the 2028/2029 delivery year, the clearing price will show whether supply moved fast enough to matter. A shortfall that grew from 210 megawatts to 6,520 megawatts in one auction cycle is not a favorable prior.