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  • Talen’s $1,208M in PJM Capacity Revenue: AI Forecasts Pay Before Servers Arrive

    Talen’s $1,208M in PJM Capacity Revenue: AI Forecasts Pay Before Servers Arrive

    TL;DR · 30-second read

    The Short Version

    Talen Energy, a company that owns power plants including a large nuclear station in Pennsylvania, has lined up about $1.2 billion in payments from the grid operator serving much of the eastern United States.

    The money is not for electricity sold. It pays Talen to keep its plants ready for the grid’s busiest days. Those payments are set in advance, and they have climbed because the grid expects many new artificial intelligence data centers. So power plants get paid before many of those data centers exist.

    Electricity customers ultimately cover the bill. The same week, Talen named a new chief executive and a $1.5 billion plan to buy back its own shares.

    ScanX reported that Talen Energy (NASDAQ: TLN), the Houston-based independent power producer, has secured $1,208 million in capacity revenues from PJM Interconnection, the operator of the largest power grid in the United States. Capacity revenues are payments a generator receives for committing its plants to be available during a future delivery year, separate from what it earns selling electricity.

    The figure lands the same week as an 8-K filed September 29 in which Talen named President Terry Nutt as chief executive effective January 1, 2027, succeeding Mac McFarland, and announced $1.5 billion of accelerated share repurchases inside an upsized $3.0 billion buyback authorization running through the end of 2028.

    Executive Summary

    Talen’s $1,208 million in PJM capacity revenue is money earned for availability, not output: PJM pays generators a fixed price for each megawatt they commit to have ready during a delivery year, and the size of that payment is set by an auction that buys enough supply to cover forecast peak demand. That forecast has been pushed sharply higher by expected data-center growth, much of it tied to artificial intelligence.

    The practical consequence is that AI demand is already turning into cash for existing merchant power plants, ahead of the data centers it anticipates. For Talen, which sells into wholesale markets rather than earning regulated rates, a large, pre-set revenue line behaves much like a contract. In the same week, the company’s board committed $1.5 billion to an accelerated share repurchase that Talen said would retire more than 10% of its shares at the current stock price, and handed the chief executive role to its former chief financial officer.

    Talen has not explicitly linked the capacity revenue to the buyback, and important details, including delivery period, cleared megawatts and plant mix, remain open. But taken together, the two announcements illustrate how the AI power story is flowing through grid market design and into generator balance sheets.

    Paid on the Forecast, Not the Plug-In

    PJM’s capacity market works through an auction, known as the Base Residual Auction, held ahead of each delivery year. PJM estimates how much generation it needs to cover forecast peak demand plus a safety margin, then buys that commitment from power plants. Every plant that clears receives the auction price for each megawatt, for every day of the delivery year, as long as it is available when called. Total revenue is simple arithmetic: cleared megawatts times the price times the days in the year. Talen’s $1,208 million is the product of that arithmetic applied to its fleet.

    The demand side of that auction is a forecast, and PJM’s recent load forecasts have been revised upward largely on expected data-center growth. PJM’s independent market monitor has attributed a large share of recent capacity price increases to forecast data-center demand, and prices for the 2026/27 and 2027/28 delivery years reached a temporary ceiling approved by federal regulators. In other words, a meaningful part of what generators are being paid reflects servers that are planned, not yet running.

    That is the operational point. Once an auction clears, the commitment and the price are locked for that delivery year. If some forecast data-center campuses slip or are never built, the payments still flow. The forecast risk sits largely with the utilities and customers who fund capacity through their bills, while generators such as Talen hold a cleared price. This is how a fleet anchored by the Susquehanna nuclear plant can bank revenue tied to the AI buildout without signing a data-center contract for every megawatt it owns.

    Contract-Like Cash for a Merchant Fleet

    Talen is a merchant generator: it sells power at market prices rather than under regulated utility rates, so its energy revenue rises and falls with natural gas prices, weather and demand. Capacity revenue is different because it is known before the delivery year begins. For lenders and shareholders, that predictability makes it behave more like a contract than a commodity bet.

    Talen’s September 29 disclosures show how it is deploying its cash. The company entered $1.5 billion of accelerated share repurchases, in which a bank delivers shares up front and the final count is settled later based on the average stock price. Talen said the ASRs are uncollared, meaning there is no price band limiting how many shares the fixed dollar amount ultimately buys, and that at the current stock price they would retire more than 10% of shares outstanding by the end of the first quarter of 2027. The board also raised remaining buyback capacity to $3.0 billion through December 31, 2028, leaving $1.5 billion beyond the ASRs.

    Nutt described the ASRs as buying stock at “an attractive free cash flow yield” while “preserving liquidity and strategic flexibility.” Talen did not tie that decision to the capacity figure in its release. Still, a large revenue line fixed in advance is exactly the kind of visibility that lets a board commit a fixed dollar amount to an uncollared buyback with confidence.

    The Price-Signal Debate, Asked of Both Sides

    Generators and PJM have argued that high capacity prices are a legitimate scarcity signal: they keep existing plants from retiring and encourage new supply as demand grows. Consumer advocates and state officials, including Pennsylvania’s governor, whose challenge preceded the temporary price cap and floor, have argued that customers are paying elevated prices on forecasts that may prove too high, and that payments to existing plants do not add new supply quickly.

    Both positions deserve pointed questions. For generators: how much of the elevated capacity revenue is going into new or uprated megawatts, rather than returned to shareholders? Talen’s most recent capital-allocation announcement is a buyback, not a construction program. For critics: if prices were held well below scarcity levels, what would keep existing plants running as load grows, and how confident can anyone be that a lower forecast would be more accurate? The reliability of large-load forecasts has itself become contested, because a single data-center project can appear in more than one utility’s plans.

    A Finance-Led Succession for a Capital-Allocation Story

    The incoming chief executive’s résumé fits the business the capacity figure describes. Nutt, 50, has been Talen’s President since December 2025 and was chief financial officer from July 2023 through December 2025. Before Talen he was chief financial officer of EDF Trading North America and held risk-management and controller roles at Vistra. Capacity auctions, hedging and capital returns are core skills in that background.

    The board framed the transition as continuity in strategy, operations and capital allocation. McFarland stays chief executive through December 31, 2026, then serves as senior advisor until his retirement on March 1, 2027. Rubric Capital Management, which described itself as Talen’s largest actively managed shareholder, and Energy Capital Partners both publicly backed the choice, signaling that the shareholder-return emphasis is likely to persist.

    Background

    Talen Energy is a Houston-based independent power producer whose fleet is anchored by the Susquehanna nuclear plant in Pennsylvania, one of the largest nuclear stations in the United States. The company emerged from a Chapter 11 restructuring in 2023 and has since become one of the most closely watched power stocks of the AI era, after selling a data-center campus adjacent to Susquehanna to Amazon and later expanding its power-supply relationship with the company.

    PJM Interconnection runs the grid and wholesale market for 13 states and Washington, D.C. Its capacity market, which pays plants to be available rather than only for power they produce, has become a focal point in the debate over who should bear the cost of AI-driven load growth, after recent auctions cleared at a temporary ceiling approved by federal regulators.

    Sources

    Source: Talen Energy secures $1,208 million in PJM capacity revenues (ScanX) reports Talen’s capacity revenue from PJM Interconnection.

    Primary sources: Talen Energy Form 8-K filed September 29, 2026 (SEC EDGAR); Talen Names Terry Nutt Chief Executive Officer and Announces $1.5 Billion Accelerated Share Repurchase, Exhibit 99.1 (SEC EDGAR).

  • Virginia’s 3.8 GW Data Center Trip Shows Why Ride-Through Is Becoming a Grid-Access Test

    Virginia’s 3.8 GW Data Center Trip Shows Why Ride-Through Is Becoming a Grid-Access Test

    TL;DR · 30-second read

    The Short Version

    On July 22, an ordinary electrical fault on a power line in northern Virginia caused a cluster of data centers, the buildings full of computers that run the internet, to disconnect from the grid almost at once.

    In minutes, about 4% of all the electricity being used across 13 states and Washington, D.C. vanished from the system.

    The organization that runs that grid says the data centers were too jumpy. It is now considering rules requiring them to stay connected through brief power glitches. If those rules arrive, how a data center reacts to a glitch could decide whether it gets connected at all.

    Utility Dive reported that PJM Interconnection, the grid operator for 13 Mid-Atlantic and Midwest states and the District of Columbia, is considering new interconnection reliability requirements for “computational loads” such as data centers and crypto-mining facilities. The requirements under consideration include “ride-through” standards, which require equipment to stay connected through brief voltage and frequency disturbances rather than disconnecting.

    The trigger was a July 22 event in which about 3,800 MW of data center load in northern Virginia tripped offline in two waves after a fault on a 230-kV transmission line in Dominion Energy’s zone. PJM’s total load fell about 3.8%, from 99,984 MW to 96,205 MW. PJM called it the largest such event in its history.

    Executive Summary

    PJM is evaluating whether to expand its reliability requirements for large computing loads after data centers disconnected from the grid in response to what its Operating Committee chair called “a normally cleared fault.” In other words, the grid did what it was supposed to do, and the data centers dropped off anyway. PJM staff told an August 6 Operating Committee meeting that the facilities appear to be disconnecting too early.

    This matters because it shifts part of the grid-reliability burden onto the load side. Until now, the obligation to stay online through disturbances has fallen mainly on power plants. PJM’s position is that a data center cluster large enough to remove nearly 4% of system demand in minutes now needs the same kind of behavioral rules. As David Souder, PJM’s executive director of system operations, put it, those requirements need to be “in place before the load comes on the system.”

    The timing also matters. The North American Electric Reliability Corp. (NERC) is building national standards for computational loads under a Federal Energy Regulatory Commission directive. PJM said, however, that NERC will not address voltage and frequency ride-through until sometime next year. That leaves PJM weighing whether to act in the meantime.

    How a Routine Fault Became a 3,800 MW Problem

    Transmission faults happen constantly. A line gets struck by lightning or contacts a tree, protective relays isolate it within a fraction of a second, and voltage briefly sags on nearby parts of the network before recovering. Power plants are expected to “ride through” that sag, meaning they stay connected and keep producing. Data centers are generally built with the opposite instinct. Their electrical systems are designed to protect servers from bad power, so when voltage moves outside a set tolerance window, they switch to batteries and on-site generators and stop drawing from the grid.

    For a single facility, that is sensible engineering. For a cluster, it becomes a system event. When thousands of megawatts of demand leave the grid at the same moment while generation keeps running, supply suddenly exceeds demand. Frequency and voltage swing, and the operator has to rebalance quickly. PJM said the July 22 event caused “a high imbalance between generation and load” and large swings in both voltage and frequency, and that it dispatched reactive power resources to bring system voltage down. PJM’s Operating Committee chair, Emanuel Bernabeu, described the data centers as “too sensitive to the kind of voltage that they like.”

    The Event Sizes Are Growing Faster Than the Rules

    PJM listed two earlier events in the same Dominion zone. Each caused a sudden load transfer of about 1,500 MW, one in 2024 and one in 2025. The July 22 event was roughly two and a half times that size. Three incidents in one region do not make a statistical trend, but the direction is consistent with how northern Virginia is building out: more and larger facilities, clustered on the same transmission network and often reacting to the same disturbance at once. For scale, 3,800 MW is on the order of the output of three large nuclear reactors.

    The grid handled it. PJM said it brought its Area Control Error, the running measure of the mismatch between supply and demand, back within limits in nine minutes, against a NERC standard of 30 minutes. That is a good operational result, and it should not be read as a near miss. The concern PJM raised is forward-looking: each new facility connected under current practice adds to the amount of demand that could disappear in a single disturbance. At some point the operator has to either hold more balancing capacity in reserve or require the load to behave differently. PJM’s move signals it prefers the second option.

    Ride-Through Moves From Design Choice to Condition of Connection

    This is the substance behind the headline. PJM is framing the fix as an interconnection reliability requirement, a condition attached to connecting to the grid, rather than a best-practice guideline. Souder’s remark that requirements must be in place “before the load comes on the system” points to the interconnection queue as the enforcement point. If PJM follows through, projects now in development would need to show that their electrical design keeps them connected through a normally cleared fault. Retrofitting that behavior after energization is harder and more contested.

    The practical effects would be felt in specific places. Developers and colocation operators would need to revisit the voltage and frequency tolerance settings on their uninterruptible power supplies and switchgear, and possibly the hardware itself. Hyperscale tenants would need to accept that their facilities ride out disturbances their servers were previously shielded from. Equipment vendors whose systems can demonstrate grid-friendly behavior would gain a selling point. Utilities such as Dominion, whose zone hosts the world’s largest data center cluster, would gain a clearer technical basis for connection studies. The rules would cover crypto miners too, because PJM used the broader category of “computational loads.” Mining loads are generally more flexible about interruption, but they are no less able to trip off in a block.

    There is a real engineering tradeoff, and it deserves an even-handed hearing. Data center operators set tight tolerances to protect equipment and meet uptime commitments to customers, and loosening them carries risk for the operator. PJM’s argument is that the risk of undisciplined load, which falls on everyone connected to the grid, now outweighs the private risk. Where the thresholds land, and whether PJM offers alternatives such as coordinated or staggered transfer settings, will determine how costly the change becomes.

    A Gap Between Regional Urgency and National Standards

    NERC is scheduled to finalize registry criteria and initial reliability standards for computational loads by December 31, and to produce a plan by March for additional standards. According to PJM, ride-through for minimum voltage and frequency will not be addressed until sometime next year. Meanwhile, Northern Virginia continues to add capacity. That leaves PJM choosing between acting regionally now and risking a mismatch with a later national standard, or waiting and connecting more load under today’s practices. Wharton’s reference to “existing and future industry ride-through standards and practices” suggests PJM intends to align with NERC where it can, without waiting for NERC to finish.

    Background

    Northern Virginia, largely within Dominion Energy’s service zone, hosts the largest concentration of data centers in the world. Rapid growth in data center demand there and elsewhere in PJM’s 13-state footprint has made large computing loads a central grid-planning issue. PJM has reported sudden data center load transfers of about 1,500 MW in both 2024 and 2025, and NERC issued alerts on sudden data center load losses earlier in 2026, including a Level 3 alert in May calling for mandated actions.

    Grid reliability rules in North America are set by NERC and approved by the Federal Energy Regulatory Commission. Regional operators such as PJM can add their own interconnection requirements. Historically those rules focused on generators. The rise of very large, clustered loads has prompted FERC to direct NERC to develop registry criteria and reliability standards specifically for computational loads.

    Sources

    Source: PJM eyes data center, crypto reliability requirements after 3.8 GW of load trips offline (Utility Dive, August 12, 2026), covering PJM’s response to the July 22 northern Virginia load-loss event.

  • PJM’s 3.1 GW Data Center Dropout Shows AI’s Other Grid Risk: Load That Leaves

    PJM’s 3.1 GW Data Center Dropout Shows AI’s Other Grid Risk: Load That Leaves

    TL;DR · 30-second read

    The Short Version

    When one power line failed near Washington, DC, a wave of data centers (the warehouse-sized buildings full of computers that run the internet and AI) unplugged from the power grid within seconds and switched to their own backup power.

    Together they had been using about 3% of the electricity on a grid that serves 67 million people. Losing that much demand at once threw the system off balance. Lights flickered from Virginia to Chicago, and it took more than 10 minutes to settle.

    It was twice as big as a similar scare in 2024, and data centers keep multiplying. The proposed fix is to make them stay connected through brief hiccups, often by using giant batteries.

    A single power line failure outside Washington, DC, this past week caused a wave of Northern Virginia data centers to switch to backup power at nearly the same moment, TechCrunch reported. According to PJM data, about 3.1 gigawatts of demand disappeared from the PJM Interconnection grid in roughly 30 seconds. After a partial recovery, more facilities dropped off, and the grid’s surplus peaked at 3.49 gigawatts. Stabilizing took another 11 minutes. A line fault like this one normally takes only a few seconds to recover from.

    According to Reuters, the disconnected load was about 3% of PJM’s demand at the time. Sensor data from the startup Ting Labs showed voltage spiking across the grid from Northern Virginia to Chicago. There was no blackout, but lights flickered across the region. The event was roughly twice the size of a 2024 PJM incident in which 60 data centers disconnected at once and removed 1.5 gigawatts.

    Executive Summary

    Most discussion of data centers and the power grid asks whether there is enough electricity to feed them. This event shows the opposite failure: a cluster of very large customers that all leave the grid at once when they sense trouble. Each facility’s protective logic behaved as designed and switched to on-site backup power when voltage dipped. Together, those individually sensible decisions turned a routine line fault into a regional disturbance that lasted more than ten minutes.

    Two remedies are being proposed. The first is coordination. Ali Zain Banatwala, a senior market models specialist at the Independent Electricity System Operator, argues that neighboring loads need a way to disconnect and reconnect one after another rather than all together. The second is ride-through, which means keeping facilities connected through brief disturbances. Ricardo de Azevedo, CTO of ON.Energy, whose company sells campus-scale battery systems built for that purpose, said ERCOT, the Texas grid operator, will require large loads to ride through disruptions.

    The stakes rise with the load. Synapse Energy Economics put data centers at about 6% of PJM’s load in 2024 and projects 24% by 2040. The potential size of a synchronized dropout grows with that share unless the facilities are built to behave differently.

    AI’s Other Grid Problem Is Load That Leaves

    An electric grid has to keep supply and demand in near-perfect balance from moment to moment. When a line goes down, the grid normally absorbs the loss and rebalances within seconds. This time, the voltage dip from the fault reached many data centers sitting close together. Their protection systems are designed to make split-second decisions to safeguard the computers inside, and they moved the facilities onto backup power within a few seconds of each other. The grid lost about 3.1 gigawatts of demand in roughly 30 seconds. Generators were suddenly producing more electricity than customers were using, and voltage jumped.

    The second wave is the detail grid planners should focus on. PJM’s grid appeared to recover partway before more loads dropped off, pushing the surplus to a peak of 3.49 gigawatts. In that pattern, the disturbance triggers disconnections, and the disconnections deepen the disturbance. That feedback is what stretched a seconds-long event into an 11-minute one. A gigawatt is roughly the output of a large power plant. In effect, the grid had to absorb the sudden departure of several power plants’ worth of customers.

    That is why the grid risk from the data center buildout is not only a question of supply. Operators are used to planning around the sudden loss of a large generator. Clustered data centers create a mirror-image contingency: a large block of customers lost all at once because of a single triggering event. Everyone on the grid is exposed to that. Households saw flickering lights, generators must ramp down fast, and the operator must hold capability in reserve for a contingency that grows as data center load grows.

    Concentration Turns a Local Fault Into a Regional Event

    Northern Virginia has the highest concentration of data centers in the world. That density is what made the disconnection synchronized, because one voltage dip reached many facilities almost at once. The effect traveled well beyond Virginia. Ting Labs runs a sensor network through household electrical outlets, and it recorded the voltage spike as far away as Chicago. PJM covers the territory from New Jersey to Illinois, serves 67 million customers, and is the largest grid operator in the United States.

    The trend line gives the event its weight. In 2024, 60 data centers disconnected together and removed 1.5 gigawatts. This time the figure was about 3.1 gigawatts, roughly double. Data centers were about 6% of PJM’s load then, and Synapse Energy Economics projects 24% by 2040. Two events are not a statistical series, and nothing here shows the next one will double again. The arithmetic still matters: if protective behavior stays the same while the share of load it governs roughly quadruples, the ceiling on a synchronized dropout rises with it.

    De Azevedo called the event “the canary in the coal mine” and said incidents involving large loads are “happening more and more.” That claim comes from a vendor of the remedy. The two PJM incidents, with their measured sizes, are the documented reference points.

    Two Fixes: Choreograph the Exit, or Don’t Leave

    The first approach accepts that data centers will disconnect but asks them to do it in order. “We need to figure a way for these loads that are located next to each other to sequentially either disconnect or reconnect,” Banatwala said. Staggered behavior would let grid operators write procedures in advance instead of reacting to a cliff. The hard part is coordination. The facilities belong to different owners, each has settings tuned to protect its own uptime, and they would need shared thresholds or a shared signal.

    The second approach is ride-through, meaning the facility stays connected through brief disturbances. ON.Energy’s version is an uninterruptible power supply, the battery backup that keeps servers running through outages, sized for an entire campus, including chillers and other equipment as well as servers. Batteries and power-conversion equipment sit between the grid and the facility, so the grid sees one steady, predictable load. The company says the system:

    • charges its batteries when the grid has surplus power;
    • discharges to the servers when supply dips;
    • follows the grid within milliseconds;
    • smooths the swings of AI training workloads that ramp power up and down.

    It says it is installing 3 gigawatts of these systems across four campuses.

    Those claims are specific enough to test. The test is whether a campus behind such a system stays connected and grid-friendly during a real fault like this one. The economics matter too. Sizing batteries and power electronics for a whole campus adds capital cost that the developer bears, while most of the benefit goes to the grid. Mandates may be what shifts that calculation, such as ERCOT’s ride-through requirement, which de Azevedo described.

    What Developers and Buyers Should Expect

    From a tenant’s point of view, the July event worked: the data centers switched to backup, and the computers presumably kept running. The cost of that decision fell on the grid and everyone else connected to it. This asymmetry is what makes the event a policy question rather than just an engineering one. Individual facilities have little reason to change behavior that protects their own uptime unless interconnection rules require it.

    For developers, the likely direction is toward grid connection terms that specify how a facility behaves during a disturbance, not just how much power it draws. ERCOT is moving that way, according to de Azevedo. PJM, where both incidents occurred, is where the question is now most visible. For suppliers of storage, power conversion and switchgear, the grid-facing layer of a campus becomes part of the design requirement. For colocation buyers, it is reasonable to ask providers how their facilities respond to voltage dips and whether ride-through requirements could change facility design or pricing.

    Background

    PJM Interconnection is a regional transmission organization, the independent body that runs the high-voltage grid and wholesale electricity market for an area stretching from New Jersey to Illinois. It serves 67 million customers and is the largest grid operator in the United States. Its territory includes Northern Virginia, which has the highest concentration of data centers in the world.

    Data centers are built never to lose power. When grid voltage wavers, they switch to on-site backup, such as uninterruptible power supplies and generators, in a split second. That design protects the computers inside. When many facilities share the same stretch of grid, however, it also means they can react to the same disturbance at the same moment. PJM saw this in 2024, when 60 data centers disconnected simultaneously, and saw it again at twice the scale this July. ERCOT, the operator of most of Texas’s grid, is among the grid managers moving to require large loads to ride through disturbances.

    Sources

    Source: One fallen power line exposed a growing AI data center problem — here’s how to fix it (TechCrunch): a report on the roughly 3-gigawatt data center disconnection on the PJM grid and proposed ride-through fixes.

  • A 6,831 MW Shortfall at PJM’s $325 Cap Shows Data Center Power Is a Build Problem

    A 6,831 MW Shortfall at PJM’s $325 Cap Shows Data Center Power Is a Build Problem

    TL;DR · 30-second read

    The Short Version

    The organization that runs the electric grid for 67 million people across 13 states, including Pennsylvania, held its auction to line up power plants for 2028 and 2029. The price hit the maximum allowed, again. Even at that price, it could not secure as much power as it wanted.

    Data centers, giant buildings full of computers, are one big reason demand is climbing fast. A Pennsylvania consumer advocate says higher power costs already add $220 to $320 a year to a typical household’s bill. Paying top dollar is not fixing it, because new power plants cannot be built and connected fast enough.

    PJM Interconnection, the Valley Forge, Pennsylvania-based nonprofit that operates the largest electricity grid in the United States, announced on July 14, 2026 that its latest capacity auction cleared at $325 per megawatt-day for the 2028-2029 delivery year. That is the maximum allowed under a price cap first negotiated by Pennsylvania Governor Josh Shapiro’s administration after the 2024 auction set a record of $269.92, and later extended at the request of PJM-state governors and the Trump administration. The Pennsylvania Capital-Star reported that the auction also fell 6,831 megawatts short of PJM’s capacity goal, a larger deficit than in last year’s auction.

    PJM President and CEO David Mills said the results show “demand for electricity continues to grow faster than electricity supply.” PJM’s peak demand forecast has risen by 66,000 megawatts through 2036, driven by retiring fossil fuel plants, electrification of transportation and industry, and proposed data center development.

    Executive Summary

    PJM’s capacity auction, the mechanism it uses to pay power plants to be available on the hottest and coldest days of the year, hit its price ceiling again. At $325 per megawatt-day, the 13-state grid still came up 6,831 megawatts short of its target. The cap will also apply to the next auction, scheduled for December and covering 2030 and 2031.

    This matters beyond the price. When an auction clears at its maximum and still falls short, the shortfall shows how much supply the highest permitted price could not attract. Consumer advocates and the generators’ own trade association disagree on a lot, but both point to the same near-term obstacle: getting new plants built and connected to the grid. The main limit on power for data centers in the largest US grid is construction and interconnection, not willingness to pay.

    For households, the cost is already visible. Pennsylvania’s former consumer advocate estimates the last two auctions added about $16 billion in reliability costs, and $220 to $320 a year to the average Pennsylvania residential bill.

    At the Ceiling, the Price Signal Runs Out of Room

    A capacity auction is supposed to work like any market. If the grid needs more standby power, the price rises until enough generators commit to being available. The price is quoted per megawatt-day, the payment for one megawatt of capacity held ready for one day. In this auction that mechanism hit its limit. The clearing price of $325 is the cap itself, and even at that price PJM ended up 6,831 megawatts below its capacity goal, a wider gap than last year’s.

    This is the key point for anyone planning around PJM power. A market that clears below its cap tells you what supply costs. A market that clears at its cap and still comes up short only tells you that the maximum permitted price was not enough. Two years ago the record was $269.92. Prices are now pinned at the ceiling, and the ceiling has been extended through the December auction for 2030 and 2031. Patrick Cicero, the former Pennsylvania consumer advocate now with the Pennsylvania Utility Law Project, described what that looks like: “These are flat prices that are going to remain high. It’s not necessarily another spike, but it’s really, really high prices remaining.”

    Why the Constraint Is Construction, Not Capital

    Robert Routh of the Natural Resources Defense Council blames data center load for the price pressure, and Todd Snitchler of the Electric Power Supply Association, which represents competitive generators, defends the price as a healthy investment signal. The two still converge on where the bottleneck sits. Routh said a lack of money is not among the problems: “Tech companies, data center customers that have a need for power have deep pockets. Any power plant that can get built these days should have no problem finding buyers and arranging financing.” He named the real obstacles as supply chain delays, long construction timelines, and siting and permitting hurdles. Snitchler said “new supply is coming; the issue now is to address getting it connected to the system as quickly as possible.”

    That connection step is PJM’s responsibility. The grid operator vets proposed power plants and transmission lines before approving them to connect, and it has faced intense criticism for a years-long backlog of projects waiting in that line, often called the interconnection queue. Some projects dropped out while they waited. PJM says it has made significant progress by prioritizing shovel-ready projects.

    There is one honest caveat. Because the cap is binding, this auction cannot show how much supply an uncapped price might have drawn in, and EPSA’s argument that years of record-low prices discouraged investment deserves weight. Still, even the generators’ trade group names connection rather than compensation as the near-term limit. For data center developers, the implication is plain: a higher bid does not produce a megawatt that has not been built. The scarce resources are deliverable, connected capacity and the time it takes to create it.

    Who Carries the Cost, and the Proposal to Separate It

    The link between auction prices and retail bills is indirect, but it is real. Cicero said the last two auctions added about $16 billion to the cost of ensuring reliability. Some Pennsylvania utilities have raised default rates, the rate paid by customers who do not shop for an electricity supplier, by up to 20%. He put the added cost to the average Pennsylvania residential customer at $220 to $320 per year.

    The policy response under discussion is a separate auction, sought by PJM-state governors and the Trump administration, in which data centers and other large-load customers would buy long-term power commitments that fund new capacity. Routh described it as a matchmaking venue to build new supply “without raising prices for everyone else.” By his own account, though, that process faces the same supply chain, timeline and permitting hurdles as everything else. It could change who pays for new generation. On its own, it does not shorten the time it takes to build and connect that generation, which is what closes a 6,831-megawatt gap.

    Weighing the Competing Explanations

    Each camp’s framing captures part of the picture. NRDC’s Routh attributes the pressure to data centers directly: “Data center load growth is degrading grid reliability, and it’s raising prices to the Governor Shapiro-negotiated cap.” PJM’s 66,000-megawatt forecast increase through 2036, nearly 80 times the output of the Three Mile Island nuclear plant, bundles three drivers into one number: retiring fossil plants, electrification, and proposed data centers. How much of that number belongs to data centers is the question that decides whether large-load cost allocation addresses most of the problem or only part of it.

    The Three Mile Island example shows how the pieces fit together. That plant is set to reopen next year to serve data centers exclusively, a sign that large tech buyers are already securing dedicated supply outside the shared pool. Snitchler’s point that new supply is coming is plausible given that buying interest. Until it is connected, however, the region is running on the capped price and a growing shortfall, and the costs fall largely on customers who did not create the new load.

    Background

    PJM Interconnection coordinates electricity supply across 13 states, including Pennsylvania, for 67 million customers. Alongside real-time grid operations, it runs capacity auctions years in advance to ensure enough generators are on standby for peak demand. It also reviews and approves new power plants and transmission lines seeking to connect, a process that has drawn criticism for a years-long backlog.

    Capacity prices in PJM were low for years, which the generators’ trade association says discouraged investment. The 2024 auction broke that pattern with a record $269.92 per megawatt-day. Pennsylvania’s governor then negotiated a price cap, and PJM later extended it at the request of state governors and the Trump administration. Demand forecasts have risen sharply since, as fossil plants retire, transportation and industry electrify, and data center proposals multiply.

    Sources

    Source: PJM Interconnection electricity price hits cap again in latest auction (Pennsylvania Capital-Star): PJM’s 2028-2029 capacity auction clears at the $325 cap and falls 6,831 megawatts short of its goal.

  • With Rates Up 16%+, New Jersey Makes Grid Upgrades an AI Data Center Site Cost

    With Rates Up 16%+, New Jersey Makes Grid Upgrades an AI Data Center Site Cost

    TL;DR · 30-second read

    The Short Version

    New Jersey’s governor has signed a law that makes large data centers, the warehouse-sized buildings full of computers that run artificial intelligence and online services, pay for the power lines and equipment they need.

    Until now, families worried those costs would land on their own electric bills. Power prices in the state have already climbed more than 16 percent since 2024.

    The catch for tech companies: plugging into the grid in New Jersey now costs them more directly, and that could shape where they choose to build.

    New Jersey Gov. Mikie Sherrill signed a package of energy legislation in the week of July 6, 2026, WHYY reported. The centerpiece creates a separate electricity ratepayer class for data centers and requires them to pay for the electrical and clean energy infrastructure upgrades their projects create. The goal is to keep those costs from being passed on to households and small businesses.

    The package also includes a “Repeal ROE Adder” bill, which requires electric utilities to join the regional grid and bars them from charging customers an extra “bonus” for doing so. It also includes the Advanced Grid Technologies Act, which directs state utility regulators to scrutinize “supplemental” grid projects and speeds approval of projects that use advanced transmission technologies.

    Executive Summary

    New Jersey has written into law a principle that is fast becoming the central fight of the AI buildout: who pays when a data center needs the grid to grow. By putting data centers in their own rate class and assigning them the cost of the upgrades they trigger, the state turns what could have been a cost spread across all customers into a line item on the developer’s budget.

    The political backdrop is electricity prices. Rates in New Jersey have risen more than 16% since 2024, according to a U.S. Senate committee report, and the U.S. Energy Information Administration counted 128,828 electricity shutoffs in the state in 2024. PJM Interconnection, which runs the regional grid, has cited data center growth as one reason for higher bills.

    The Data Center Coalition says its members are committed to paying the full cost of the energy they use. Its concern is that the law’s structure could make New Jersey less predictable and less competitive. The details regulators write next will largely decide which side’s expectations prove right.

    Grid Upgrades Move From the Shared Bill to the Project Budget

    The mechanism is simple to state. A “rate class” is a group of customers that a utility bills under the same set of prices; residential, commercial and industrial users typically sit in different classes. By creating a dedicated class for data centers, New Jersey can price their energy use separately, so costs driven by data center demand stay with data centers rather than flowing into everyone else’s rates. The second provision is more consequential for builders: data centers must pay for the electrical and clean energy infrastructure upgrades they create. New substations, feeder lines and transformer capacity needed to serve a large AI campus become a cost the developer carries.

    That changes the economics of choosing a site. An AI data center developer choosing between locations weighs land, fiber, water, tax treatment and, above all, how quickly and cheaply it can get power. In New Jersey, the “cheaply” part now explicitly includes the upgrade bill. Colocation operators (companies that build facilities and lease space to tenants) and the large cloud and AI companies that lease or build capacity will price that obligation into their comparisons with other locations in the PJM region. How large the effect is depends on how regulators define the new class and calculate upgrade costs, which the law’s sponsors have not yet spelled out in public.

    The legislators’ case rests on household affordability. Assemblyman Dave Bailey, a sponsor, framed the bill as “preventing households and small businesses from paying for data centers to connect to the grid.” With rates up more than 16% since 2024 and six-figure shutoff counts, the state has chosen to make the connecting customer, not the existing customer base, absorb the risk of the upgrades.

    The Industry’s Objection Is About Design, Not Payment

    The Data Center Coalition’s response is notable for what it concedes. The trade group did not argue that data centers should avoid these costs; it said members are committed to paying the full cost of the energy they use. Its argument is that any approach should “align costs with cost causation,” meaning each customer pays for the costs it actually causes. It also argued that protections should be “evidence-based” and “grounded in specific cost risks,” warning that anything else risks “market friction” and uncertainty.

    That is a fair question to put to the law, and a fair one to put back to the industry. Supporters have pointed to PJM’s view that data centers are pushing up bills, but in their public statements they have not put a figure on how much of New Jersey’s rate increase is attributable to data centers. The coalition, for its part, cited unnamed “other markets” as a workable model without saying which rules it would accept in New Jersey. Both sides agree on the principle that data centers should pay their way. The dispute is over how precisely that is measured, and whether rules written broadly in advance will deter investment that tightly targeted rules would not.

    The Utility Half of the Package

    The package does not target only data centers. The “Repeal ROE Adder” bill addresses a feature of utility pricing. Return on equity (ROE) is the profit rate regulators allow a utility to earn on its investments, and an “adder” is a bonus on top of that rate, in this case one tied to joining the regional grid. The law requires utilities to join and removes the extra charge to customers for doing so.

    The Advanced Grid Technologies Act points in two directions at once. It tightens oversight of “supplemental” projects, the wires, poles and substations utilities build outside the regional planning process, to screen out spending that raises bills without clear need. It also speeds approval for projects using advanced transmission technologies, a broad category of equipment and software that can move more power over existing lines. For data center developers, that second provision could eventually matter as much as the cost rules: faster approval of capacity upgrades can shorten the wait for power, which is often the binding constraint on an AI project’s timeline.

    A State Law Inside a Regional Grid

    New Jersey sits inside PJM, a wholesale market and grid that spans multiple states. A state law can decide how costs are allocated among a utility’s retail customers. It cannot on its own change wholesale power prices set regionally or the capacity pressures PJM has flagged. The law is therefore best read as an allocation tool: it decides who absorbs the local costs of growth, not whether that growth strains the regional system.

    That distinction matters for residents and investors alike. Households may be shielded from the local upgrade costs a new data center triggers. They remain exposed to regional supply-and-demand pressures and weather-driven price spikes, which also drove last winter’s bills. Developers, meanwhile, now face a clearer but potentially higher cost of entry in New Jersey than in neighboring locations with different rules.

    Background

    Data centers house the servers that power online services, storage and, increasingly, artificial intelligence. They have existed since the mid-20th century, but the AI boom has driven demand for larger sites and far more electricity. In the mid-Atlantic, that demand lands on the grid run by PJM Interconnection, which has linked data center growth to higher power bills.

    New Jersey has seen electricity prices climb sharply. Last winter’s freezing weather added to bills, but rate increases have also been driven by an imbalance between supply and demand and slow construction of new generation. Supporters of data centers point to tax revenue, while some residents have raised concerns about air quality, water use and electricity costs.

    Sources

    Source: N.J. Gov. Sherrill signs legislation to make data centers pay for infrastructure, energy – WHYY, reporting on New Jersey’s new data center rate class, grid upgrade cost rules and related utility legislation.

  • PJM’s Record 168 GW Peak: AI-Era Demand Collides With a Strained Grid

    PJM’s Record 168 GW Peak: AI-Era Demand Collides With a Strained Grid

    PJM Interconnection, the largest electric grid operator in North America, set a new all-time peak-load record of 168.158 gigawatts (GW) during a heat wave, S&P Global reported on July 9, 2026. Peak load is the highest instantaneous electricity demand a grid must serve, and PJM’s footprint spans 13 states and the District of Columbia — including Northern Virginia, the densest data center market in the world.

    Executive Summary

    The number itself is the story: 168.158 GW is an all-time record for a grid that has operated since 1927, exceeding the prior widely cited all-time mark of roughly 165.6 GW set in the summer of 2006. Grid demand in mature economies was assumed for years to be flat or declining as efficiency gains offset growth; a new absolute record — set during a heat wave, when air conditioning load stacks on top of everything else — signals that assumption no longer holds in PJM territory.

    Why it matters: PJM is where the AI infrastructure boom and the physical grid meet most directly. The region hosts the largest concentration of data centers on earth, and PJM’s own planning processes, capacity auctions, and interconnection queue have all been reshaped by projected data center growth. A record peak turns those projections into observed, metered reality — with consequences for power prices, data center siting decisions, and the pace of generation and transmission construction.

    The End of Flat Demand

    For roughly two decades, U.S. grid planners could count on a comfortable pattern: efficiency improvements (LED lighting, better HVAC, industrial offshoring) absorbed most economic growth, so peak demand crept along or even fell. That the previous PJM record dated to 2006 illustrates the point — the grid went nearly twenty years without needing to serve a bigger hour. A new record, driven by weather layered on structural load growth, marks a regime change. Data centers, electrification of heating and transport, and reshored manufacturing are all pushing the same direction, and data centers are the fastest-moving of the three because a single large AI campus can draw hundreds of megawatts continuously, day and night.

    Heat Waves Are the Stress Test

    Records like this are set when a heat wave pushes air-conditioning demand to its maximum at the same time that always-on loads — including data centers — are running flat out. Unlike residential cooling, data center load does not relent in the evening or on weekends, which raises the floor beneath every weather-driven spike. For grid operators, that changes the risk calculus: reserve margins (the buffer of spare generating capacity above expected peak) get consumed from both ends, by rising peaks and by the retirement of older coal and gas plants. PJM has publicly warned for several years that retirements were outpacing new entry; a record peak is exactly the scenario those warnings anticipated.

    The Economics: Someone Pays for the Peak

    Grids are built for their single highest hour, so peaks are expensive. In PJM, the cost shows up through capacity auctions — payments to generators for being available when demand spikes — and recent PJM capacity auctions have cleared at record-high prices, driven in large part by demand forecasts that data center growth dominates. Those costs flow to ratepayers across the footprint, which is why data center load growth has become a live political issue in states like Virginia, Ohio, and Pennsylvania. A verified record peak strengthens the case of utilities and generators seeking to build; it also sharpens questions from consumer advocates about who should bear the cost of infrastructure that primarily serves new industrial customers.

    Winners, Losers, and the Siting Chessboard

    Owners of existing dispatchable generation — gas, nuclear, and remaining coal in the PJM footprint — are clear near-term beneficiaries, since scarcity raises the value of every megawatt that can run on command. Data center developers face a more complicated picture: record peaks validate the demand they are bringing, but also lengthen interconnection timelines, raise power costs, and invite regulatory scrutiny. Expect continued interest in behind-the-meter and co-located generation, long-term nuclear power purchase agreements, and siting in less-constrained regions. For the connectivity and colocation industry broadly, grid capacity — not land, not fiber — is now the binding constraint on where digital infrastructure gets built.

    Background

    PJM Interconnection began in 1927 as a power pool among Pennsylvania and New Jersey utilities and grew into the largest regional transmission organization in North America, coordinating the grid and wholesale markets for 13 states and Washington, D.C. Its territory includes Northern Virginia’s “Data Center Alley,” the densest concentration of data centers in the world, which has made PJM the front line where AI-driven electricity demand meets grid reality.

    For most of the 2010s, PJM demand was flat as efficiency gains offset growth, and its 2006-era peak record went unchallenged. That changed as data center construction accelerated, power plant retirements thinned reserve margins, and PJM’s capacity auctions began clearing at record prices — a trajectory that made a new all-time peak a question of when, not if.

    Source: PJM Interconnection sets new all-time peakload record of 168.158 GW in heat wave — S&P Global’s July 9, 2026 report on PJM’s record-setting peak demand during a regional heat wave.

  • Heat Wave and Data Center Demand Push PJM Grid to the Brink in Northern Virginia

    Heat Wave and Data Center Demand Push PJM Grid to the Brink in Northern Virginia

    The Prince William Times reported on July 4, 2026 that a summer heat wave, layered on top of the enormous electricity appetite of the region’s data centers, pushed the regional power grid “to the brink.” The grid in question is operated by PJM Interconnection, the regional transmission organization that coordinates electricity across all or parts of 13 states and the District of Columbia — including Northern Virginia, home to the largest concentration of data centers in the world.

    The report frames a collision that grid planners have warned about for years: weather-driven peak demand from air conditioning arriving at the same moment as a structural, around-the-clock load from data centers that has grown far faster than new generation and transmission have been built.

    Executive Summary

    According to the report, the stress event unfolded in Prince William County, Virginia and the surrounding region — the heart of “Data Center Alley,” where Prince William and neighboring Loudoun County host an unmatched density of hyperscale and colocation facilities. During a heat wave, residential and commercial air conditioning drives electricity demand to its annual peaks; data centers, unlike air conditioners, draw near-constant power day and night, so their load sits underneath the weather peak rather than replacing it.

    Why it matters: grid operators plan for the single worst hour of the year. When a fast-growing baseload (data centers) raises the floor and a heat wave raises the ceiling, the margin between available supply and peak demand — the buffer that prevents emergency measures like conservation appeals or rolling outages — shrinks. A “to the brink” event is a concrete, dated data point in a debate that is often conducted in abstractions about future AI load forecasts.

    A caveat on sourcing: this is a single local-newspaper account, and the headline-level material available does not specify which emergency procedures, if any, PJM invoked, what demand peaked at, or how close reserves actually came to exhaustion. Those specifics matter, and we flag them below.

    The Peak Problem: Flat-Out Air Conditioning Meets Always-On Compute

    Electric grids are sized for their worst hour, not their average one. In PJM territory that worst hour almost always occurs on a hot summer weekday afternoon, when tens of millions of air conditioners run simultaneously. Data centers change the arithmetic because they are effectively a new floor under demand: a large AI training or cloud facility draws a high, steady load 24 hours a day, in fair weather and foul. When a heat wave arrives, that steady draw does not politely step aside — it stacks. The result is that the same heat wave that a decade ago would have been routine can now push a region toward its limits, which is precisely the dynamic the Prince William Times describes.

    For lay readers, “to the brink” typically means the grid operator is working through its escalation ladder — asking generators to defer maintenance, importing power from neighbors, calling on demand-response customers who are paid to curtail, and in the worst case shedding load (rolling blackouts). The available reporting does not tell us how far down that ladder PJM went in this event, and that distinction — between a tight day and a genuine emergency — is the difference between a warning sign and a crisis.

    Northern Virginia Is the Stress Test the Rest of the Country Is Watching

    Prince William County is not a random dateline. Northern Virginia is the world’s largest data center market, and the AI buildout has accelerated demand there just as it has become harder to site new transmission lines and generation. PJM’s own capacity auctions — the mechanism by which the operator procures commitments of future power supply — have cleared at sharply higher prices in recent cycles, a market signal that supply is not keeping pace with projected demand. A heat-wave near-miss in this region is therefore a preview: other fast-growing data center corridors in Texas, Georgia, Ohio, and Arizona face versions of the same squeeze.

    The economics cut in several directions. Utilities and independent power producers benefit from higher capacity prices and large, creditworthy new customers. Data center operators face rising power costs and, increasingly, multi-year waits for grid connections — which is pushing some toward on-site generation, long-term nuclear and renewable contracts, and demand-flexibility commitments. Residential ratepayers, meanwhile, worry about absorbing the cost of grid upgrades driven by industrial customers, a tension that is now a live political issue in Virginia and across PJM’s footprint.

    Who Bears the Risk — and Who Blinks First in the Next Heat Wave

    Events like this sharpen a policy question that regulators have so far answered only partially: when supply gets tight, whose power is interruptible? Data centers have historically demanded — and paid for — extreme reliability, backed by on-site diesel or battery backup. That backup capacity is mostly idle during grid emergencies. Proposals to enroll data centers in demand-response programs, require flexible-load commitments as a condition of interconnection, or price peak consumption more aggressively all gain momentum every time a grid operator has a bad afternoon.

    There is also a reputational dimension. The data center industry argues, with some justification, that it pays substantial sums into the grid and that load growth also comes from electrification of homes, vehicles, and factories. But headlines that pair “heat wave” with “data centers” and “brink” land hard with the public regardless of the precise load attribution. Operators that can document flexibility — shifting deferrable computing work away from peak hours, dispatching backup assets to support the grid — will have an easier time in siting battles than those that cannot.

    Background

    Northern Virginia became the world’s data center capital over two decades, thanks to early internet exchange points, cheap land, favorable tax treatment, and proximity to federal and enterprise customers. Loudoun County led the first wave; Prince William County became the frontier of the next one, with the AI boom driving proposals for ever-larger campuses. PJM Interconnection, formed from a power pool dating to 1927, operates the transmission grid across the Mid-Atlantic and parts of the Midwest and has repeatedly flagged accelerating load growth — led by data centers — as a central reliability challenge of the coming decade.

    The tension surfaced well before this heat wave: PJM’s recent capacity auctions cleared at dramatically higher prices, utilities in Virginia have proposed new rate structures for large loads, and local land-use fights over data center siting in Prince William County have become some of the most contentious in the country. A dated, weather-driven stress event adds an operational exclamation point to what had largely been a forecasting debate.

    Source: Heat wave, data centers’ huge demand push regional power grid to the brink — Prince William Times, July 4, 2026, reporting on grid strain in the PJM region amid a heat wave and data center load growth.

  • DOE Emergency Order for PJM Ahead of Heatwave Signals a Grid Under Strain

    DOE Emergency Order for PJM Ahead of Heatwave Signals a Grid Under Strain

    The US government has issued an emergency order covering PJM Interconnection — the largest electric grid operator in the United States — ahead of a heatwave expected to drive electricity demand toward the edge of available supply, Reuters reported on June 30, 2026. Emergency orders of this kind allow the Department of Energy to temporarily relax normal operating constraints so that generators can run at maximum output to keep the lights on.

    Executive Summary

    According to the Reuters report, federal authorities acted preemptively: the order was issued as the heatwave loomed, not after the grid had already buckled. That timing matters. Emergency authority — typically exercised under Section 202(c) of the Federal Power Act, which lets the Energy Secretary direct generators to operate notwithstanding permits or other limits — was historically reserved for rare, acute crises such as hurricanes or sudden plant failures.

    That such an intervention now precedes a forecastable summer weather event suggests the buffer between peak demand and available generation in PJM’s territory has grown uncomfortably thin. PJM coordinates power for roughly 65 million people across 13 states and the District of Columbia — including Northern Virginia, the densest data-center market on Earth — so an emergency footing on this grid is a material signal for the entire digital-infrastructure industry.

    When Emergency Powers Become Routine Tools

    An emergency order is, by design, an extraordinary instrument. It can authorize power plants to exceed environmental or operational limits, keep units scheduled for retirement running, and compel generation that market signals alone would not produce. Using it in anticipation of hot weather — one of the most predictable stresses a grid faces — indicates that ordinary market and reliability mechanisms are no longer producing enough headroom on their own. Similar orders were issued for PJM and other regions during heat events in prior summers, so the June 2026 action fits an emerging pattern rather than standing as a one-off.

    The pattern is the story. Each individual order is defensible as prudent risk management; a sequence of them amounts to the federal government repeatedly bridging a structural gap between demand growth and supply additions. That gap has causes on both sides of the ledger: large thermal plants retiring faster than replacement capacity comes online, interconnection queues that delay new generation for years, and demand rising after two decades of near-flat load.

    AI Load Growth Meets a Tightening Grid

    PJM sits at the center of the demand-growth debate because its footprint includes Northern Virginia’s ‘Data Center Alley,’ along with fast-growing campuses in Ohio, Pennsylvania, and Maryland. Grid planners across the country have sharply raised load forecasts, driven in large part by AI-oriented data centers, electrification, and new manufacturing. PJM’s own capacity auctions — the market that pays generators to be available during peaks — have cleared at record-high prices in recent cycles, a direct financial symptom of scarcity.

    A heatwave is where these abstractions become physical. Air-conditioning load peaks at exactly the moment thermal plants lose efficiency in the heat, and data-center cooling demand rises in parallel. When the margin for error narrows, operators lean on emergency tools. For the industry we cover, the lesson is blunt: electricity availability, not land or fiber, is now the binding constraint on digital-infrastructure growth in America’s largest power market.

    What It Means for Data-Center Operators and Their Customers

    For operators, recurring grid emergencies raise both operational and reputational stakes. Operationally, facilities in PJM territory should expect more frequent conservation appeals, demand-response calls, and scrutiny of backup-generation readiness during peak season. Reputationally, data centers are increasingly cast as the face of load growth; every emergency order sharpens public and regulatory questions about who pays for grid stress and whether large loads should be required to be curtailable or bring their own generation.

    The likely winners in this environment are firms that treat power as a first-class engineering problem: those with flexible-load capability, on-site or contracted generation, long-dated capacity positions, and sites in regions with genuine surplus. The exposed parties are speculative projects counting on grid interconnection timelines and power prices that no longer reflect reality. Utilities and generators in PJM, meanwhile, gain leverage — scarcity is lucrative for whoever owns dispatchable megawatts.

    Background

    PJM Interconnection, founded as a utility power pool in 1927, evolved into the largest competitive wholesale electricity market in the United States, coordinating generation and transmission across the Mid-Atlantic and parts of the Midwest. Its footprint includes Northern Virginia’s data-center corridor, which has made PJM the frontline grid for AI-era load growth. Section 202(c) of the Federal Power Act gives the Department of Energy authority to order emergency generation during grid crises — a power used sparingly for decades but invoked more frequently in recent years as plant retirements, slow interconnection of new resources, and surging demand forecasts have narrowed the system’s reserve margins.

    Source: US issues emergency order for PJM Interconnection as heatwave looms — Reuters report, June 30, 2026, on federal emergency action to shore up the largest US grid ahead of extreme heat.

  • Ohio Would Halve a $1.6B Data Center Break. The Harder AI Fight Is Who Pays for the Grid

    Ohio Would Halve a $1.6B Data Center Break. The Harder AI Fight Is Who Pays for the Grid

    TL;DR · 30-second read

    The Short Version

    Ohio lawmakers want to shrink a tax break for data centers, the giant warehouses of computers that run artificial intelligence and online services. The break cost the state roughly $1.6 billion last year. The bill would cut it in half.

    The bigger fight is over electricity bills. These buildings use so much power that new power lines and power plants have to be built. Manufacturers and environmental groups warn that ordinary households could end up paying part of that cost.

    Senators aimed to pass the bill within a day.

    Ohio state Sen. Brian Chavez unveiled a sweeping data center bill on Tuesday, June 9, attaching a long list of policy changes to a measure originally written only to study the issue, the Ohio Capital Journal reported. The proposal would cut the state’s discretionary sales and use tax exemption for data centers from 100% to 50%, or 75% for projects that build on brownfields and bring their own power. The exemption has grown to roughly $1.6 billion in the last year. The bill would also cap local property tax abatements at 50%, end data center access to Ohio’s 30-year mega project job creation grant, require data centers to track and report water use, and direct the Public Utilities Commission of Ohio (PUCO) to create a separate electricity rate class for data centers.

    The Senate Energy Committee was scheduled to advance the bill Wednesday morning, June 10, with a full Senate vote planned for later the same day.

    Executive Summary

    Ohio’s bill is one of the broadest state-level rewrites of data center policy so far. It covers tax incentives, nondisclosure agreements, water monitoring, utility billing, and a new surety bond meant to protect local governments. The tax provisions are the most concrete part. A roughly $1.6 billion incentive would be cut in half, with a larger 75% break reserved for projects on brownfields (previously developed, often contaminated land) that supply their own electricity.

    The provision that drew the sharpest testimony was the proposed data center rate class. It is modeled on the tariff PUCO approved for AEP Ohio last year, which the Ohio Manufacturers’ Association is now challenging in the Ohio Supreme Court. The underlying question is the one now running through every state served by PJM Interconnection, the regional grid operator: when AI-era data centers drive new transmission, distribution and generation spending, who ends up paying for it? PJM plans a backstop auction in September to secure 15 gigawatts of new generation. It has warned that without state rules, those costs could fall on other consumers, including residential customers.

    With a committee vote and a floor vote planned within about a day of introduction, the chance to refine the rate-class language before the Senate acts was limited.

    Tax Policy That Doubles as Power Policy

    The headline change is a 50% cut to the sales and use tax exemption. The more revealing detail is the exception. Projects keep a 75% break only if they build on brownfields and bring their own power. That condition ties Ohio’s largest data center incentive to a developer’s grid footprint as well as its capital spending. In practice, the state would be paying a premium for sites that reuse industrial land and lean less on utility-supplied electricity.

    Other provisions point the same way. Capping local property tax abatements at 50% and removing access to the 30-year mega project job creation grant both reduce the long-term public subsidy a single campus can collect. Together, these changes suggest Ohio is trying to stay open to data center investment while no longer competing mainly on how much tax it will forgo. Developers already planning Ohio sites will need to revisit their project economics. Those able to secure their own generation gain a relative advantage. The bill does not define what counts as bringing their own power, and that definition will matter.

    The Harder Fight Is the Rate Class

    The tax changes drew relatively little objection in testimony. The utility billing provision did not. The bill directs PUCO to create a data center rate class that assigns generation, distribution and transmission costs to data centers, similar to AEP Ohio’s existing data center tariff. The Ohio Manufacturers’ Association, already challenging that tariff in court, opposed extending the model statewide. Its energy consultant, John Seryak, described one project in AES Ohio’s territory that would need roughly $230 million in supplemental grid equipment. He said that once the cost is financed over 40 years with return on equity and interest, it comes to about $850 million, and the tariff would recover only $300 million of it. These are the association’s estimates, not audited figures. But the mechanism is plain. If a rate class spreads a project’s costs over years and collects less than the full lifetime cost, the gap has to be paid by someone else on the system.

    Seryak raised a second concern about the minimum monthly demand payments these tariffs impose. Minimum payments are generally meant to ensure a large customer covers the capacity built for it. He argued they could also inflate utilities’ load forecasts, pushing them to plan for more capacity whose cost is then spread across all ratepayers. They could also weaken a data center’s incentive to use power efficiently. The Ohio Environmental Council Action Fund raised a related gap. Nolan Rutschilling asked lawmakers to add explicit language telling PUCO how to handle PJM’s September backstop auction for 15 gigawatts of new generation. He said the large-load tariff might cover it, but the bill should make sure it does. The affected parties are clear. Manufacturers and households pay if costs leak out of the rate class. Developers pay more if it is written tightly. Utilities have to forecast and build against whatever the final design encourages.

    Water, NDAs and Local Leverage

    On water, the bill directs the Ohio EPA to develop a water quality testing plan and report any anomalies. Data centers would have to track and report their water use and adopt conservation practices, including closed-loop cooling, which recirculates coolant rather than continually drawing fresh water. This gives regulators data they currently lack. It does not set usage caps.

    The nondisclosure agreement provision drew criticism from both parties. The bill states that an NDA cannot prohibit or limit the release of a public record. Sen. Bill DeMora, D-Columbus, said this “does nothing to stop NDAs,” because it does not ban them. Sen. Jerry Cirino, R-Kirtland, worried from the other direction that the bill could hurt data centers’ ability to negotiate with local governments. The proposed surety bond is the most unusual local protection. It would equal the average salary of all of a data center’s workers over ten years, which Chavez described as “financial insurance” for affected communities. Save Ohio Parks asked for some carbon-free energy requirements and pointed to diesel backup generators as a pollution concern. The bill as introduced does not include such a requirement.

    Speed Leaves the Details Unsettled

    Chavez’s timeline, with a floor vote potentially one day after introduction, means the most contested language faced little revision in the Senate. DeMora warned that “anything the legislature does in a swift amount of time ends up being bad for everybody.” The risk is concentrated in the rate-class provision. The tax percentages are simple numbers. The cost-allocation rules are not, and they would be left largely to PUCO to design while the AEP tariff remains in litigation.

    For the wider PJM region, Ohio’s bill is a sign of where state policy is heading. Incentives are being trimmed and made conditional, while the real policy work moves to utility commissions and tariff design. That is where the costs of AI-driven load growth will actually be divided.

    Background

    Ohio, particularly central Ohio, has become a major destination for large data center campuses. Its utilities, including AEP Ohio and AES Ohio, are part of the PJM Interconnection grid, which covers all or parts of 13 states and Washington, D.C. As AI-driven demand for computing power has grown, PJM and its member states have struggled with how to pay for the transmission lines, substations and power plants needed to serve that load without shifting costs onto existing customers.

    PUCO approved a data center tariff for AEP Ohio last year to assign more of those costs to data centers. The tariff is now under challenge by the Ohio Manufacturers’ Association in the Ohio Supreme Court. Chavez’s bill draws on testimony from the Ohio Senate’s Select Committee on Data Centers and would extend a similar rate-class approach across the state’s utilities.

    Sources

    Source: Ohio lawmakers introduce sweeping new data center legislation (Ohio Capital Journal), covering Sen. Brian Chavez’s bill on data center tax breaks, water use, NDAs and utility rate classes.

  • Virginia’s Data Center Boom Is Raising West Virginia’s Power Bills, NPR Reports

    Virginia’s Data Center Boom Is Raising West Virginia’s Power Bills, NPR Reports

    NPR reported on June 6, 2026 that the data center construction boom in Virginia — the world’s largest concentration of data center capacity — is contributing to higher electricity bills for households in neighboring West Virginia. The report highlights a structural feature of the mid-Atlantic power grid: costs for transmission infrastructure built to serve concentrated new demand in one state can be allocated across ratepayers in other states within the same regional grid.

    The story lands amid a period of unprecedented electricity demand growth driven largely by AI computing, and it adds West Virginia to a growing list of jurisdictions where the question of who pays for data center-driven grid expansion has become a live political and regulatory issue.

    Executive Summary

    The core of the NPR report is a cost-shifting story. Northern Virginia hosts the densest data center market on Earth, and the electricity demand of that cluster has grown so quickly that the regional grid — operated by PJM Interconnection, which coordinates wholesale power across 13 states and the District of Columbia — requires major new transmission investment to serve it. Under regional cost-allocation rules, portions of those investments, along with rising wholesale capacity prices, can show up on bills paid by customers far from the data centers themselves, including in West Virginia.

    Why it matters: the data center industry has long argued that its facilities pay their own way through large utility bills, taxes, and infrastructure contributions. Reporting that traces rate increases in a neighboring state to Virginia’s load growth tests that claim at the regional level, where cost allocation is decided by grid operators and federal regulators rather than by any single state. For an industry planning hundreds of billions of dollars in AI infrastructure, the durability of public consent — and of the rate structures that underpin it — is a material business question.

    West Virginia’s situation is notable because the state hosts relatively little of the data center capacity generating the demand, yet its ratepayers participate in the same regional transmission and capacity markets that must be expanded to serve it. That asymmetry between where the load sits and where the costs land is the tension at the center of the story.

    How One State’s Load Becomes Another State’s Bill

    The mechanism here is unglamorous but important. PJM Interconnection is a regional transmission organization, or RTO — essentially an air-traffic controller for the electric grid across the mid-Atlantic and parts of the Midwest. When large new demand appears in one part of its territory, PJM plans transmission upgrades to keep the whole system reliable, and the costs of those upgrades are allocated among utilities across the region under formulas overseen by federal regulators. Wholesale capacity prices — payments to power plants for being available when demand peaks — are also set regionally, and they rise when demand growth outpaces new supply.

    The practical result is that a household in West Virginia can pay for grid reinforcement whose primary driver is data center growth in Loudoun County, Virginia. That is not a scandal in the legal sense; it is how regional grids have worked for decades, on the theory that everyone benefits from a reliable interconnected system. But the theory was built for an era of slow, diffuse demand growth. Concentrated, hyperscale load growth strains the fairness logic of regional cost sharing, and NPR’s reporting illustrates what that strain looks like from the paying end.

    The AI Demand Shock Meets a Slow-Moving Rate System

    After roughly two decades of flat U.S. electricity demand, utilities and grid operators across the country have revised load forecasts sharply upward, with data centers — particularly AI training and inference facilities — the largest single driver in markets like PJM. Transmission lines and power plants take years to permit and build, while data centers can be constructed in eighteen months or less. Ratepayers sit in the gap: when supply and delivery infrastructure lag demand, prices for capacity and transmission rise before new investment catches up.

    West Virginia adds a distinct wrinkle. It is a coal-heavy state whose power plants sell into the same regional market that data center demand is tightening. Rising regional demand can extend the economic life of existing plants and reward generation owners, even as delivery costs raise residential bills. Whether West Virginians net out ahead or behind depends on specifics the headline alone cannot settle — which is precisely why the attribution question deserves careful scrutiny rather than a reflexive verdict in either direction.

    Winners, Losers, and the Attribution Problem

    Stories about data centers raising electricity bills are becoming a genre, and both sides of the debate deserve pointed questions. For critics: how much of a given rate increase is attributable to data center load, as opposed to fuel costs, storm hardening, aging infrastructure replacement, or plant retirements that would have raised costs anyway? Rate increases are almost always multi-causal, and clean attribution requires access to utility filings and PJM planning documents, not just bill totals. For the industry: the claim that data centers pay their full freight is typically true at the retail level — they are enormous customers of their local utility — but it is weaker at the regional level, where transmission and capacity costs are socialized across states. Both claims can be partially true at once.

    The clearest losers in the current arrangement are residential ratepayers in low-income regions inside high-growth RTOs, who have the least ability to absorb increases and the least political leverage in regional planning. The clearest winners are landowners, generation owners, and the data center operators themselves, who obtain grid service at speed. Utilities occupy the middle: load growth is the best news their business model has had in twenty years, but ratepayer backlash is now their biggest regulatory risk.

    What This Means for Data Center Operators and Their Customers

    The industry’s strategic response is already visible in other markets: special data center rate classes that assign large-load customers more of the incremental cost, long-term take-or-pay contracts that protect other ratepayers if a project cancels, co-located or dedicated generation, and direct developer funding of transmission upgrades. Several states in and around PJM have been debating or adopting such structures. Reporting like NPR’s accelerates that trend, because it converts an abstract cost-allocation debate into a concrete kitchen-table story that state commissions and legislators respond to.

    For operators and hyperscale tenants, the lesson is that cheap, fast interconnection obtained under legacy cost-sharing rules is not a stable equilibrium. Projects that internalize their grid costs — visibly and contractually — will face less siting resistance and less regulatory reopening risk than projects that rely on regional socialization of costs. In infrastructure, public legitimacy is a capacity constraint like any other.

    Background

    Northern Virginia has been the center of gravity of the internet’s physical infrastructure since the 1990s, when early exchange points and federal networking activity seeded a cluster that now constitutes the largest data center market in the world. The AI boom that began in earnest in 2023 supercharged demand for that capacity, pushing utility load forecasts in the region to levels not seen in decades and triggering large transmission expansion plans across PJM Interconnection, the regional grid operator.

    West Virginia, a longtime coal-producing and power-exporting state, shares that regional grid but hosts comparatively little of the data center capacity driving its expansion. The NPR report examined here — published June 6, 2026 — is part of a broader wave of journalism and regulatory activity probing who pays for AI-era grid growth, a question now being contested at state utility commissions, at PJM, and before federal energy regulators.

    Source: Virginia’s data center boom is raising West Virginia’s electricity bills — NPR reporting, published June 6, 2026, on interstate electricity cost impacts of Virginia’s data center growth.