PJM's September backstop auction leaves the data-center capacity problem largely unsolved
Jefferies says the auction addresses only a prior deficit, not the new large loads driving costs up, while MISO outage data point to supply-side upside bears are ignoring.
PJM moved its backstop reliability auction forward to September this year, pulling it from a planned 2027 run, after surging data-center demand made the original timeline untenable.1 The bearish consensus on PJM and MISO real-time power has since settled into what looks like a comfortable majority — seven bearish signals against the current bullish weight, with bearish positioning outrunning bullish by more than four to one.
But the supply picture in MISO carries an implication that demand-side positioning alone will not capture. MISO seasonal readiness data compiled in early June (2026-06-03) showed 17 GW of incremental generation outages during a single three-day study window, against peak demand of 108 GW and renewable output of just 19 GW over the same period — uplift costs reached $4 million across those three days.2 A subsequent three-day window recorded 19 GW of incremental outages with $1.5 million in uplift and the same 19 GW of renewable cover.2 That ratio — outages running at roughly 16 to 18 percent of peak demand, with renewables providing no buffer — leaves MISO real-time prices exposed to upside pressure. A contrarian bullish signal on MISO real-time, rated at 0.65 confidence, is driven specifically by that outage picture.
Bears calibrated to weak end-of-summer demand are pricing one variable. The outage data argues they may be pricing the wrong one.
The transmission picture adds a separate layer to the cost story. FERC on Friday (2026-08-14) approved a cost allocation framework for transmission projects initiated by MISO but built inside PJM's footprint, with Exelon's Commonwealth Edison positioned to bear costs under the approved structure.5 Studies have linked transmission expansion across this corridor to potential savings of billions of dollars concentrated in PJM. The FERC approval does not build the lines, but it removes a legal barrier that had blocked cross-regional investment — which matters when capacity costs in PJM are already running far above any recent baseline.
Those costs have become hard to ignore. Data-center load pushed PJM capacity costs up by $29.4 billion across the last four auctions, according to figures cited by Utility Dive on 2026-07-28.4 Jefferies analysts said that figure will accelerate if PJM continues absorbing large loads without structural reform. The September backstop auction does not address that trajectory. Jefferies described the auction's scope problem directly: it addresses only the deficit from a prior base capacity auction and does not reach "new large loads which have yet to materialize" — their phrasing — which are the actual driver of the longer-term cost curve. More backstop auctions could follow, the analysts said, if supply additions keep trailing the interconnection queue.4
FERC widened its focus in June (2026-06-18), voting unanimously to issue show-cause orders to all six regional transmission organizations under Section 206 of the Federal Power Act, directing each to justify or rewrite its large-load tariff structures. FERC staff described the orders as addressing "the pressing need in the RTO/ISO regions," covering more than 200 million Americans across 30-plus states — close to two-thirds of electricity load under commission jurisdiction.3
MISO has been moving in parallel. A MISO proposal under development would impose reliability requirements on large interconnecting loads, a departure from existing tariff structures that, if finalized, raises entry costs for data centers and heavy industrial customers seeking interconnection in MISO's territory.3 How that proposal is finalized, alongside FERC's show-cause outcomes, will set the terms for large-load economics across both territories through the next capacity cycle.
MISO Indiana Hub spot power closed at $70.25/MWh on Wednesday (2026-09-02) and PJM Western Hub spot settled at $73.72/MWh on Wednesday (2026-09-02), levels consistent with a market pricing weak late-summer demand.2 The outage data compiled in June (2026-06-03) predate those settlements by three months. But generation outages do not schedule themselves around consensus positioning, and the MISO seasonal readiness figures suggest the supply-side picture is less orderly than current prices imply.
If September's backstop auction produces clearing prices below PJM's projections, or if FERC's show-cause process forces tariff changes ahead of the 2027 base auction, the $29.4 billion in capacity costs absorbed over the last four auctions starts to look less like a ceiling and more like a reference point for what comes next.4