PJM's capacity shortfall and FERC's cost-allocation fight are hitting ratepayers from both sides
A 6.8-gigawatt supply gap and a regulatory war over who pays for data center power growth are converging in ways the market hasn't fully priced.
PJM Interconnection's 2028/2029 Base Residual Auction, results published on July 15 (2026-07-15), came up 6.8 gigawatts short of what the grid needs to meet projected peak demand, marking the third consecutive year the nation's largest grid operator has failed to secure sufficient future supply commitments. The auction secured 138,318 MW of unforced capacity, with an additional 10,864 MW from regions under the Fixed Resource Requirement, leaving a gap that grid planners cannot paper over with accounting.4
Markets have been watching the capacity shortfall as a supply story. The more consequential fight is unfolding on the cost side, and it is moving faster.1
On June 18 (2026-06-18), FERC voted unanimously to issue show-cause orders to all six regional transmission organizations and independent system operators under its jurisdiction, directing them to justify or rewrite their large-load interconnection tariffs. FERC staff said the orders cover more than 200 million Americans across more than 30 states and the District of Columbia — roughly two-thirds of U.S. electricity load. The explicit trigger was data center growth and who bears the infrastructure cost of serving it.2
The cost-allocation question is not abstract. Transmission charges now account for about 15% of a residential customer's bill, according to testimony cited in the Maryland complaint filed the week of June 29 (week of 2026-06-29). Maryland agencies asked FERC to strip Exelon and FirstEnergy utility subsidiaries, along with a NextEra Energy unit, of the extra 0.5% return on equity those companies earn simply for being voluntary members of PJM. Jefferies equity analysts, in a client note dated July 6 (2026-07-06), said the complaint would likely succeed given precedents set in California and Ohio. In Connecticut alone, the RTO adder added $4.5 million to ratepayer bills in 2024.3
PJM published its own response to the cost-allocation pressure on August 5 (2026-08-05): effectively defer to individual states. Under PJM's framework, each of its 13 member states would be left to determine how data center-related grid costs get distributed among customers within their borders. Canary Media reported the plan, framing it as PJM's attempt to prevent data center growth from inflating other customers' utility bills without PJM itself adjudicating the allocation.6
The problem with that approach is that state-by-state cost design, sitting underneath a grid that dispatches power across 13 jurisdictions simultaneously, is unlikely to produce coherent outcomes. Maryland has already passed the Utility RELIEF Act, signed by Governor Wes Moore and effective July 1 (2026-07-01), which requires transmission owners to be PJM members — removing the voluntary status that underpins the 0.5% ROE adder. If Maryland forces the adder off and other states do not act, the cost burden shifts rather than shrinks.3
The contrarian read on PJM's capacity gap runs in the same direction. Power analysts watching the 6.8 GW shortfall have largely framed it as a generation investment problem requiring new supply. But the FERC investigation, the Maryland complaint, and PJM's state-deferral plan together suggest a different constraint: developers may be reluctant to commit capacity in a market where interconnection cost allocation remains unsettled and tariff rules face mandatory reform under Section 206 of the Federal Power Act. Uncertainty over how large-load customers are charged changes the revenue calculus for any generator or demand-response provider considering a long-term capacity commitment.2,4
FERC Chairman Laura Swett signaled on July 22 (2026-07-22) that the agency is also building out incentives for grid-enhancing technologies — dynamic line ratings, advanced conductors — through a newly created task force, suggesting FERC views supply-side reform and grid efficiency tools as running in parallel rather than in sequence.5
A late-July FERC ruling also ordered PJM to allow virtual power plants to participate in meeting surging demand in the region, a decision Canary Media reported would open new pathways for distributed resources to compete in capacity markets.7
The near-term test is whether the FERC show-cause process produces actual tariff rewrites before PJM's next capacity auction cycle, or whether RTOs file justifications that push structural change past 2028. If Maryland's complaint against the RTO adder succeeds, as Jefferies analysts expect, the precedent will accelerate similar filings across PJM and potentially other regions — compressing the timeline for transmission owners to reprice their rates. That repricing, not the gigawatt gap alone, is what would shift the capacity market's investment signal.3,2