Opinion: LaCerte Has PJM's Diagnosis Right. The Treatment Won't Arrive Before 2027.

LaCerte Has PJM's Diagnosis Right. The Treatment Won't Arrive Before 2027. PJM's most recent base residual auction hit its administrative price cap and still came up 7 gigawatts short of the grid's reliability target. Only around 500 megawatts of new generation showed up to bid. The price cap is, by definition, the highest signal the market can legally send to attract supply. That signal was insufficient. What happens next in Washington makes the arithmetic worse. On Wednesday, FERC Chairman Laura Swett announced a task force on grid-enhancing technologies, dynamic line ratings, advanced conductors, the tools that can squeeze more capacity from existing wire. The same week, Commissioner LaCerte put sharper language around what he sees as the root problem: a PJM board that has become passive because members fear termination, an institutional docility engineered by the utilities and generators who hold removal authority in PJM's governance documents. These are the two poles of the federal response to a grid serving 70 million people: a technology task force aimed at the medium term, and a governance critique aimed at the long term. Neither addresses what is about to happen to investment signals in the near term. The structural reform currently advancing through PJM's stakeholder process, the one designed to fix the capacity market's so-called intervention doom loop, is forecast by Jefferies analysts to produce a "continuing operating cost model" with materially lower prices. That forecast came on July 15, nine days before FERC's task force announcement. The logic is straightforward: the reform recalibrates how capacity prices are set, reducing the peaks that have historically triggered regulatory interventions. Lower peaks, lower prices. That is the design. The problem is the starting point. An auction that already cleared at its price cap while falling 7 GW short of target is not an auction that needs a reinforced price ceiling mechanism. It is an auction where the price signal, at its legal maximum, cannot close the gap between the supply that exists and the supply the grid requires. Introducing a structural reform that Jefferies explicitly says will produce materially lower prices into that environment is not fixing the doom loop. It is lowering the floor of a room already flooded. Defenders of the reform will argue that the capacity market has structural problems beyond price levels, that the intervention mechanism itself distorts investment signals, that clearing prices have been volatile in ways that make long-duration financing difficult regardless of their level. These arguments have merit. But they bear on investment predictability, not on the directional price signal. A developer financing a new combined-cycle unit or a battery installation across a twenty-year horizon needs both signal stability and signal magnitude. The reform addresses one. At the margin it degrades the other. LaCerte's governance diagnosis sits underneath all of this. His specific claim, that PJM board passivity stems from "eroding the board in the past and creating this fear of board members being terminated", is not an observation about organizational culture. It is a structural claim about who holds power. PJM's governance documents give termination authority to its members: the utilities and generators who participate in the capacity market. Those same entities benefit, in aggregate, from a stakeholder process that moves slowly and a board that does not act against their collective institutional interests. FERC can pressure the board through speeches and pointed questions at technical conferences. It cannot change who holds the lever without rewriting PJM's membership agreements, a process that requires the cooperation of the members who currently hold the lever. There is also $6 billion sitting in the ground that illustrates the governance problem more concretely than any board meeting transcript. Utilities across PJM collectively spent roughly that amount installing approximately 12 million smart meters. Voltus, one of the larger demand response aggregators operating in the region, got just 4 percent of 20,000 enrolled Commonwealth Edison customers through the utility's enrollment process because utilities do not share meter data in formats that are operationally workable. The meters are installed. The data exists. The coordination to make that data functional for demand response has not materialized, because utilities that own the meters have no competitive incentive to make aggregators more effective at reducing peak load. Swett's GETs task force faces the same wall. Grid-enhancing technologies require real-time line data, thermal ratings, conductor temperatures, load flows, that utilities presently control and share selectively. The policy lever that would unlock GETs deployment is the same lever that has not been pulled on smart meters despite $6 billion of capital already deployed. A task force does not change the underlying incentive structure. The timeline problem compounds everything. OATI, one of the main deployment players in the GETs space, indicated in June 2026 that real-world capacity improvements from its nationwide deployment initiative would emerge in the third and fourth years of the program, 2029 to 2030 at the earliest. Exelon CEO Calvin Butler flagged 2027 as the year the grid faces meaningful reliability stress. The GETs response lands after the stress window Butler defined. What fills the interim gap is the bilateral contract market between large data centers and individual generators. Hyperscalers are contracting power directly, routing around the capacity auction entirely, because the auction's price levels and timelines do not match their development schedules. The practical consequence is that the highest-credit buyers in the PJM footprint, the ones whose demand growth is driving the capacity shortage, are exiting the mechanism designed to respond to that demand growth. Every hyperscaler that self-provisions at scale removes a high-credit counterparty from the capacity auction pool, suppressing the clearing prices that Jefferies already says are too low to attract new builds. PJM Western Hub spot power closed Friday at $62.49. MISO Indiana Hub, the neighboring market the PJM footprint interconnects with, settled at $116.00. That $53 spread between adjacent markets is not a pricing anomaly to be rationalized away. It reflects that transmission constraint and market design are already distorting where capital flows, independent of what any task force recommends. LaCerte is right that PJM's board has a structural passivity problem. The diagnosis is accurate. But the policy responses in motion, a technology task force arriving years after the crisis window, a capacity market reform that Jefferies says will reduce prices further, and institutional pressure toward a board whose members answer to entities with no incentive to accelerate change, are not commensurate with what the auction results already show. A grid that cleared 7 GW short at its price ceiling does not need lower prices next cycle. It needs supply. Washington's current toolkit does not produce supply on the timeline that matters, and none of the active reform tracks changes who actually controls the room.