On a quiet road in Valley Forge, Pennsylvania, not far from the field where George Washington’s starving soldiers waited out the winter in 1778, sits the headquarters for PJM Interconnection, the largest electrical grid operator in the United States. Inside, operators wage war against inclement weather and power surges, ensuring that electricity is reliably delivered to 65 million customers across 13 states and the District of Columbia. The control board looks like something out of a disaster movie — covering the walls and stretching nearly from floor to ceiling — but, by design, it’s a pretty drama-free environment.
As the U.S. grapples with a surge in electricity demand, however, that may be changing.
In late September, governors from 11 of PJM’s member states banded together in Philadelphia to demand a greater role in the grid’s energy decisions, given rapidly rising costs faced by their constituents. Some even threatened to walk away from the 13-state grid altogether.
“We need states to have more of a say in how PJM operates,” said Governor Josh Shapiro of Pennsylvania, who led the charge. “We need to move more quickly on energy-producing projects, and we’ve got to hold down costs. If PJM cannot do that, then Pennsylvania will look to go it alone.”
Pennsylvania is a net exporter of power and could, theoretically, pass a law forcing its generators to withdraw from the nonprofit and join a new grid operator, but that would require federal approval; plus, power generators would have to repay PJM for a mountain of payments the grid operator has already made. Shapiro’s bluster is more likely intended to force changes within PJM and secure a greater role for public officials in the grid they rely on.
What the governors really want, in the end, is lower retail electricity prices. In fact, preventing the kinds of dramatic rate increases that customers are seeing now, as tech companies rush to build energy-hungry data centers, was the reason PJM was formed. Until about 30 years ago, U.S. electric utility companies controlled both the means of generating energy via power plants and the transmission and distribution systems that delivered that energy to customers. Rising prices in the ’80s and ’90s led many states to rule that utility companies could no longer own power plants, breaking the generators’ monopoly control within a given region. These moves came after the federal government took steps to open the nation’s grids to independent power generators that could compete with utility-owned plants.
Today, PJM acts as a kind of middleman. It runs a daily energy market, which buys power from the generators offering the lowest prices and then sells it to local utilities to meet real-time demand. But in order to do this, PJM has to guarantee that there will be enough power plants (or solar arrays or wind turbines) offering to sell their power at any given time. That’s why, every year, PJM also runs a so-called capacity market, which estimates the total amount of electricity the entire region is projected to use over the next three years. PJM uses that figure to pay power plants to secure their commitment to operate when called upon.
To estimate required capacity, PJM looks at historical data and new load requests — potential customers who want to be connected to the grid — and then adds extra capacity so that regions have some wiggle room, rather than facing rolling blackouts when challenges like extreme weather arise. About 25 percent of every utility bill reflects this “capacity market,” the amount of money PJM expects to pay to ensure reliable service on the hottest and coldest days of the year, over the next three years.
Capacity auctions rarely make headlines, but Silicon Valley’s race toward artificial intelligence is forcing these dynamics into the spotlight, because PJM member states such as Pennsylvania, New Jersey, Ohio, and Virginia have aggressively courted the industry. In March, President Trump joined Pennsylvania Senator Dave McCormick at the Energy and Innovation Summit in Pittsburgh to announce $90 billion in private investment, aiming to turn Pennsylvania into a national hub for data centers and AI. Virginia is already home to the so-called Data Center Alley, a cluster of facilities through which 70 percent of global internet traffic eventually flows, and Ohio is emerging as a major player in tech infrastructure as well. The result is an unprecedented number of large load requests flooding the grid.
A report from the Union of Concerned Scientists found that ratepayers in seven data-center-friendly states within PJM’s territory were charged $4.4 billion for the transmission upgrades data centers require in order to come online. In Washington, D.C., for example, customers saw an average increase of $21 on their monthly electricity bills.
Skyrocketing prices at PJM’s capacity auctions are a key factor putting pressure on consumer prices. In July, PJM announced that the cost of its most recent capacity auction had risen to $16.1 billion, up from only $2.2 billion just two years ago. This was, according to Monitoring Analytics, a PJM watchdog group, “almost entirely due to existing and projected large data center load additions to the PJM grid.” The group also pointed to “the extreme uncertainty in the load forecasts” as a “unique and unprecedented situation” that needs to be addressed. Monitoring Analytics and the Natural Resources Defense Council, or NRDC, have both suggested that PJM adopt a “bring your own generation” system, in which particularly electricity-gobbling customers like data centers would be obligated to build their own sources of power upfront, rather than draining the grid.
Valerie Plesch/ The Washington Post via Getty Images
Much of the uncertainty around the future of the grid, experts from NRDC and the Sierra Club caution, is because some of this seemingly bottomless demand for power may amount to little more than a mirage. A tech company looking to build a single data center, for example, might apply to the utility operator in three different areas before they’ve definitively secured land. Ultimately, they build a single data center, but ratepayers are still stuck fronting the cost for three data centers, because all three applications were taken into account on the capacity market. Indeed, some estimates suggest that roughly 75 to 90 percent of data center load requests will amount to nothing.
PJM has also taken heat for leaving new sources of electricity languishing, waiting to be connected to the grid. The grid operator has a so-called interconnection queue, largely full of renewable energy projects that have been waiting to come online for years. Earlier this month, 105 lawmakers signed a letter urging PJM to clear the queue of renewable energy projects to take advantage of tax credits that expire at the end of the year. (The current federal government shutdown may further complicate efforts to meet that deadline.)
Part of the problem is logistical, according to Robert Routh, the Pennsylvania policy director of NRDC. “For a long period of time, PJM was accustomed to seeing its interconnection queue requests … come at a fairly leisurely pace,” he said. In an earlier era, PJM was dealing with large fossil fuel plants that were constructed close to transmission lines and had a fairly standardized process for interconnection. But as renewable energy became cheaper, the number of smaller energy projects trying to connect to the grid increased. In 2022, PJM stopped taking new interconnection requests in order to work through its backlog, which is expected to take until the end of 2026.
“The sheer volume of requests started to overwhelm them,” said Routh. “They didn’t adapt to those circumstances.”
In the meantime, member state governors are requesting more say in how PJM allocates its resources and brings generation online. Although states have actively courted tech investment generally and data centers specifically, lawmakers are concerned that the investment boom is causing consumer electricity prices to rise to an unsustainable level.
A representative from PJM said it was “doing everything within our given authority to deal with this unprecedented growth in expected electricity demand.” PJM is seeking public comment on an initiative called the Critical Issue Fast Path that would fast-track state-sponsored energy projects associated with large load requests; task utilities with weeding out duplicative requests; and require states to sign off on capacity market projections. The requirement for state approval puts the onus back on the governors, who are “basically pointing fingers at PJM,” said Rao Konidena, an energy market analyst.
Under the updated plan, states could choose large energy projects that would be allowed to jump the queue and power these data centers. But, critics say, this will inevitably result in more oil and gas projects — given the regulatory headwinds facing solar and wind under the Trump administration and the desperate race to build superintelligence, it’s unlikely that tech companies will wait around for clean energy. Shapiro’s office did not respond to a request for comment when asked how they planned to square Pennsylvania’s emissions goals with the billions of dollars in AI investment the state has pursued.
“So many of these [tech] companies — you know, Google, Apple — have these supposedly ironclad commitments to clean energy and climate action and reducing emissions,” said Nick Abraham, the senior state communications with the League of Conservation Voters, an environmental advocacy group. “They cannot do that if they are adding more fossil fuels to the grid because of these data centers.”
Editor’s note: The Natural Resources Defense Council is an advertiser with Grist. Advertisers have no role in Grist’s editorial decisions.