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The data-center boom is pushing electricity costs to the breaking point for PJM Interconnection — the country’s biggest grid operator, serving more than 65 million people from the mid-Atlantic coast to Illinois — and that’s fueling a popular backlash.
Democratic gubernatorial candidates pledging to combat rising utility bills just won landslide victories in New Jersey and Virginia, two states bearing much of the brunt of data-center-driven cost increases. Congress members along with state governors and lawmakers are demanding that PJM take action.
PJM is poised to make a key decision this week on a fast-track process to get data centers online quickly while mitigating the impact of the facilities, which can use as much power as small cities. But a conflict has emerged over how far the grid operator can go. It boils down to this: Can PJM force data centers to stop using electricity at moments when demand for power peaks?
Data-center trade groups say no. But a growing number of politicians and environmental and consumer advocates say that requiring data centers to be the first to get disconnected from power during grid emergencies is the only surefire way to protect customers.
Last week, a bipartisan coalition of state legislators representing many of the 13 states served by PJM submitted its Protecting Ratepayers Proposal, which argues for data centers to be allowed to connect to PJM’s grid with the stipulation that they will be “‘interrupted’ during grid emergencies until they bring their own new supply.”
“We have a responsibility to ensure that technological growth doesn’t push vulnerable residents into financial hardship or enable a massive transfer of wealth from ratepayers to data centers,” said Maryland state Sen. Katie Fry Hester, a Democrat and organizer of the coalition, in a press release introducing the proposal.
“This proposal is about fairness and responsibility,” added Illinois state Sen. Rachel Ventura, also a Democrat. “We’re making sure data centers carry the cost of their own energy demands instead of passing it on to the public.”
That’s a salient concern, because the peak power needs of data centers are what’s driving electricity costs through the roof in PJM territory.
The grid operator must secure enough capacity from power plants and other resources to serve its peak loads. The prices of securing that capacity have skyrocketed in the past two years, from $2.2 billion in 2023 to $14.7 billion in 2024 and to $16.1 billion in PJM’s latest capacity auction this summer.
Growing demand forecasts of yet-to-be-built data centers are the primary culprit for these price spikes, and constitute the “core reliability issue facing PJM markets at present,” according to an August report from Monitoring Analytics, the company tasked with tracking PJM’s markets. “There is still time to address the issue but failure to do so will result in very high costs for other PJM customers,” the report warns.
Utility bills are rising across much of the U.S. due to a combination of factors, including volatile fossil-gas prices and the expense of repairing and expanding power grids. Data-center growth is not directly increasing costs in most regions yet, but in PJM, utility customers’ bills already reflect the capacity cost increases tied to serving future data centers.
Groups including consumer advocates in Maryland and the Natural Resources Defense Council agree that requiring new data centers to get cut off first during grid emergencies is a vital backstop to the suite of interventions PJM is considering for its fast-track process.
“We’re proposing to allow data centers to join PJM’s grid as fast as they want, but not guarantee them firm service, so they’ll be given interruptible service until they bring their own capacity,” Claire Lang-Ree, clean-energy advocate at the Natural Resources Defense Council and coauthor of the environmental group’s proposal, explained during an Oct. 22 webinar. “We think that’ll solve both the cost and reliability problem, because by removing all these large loads out of the capacity market until they bring their own supply, … capacity prices might go back down to historic levels.”
PJM’s Members Committee is expected to vote Wednesday on a final advisory recommendation to send to the grid operator’s board of managers. PJM has said it intends to file a proposal in December with the Federal Energy Regulatory Commission, in hopes of gaining approval to institute changes in 2026.
Data-center companies and utilities are not happy about mandatory power cutoffs for new computing facilities, however — and their arguments have so far carried the day at PJM.
In August, PJM issued a “conceptual proposal” that included a “non-capacity-backed load” (NCBL) structure. The approach would force loads of 50 megawatts or larger to curtail power use to forestall grid emergencies as a precondition to interconnection.
That proposal was lambasted by the Data Center Coalition, a trade group that includes Google, Microsoft, Meta, Amazon, and dozens of other companies that own, operate, or lease data-center capacity. In comments to PJM, the coalition warned that by imposing NCBL status on data centers, the grid operator “risks exceeding its jurisdictional authority” over customer interconnection and interruptibility status, which are generally managed by utilities regulated at the state level.
“PJM has not provided a defensible rationale for creating this new class of service, and on its face the proposal is unduly discriminatory,” the coalition wrote.
PJM responded by pulling the NCBL concept from its next round of proposals, instead offering new data centers a voluntary method to commit to curtailing their peak power use through tweaks to a structure called “price-responsive demand,” or PRD.
As PJM explained in an October update, “With these changes, PRD becomes similar to voluntary NCBL,” since data centers that opt in would be exempt from paying for capacity but be obligated to “reduce demand during stressed system conditions.”
The big question is if data-center developers will choose to act at the scale required to “move the needle,” as analytics firm ClearView Energy Partners put it in a November research note. The authors wrote that, according to their observations in recent PJM meetings, “it’s far from clear whether new large load[s] would take service via this voluntary program.”
Consumer advocates aren’t happy with the data-center industry’s resistance to mandatory controls. Clara Summers, campaign manager for the Citizens Utility Board, an Illinois-based consumer-advocacy group, told Canary Media that the Data Center Coalition’s positions “are generally disappointing, given how some individual members of the DCC have shown a willingness to hammer out decent solutions that actually take responsibility for their own costs.”
Summers is referring to a handful of efforts by tech giants and data-center developers to use their own capacity resources to reduce their grid impacts. One such rare example is an agreement Google reached in August with PJM utility Indiana Michigan Power that commits the tech giant to bringing additional new capacity online and lowering power use during times of peak demand to alleviate the impacts of expanding a massive data center in Fort Wayne, Indiana.
Most of the groups submitting proposals to PJM agree that its new rules should enable data centers to fast-track development by paying for generation and other capacity resources to serve their own needs. Stakeholders also agree that data centers that can use less power during times of peak demand should be rewarded for the relief that would provide to PJM’s system.
The Data Center Coalition has also won backing from the governors of Maryland, New Jersey, Pennsylvania, and Virginia, four states in PJM territory courting data centers for economic development. Those governors joined the coalition in submitting a proposal for the fast-track process that would task state regulators with expediting interconnection for data centers that can add enough new generation capacity to the grid to cover their energy demand at the time they are connected.
But groups arguing for mandatory restrictions say these alternatives may not take effect quickly enough to prevent data-center growth from outpacing the capacity of PJM’s grid.
PJM’s notoriously backlogged interconnection queue is impeding the addition of new power plants to the system. The grid operator’s efforts to fast-track new generation resources have yielded only a handful of projects expected to come online before 2030.
PJM is still in the early stages of developing options to add capacity to existing generators, such as pairing batteries with solar and wind farms. And proposals that let data-center developers tap into the flexibility of virtual power plants remain a work in progress.
Meanwhile, PJM’s grid is only just beginning to feel the pressures of data-center expansion. The latest forecasts of large-load growth across PJM territory show 32 gigawatts of additional demand by 2028 and about 60 gigawatts by 2030, or a 37% increase from PJM’s peak load today, according to the Maryland Office of People’s Counsel, the state’s consumer advocate.
The sheer scale of proposed data-center construction beggars belief. To meet that projected demand, “by 2028, [developers] would have to be investing about $1 trillion within PJM in the next three to four years,” David Lapp, who leads the Maryland office, said during a press conference last month. “That’s an insane amount of money.”
Many groups are arguing to keep price caps on PJM’s capacity auction in place to mitigate the pass-through costs of rising data-center demand. They’re also pushing for PJM to order utilities to more stringently clear their load forecasts of speculative or redundant data-center applications, which experts agree are inflating expectations of how much load utilities and grid operators will have to serve.
But utilities, power-plant owners, data-center developers, and the tech giants spurring the AI boom have little reason to constrain these outsized growth plans, or to concede to restrictions on their peak power use, Lapp said. These are “some of the most powerful corporations in the world, all increasing their bottom line on the backs of existing customers,” he said.
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