The Federal Energy Regulatory Commission threatened Thursday to use its authority to reform the nation’s largest and oldest regional grid operator should it fail to unify the diverse group of power market players from the Midwest to the mid-Atlantic behind a set of critical changes in the next two months.
FERC Chair Laura Swett said the regulator would take the unusual step of issuing a notice to put PJM Interconnection’s stakeholders on record regarding a series of questions to gather “robust and unambiguous answers to the core issues” affecting the transmission operator’s governance model and processes.
“I want you all to hear this plainly: If the stakeholders cannot reach a set of credible, meaningful reforms or an agreement in principle by the end of September, then this commission is not going to hesitate to use the full extent of our legal authority to implement reforms necessary to restore confidence in PJM’s governance,” Swett told a technical conference Thursday.
The pressure on members to weigh in on the changes they support comes as the political scrutiny — both from the Trump administration and governors from both parties — over PJM’s efforts to grow the region’s power supply to meet soaring electricity demand, in part from data centers.
FERC commissioners told a technical conference the current process for PJM is overly complex and opaque, hindering the grid operator’s ability to act quickly on crucial issues over resource adequacy and energy affordability in the 13-state region that stretches from Illinois to the Atlantic Coast. The regulator directed PJM to show which potential reforms members agree or disagree with.
“We should attach a ballot to be sent out to all the PJM stakeholders to put them on the record to say, ‘Where do we stand on these issues? Do we stand in favor of good governance reforms where we see them? Are we opposed?’” said Commissioner David LaCerte. “Because I do think the public believes a lot of these stakeholders vote in line with their interests.”
Swett said the agency is hoping to hear “clear positions and a willingness” to move toward solutions. “If you do not respond and you are a stakeholder, then we are going to assume that you do not care,” she added.
FERC intends to use the responses to inform a forum that will be held in September, where FERC will “finalize a package of solutions,” Swett said.
“Ninety-nine years ago, in 1927 September, PJM was formed, and perhaps this September is when PJM can be saved,” she added.
LaCerte added that he wanted to see “bold action” out of PJM, adding that if that action does not come “we will use every single legal authority within us, and maybe some more, to figure that out.”
The lengthy technical conference held Thursday was convened to bring together federal and state officials, utilities, transmission owners, hyperscalers and other participants in PJM to hash out what changes are needed to its governance mechanisms and stakeholder process.
“This conference was not an academic exercise. We’re on the beginning of a path, and the end of it is going to be reform,” Swett said. “How we get there is really up to you and the stakeholders in the market.”
‘Change is coming’
Administration officials who spoke earlier in the day said PJM’s policy logjams and entrenched secrecy threatens electric reliability and rising power bills for nearly 70 million people in the eastern United States.
“This White House very much wants PJM to succeed, but will not tolerate continued failure,” said Peter Lake, senior director of power at the National Energy Dominance Council inside the White House.
The influence of PJM’s huge membership of power generators, transmission operators and big and small utilities — all of whom have vested interests — can jam up decision-making and hide the positions of people representing the various interests. The opaque management of PJM has faced pointed criticism from governors, Trump officials and FERC commissioners.
PJM has projected that 30 gigawatts of the 32 GW of new electricity load forecast by 2030 is primarily for data centers for artificial intelligence and cloud computing.
“Yes, we can maintain America’s lead in AI and also protect residents and small businesses, but we cannot do it in a broken system like PJM,” Lake said.
“Change is coming to PJM one way or the other,” he added.
FERC commissioners have previously threatened to exercise more authority over the operator, in part to ensure it can meet the moment brought by the surge in data centers and to ensure reliability. Pennsylvania’s Democratic Gov. Josh Shapiro has threatened to leave the organization if it doesn’t do more to protect consumers against soaring power prices, and the Ohio-based utility American Electric Power has also opened the door to leaving PJM.
PJM released results last week of its latest electricity capacity auction that once again fell short of its reliability requirement. The rapidly rising cost of guaranteeing future power generation was held in check by a rate cap pushed by Shapiro.
“PJM has real problem in how it operates its markets,” said Deputy Energy Secretary James Danly. He pointed to the auctions that failed to meet the capacity requirement and said it is an institution that “has not wanted to show confidence” in its own reliability pricing model. “That is not a functioning market.”
Both Trump administration officials pointed to the need for more board independence within the structure of PJM. Its board of directors is seen as having too little power to make decisions that cut against the interests of PJM member companies — even when that large group is at an impasse.
“The board is only independent insofar as it is chosen by the people that are going to be overseen by it,” Danly said.
As it stands it is unclear “who does what” at PJM, Danly said. “We want the board to not be shrouded in mystery or secrecy. We want to know what’s going on.”
Lake — a former chair of the Public Utility Commission of Texas — likened the need for further independence to his experience with the Electric Reliability Council of Texas following Winter Storm Uri. He told the commissioners that the root cause of failure within ERCOT at that time was with its governance structure and stakeholder process — “the same ills that haunt PJM today.”
Lake also pointed to the structure of the Midcontinent Independent System Operator, which delivers power across the Midwest. He said both ERCOT and MISO, though they have different regulatory regimes, provide member companies a “voice but not a veto” and have independent boards “that can make decisions in the public interest” without fear of their members.
More board independence?
Panelists from energy suppliers, market researchers, and state governments largely agreed that the PJM Board of Managers should be given more power and greater independence from its members.
Under PJM’s current structure, board members can be fired by the operator’s “stakeholders” — the electricity suppliers, distributors and customers that operate within the region. Two board members, including then-Chair Mark Takahashi, suffered that fate last year.
“The players should not be able to fire the referees if they don’t like their calls,” FERC’s LaCerte said.
David Mills, PJM’s new president and CEO, told commissioners he would also like to see terms for board members lengthened from three years to something in the range of six to nine years to encourage long-term decision-making. Representatives from the utilities LS Power and American Electric Power both signaled support for term lengths around five years.
“The board would be more independent and act more quickly if we had those 205 rights over the operating agreement,” Mills added.
205 rights refer to the right to file proceedings at FERC under section 205 of the Federal Power Act and ask the commission to eliminate a rule at a grid operator. Another avenue for forcing change at PJM is filing under Section 206 of the Federal Power Act.
PJM’s board can unilaterally initiate 205 proceedings for reliability matters, but it requires broader member approval to start a 205 over transmission planning, cost allocation, and energy and ancillary services markets. There are no such limits on bringing 206 proceedings, which can be a bigger legal lift.
