Last week, stakeholders of the Mid-Atlantic’s regional electric grid operator, known as the PJM, could not reach consensus on which of a dozen data center regulation proposals to send to its board of directors for final approval.
PJM stakeholders include transmission and generation owners, utility companies and end-use customers.
PJM is considering implementing new rules for interconnecting large loads — like data centers — to the power system as load forecasts and utility costs continue to rise across the region.
One of the proposals in the running is known as the “Protect Ratepayers Proposal,” which Maryland State Sen. Katie Fry Hester (D-Caroll & Howard Counties) presented to the PJM Board.
The “Protect Ratepayers Proposal,” allows data centers to quickly connect to the PJM grid and incentivizes them to bring their own power supply, in turn relieving some of the cost burden on ratepayers. If the data centers don’t bring their own capacity, their service would be interruptible.
The proposal was developed by a bipartisan coalition of state lawmakers across the region, and despite stakeholders’ inability to reach a consensus, Hester believes the board will still consider it when developing their final regulations.
“I think it was very well received by the board of directors, and they are the ultimate decision makers,” Hester said. “It is now in their hands because this vote, by the entities with a financial interest, is advisory.”
Hester explains roughly 80 percent of the voting power within the PJM’s stakeholder group have a direct financial interest in building “big, expensive projects,” while consumer advocates make up a small portion of the remaining 20 percent.
“I have said, and I'll say it again, that the PJM governance system is broken. It's a structural conflict of interest, and when billions of dollars of people's monthly bills are on the line, something has to change,” Hester said. “So we're looking to the commissioners to make a good decision that will protect the reliability and affordability of the 67 million ratepayers that they serve, and hopefully they will make a good choice.”
The PJM Board will now review the 12 proposals and submit its own regulation plan to the Federal Energy Regulatory Commission (FERC) for approval.
The PJM has faced immense scrutiny from participating states in recent years after its last two capacity auctions set record-high prices, leading to escalating utility costs.
Last year, Maryland lawmakers passed the Next Generation Energy Act, which incentives new energy generation to help with the region’s supply issue.
The legislation also requires electric companies to submit a specific rate schedule — or tariff — for large load customers.
While these efforts should help reduce ratepayers’ utility bills, Hester says local intervention can only do so much when the real problem persists on a grander scale.
“Most of this new data center demand isn't actually in Maryland. The core problem sits at the wholesale electricity market. So if we want to bring down the wholesale electricity costs, we have to engage in the PJM process,” Hester explained.
Governors of neighboring states like Pennsylvania and Virginia have been vocal about considering leaving the PJM unless the grid operator’s decision processes become more transparent.
“Every single state is frustrated with PJM, and I know of four that are actively drafting either a study, bill or a resolution to consider leaving PJM,” Hester said. “If we lose four big states from PJM, what does that do to the market that we are left in, and do we then have to study what it means to stay in a market that instead of having 13 states plus DC, has nine states plus DC?”
Maryland imports around 40 percent of its energy from other states, meaning a large generator like Pennsylvania leaving the grid could have drastic consequences on dependent states.
The PJM Board plans to announce its decision on data center regulation in the coming weeks.
