AI is overtaxing the grid so much that it’s forcing power markets to improvise. And so far, the primary example of this improvisation has been the PJM emergency backstop auction.
The idea was first floated back in January, when the White House and several governors of Mid-Atlantic states launched a dramatic intervention into PJM. The intervention entailed a one-time auction to be held outside of PJM’s regular timeline or rules, to enable large loads to procure new generation.
A series of reliability workshops came next, and then last Friday after the markets closed, PJM released its proposed framework for the emergency auction. As energy attorney and policy expert Elizabeth Whitney noted at Latitude Media‘s Transition-AI conference this week, the setup isn’t actually an auction at all.
“I wonder if they asked, is an auction really the format that data centers want?” Whitney said onstage. “Because an auction sort of implies that you have a limited supply of something, and you’re parceling it out. [PJM doesn’t] have power to parcel out in an auction. So it’s not really surprising that they went with a format that’s not an auction at all.”
Here’s the plan: PJM is proposing an “emergency backstop procurement,” targeting 14.9 gigawatts, held over two phases. During the first phase, which would run from September 2026 through March 2027, PJM would act as a matchmaker, facilitating bilateral contracts between load and new generation. In that phase, Whitney explained, PJM is positioning itself as a clearinghouse for deals to come together. If that phase doesn’t attract enough supply, the difference would be procured in phase two, a PJM-administered central procurement with Electric Distribution Companies as offtakers.
A few notable things from the proposal:
Cost: The PJM proposal allocates costs to the local utilities “based on their pro-rate share of the target megawatts,” or in other words, the amount of new capacity they’re getting. The President and 13 governors who initiated the auction in the first place wanted costs to be allocated directly to data centers that didn’t bring their own capacity or agree to be curtailable. But PJM is saying that’s something it doesn’t have the authority to do, and is leaving that up to individual states.
According to a Jefferies note, by putting the cost responsibility on utilities, PJM is forcing “utilities to sharpen their load forecasts lower” to avoid over-procurement, which would risk forcing ratepayers to shoulder the cost.
Technologies: The proposal is technology-neutral, and doesn’t follow the White House’s suggestion that the auction should focus on “new baseload generation” with 15-year contracts (read, gas). Importantly, capacity coming from demand-response and distributed energy resources is also eligible, a win storage and VPPs.
Basically all new supply would be eligible, as long as it hasn’t won a contract in a previous PJM auction, and can come online by June 2031. That means both new power plants and the repowering of deactivated generation will be eligible, though delayed retirements won’t be.
Interconnection: PJM declined to bypass its Critical Interconnection Fast Path Process for the projects that enter the emergency auction. The White House explicitly called for PJM to accelerate interconnection studies for projects that clear the backstop to 150 days or less, but PJM’s proposal would send projects through the standard process.
PJM stresses in the proposal that this auction is intended to be a one-off, noting that it “does not believe [it] is a long-term fix for its resource adequacy issues” and that it shouldn’t substitute or delay a “larger review of market fundamentals.” A key question is whether this will actually be the case, however. As Jefferies notes, it’s possible this will create a precedent for a “bifurcated” approach where regular auctions will be used to prevent existing resources from retiring, and new resources will come at a higher price.
A version of this story was published in the AI-Energy Nexus newsletter on April 15, 2026, with reporting help from Maeve Allsup. Subscribe to get pieces like this — plus expert analysis, original reporting, and curated resources — in your inbox every Wednesday.
