PUC warns of potential capacity shortfall as data centers and interconnection delays strain PJM grid

The Pennsylvania Public Utility Commission told the House Appropriations Committee that rapid load growth from data centers, slow interconnection of new generation and retirements of thermal plants together risk a large capacity shortfall in the PJM regional grid.

PUC Chairman Steve DeFrank told lawmakers that the commission and PJM are seeing a combination of factors — interconnection queue backlogs, faster thermal retirements and rising demand driven by data centers — that have pushed the PJM capacity market price sharply higher and could produce a 30- to 40-gigawatt shortfall over the coming years. "That $270 clearing price . . . the market's saying build generation," DeFrank said, referring to the capacity auction results.

The committee’s exchange highlighted three linked problems: (1) a backlog in PJM’s interconnection queue that delays bringing ready projects online; (2) a concentration of new high-demand loads (data centers) that can add thousands of megawatts quickly; and (3) the pace of thermal-generator retirements. Vice Chair Kimberly Barrow said the region may need 30 to 40 gigawatts of added capacity in the next five years and urged creative solutions including generation sited with large loads. "I am hopeful that a lot of these data centers bring their own power," Barrow said.

Why this matters: PJM’s capacity auction rose from about $28 per megawatt-day to roughly $270 in the most recent auction, a change committee members described as a wake-up call. Capacity-price spikes affect wholesale commodity costs and can be passed to consumers through supply contracts; they also signal the market’s expectation that new capacity is needed. Several lawmakers pressed the PUC on whether state climate policies such as RGGI or PACER are discouraging investment in generation; DeFrank responded that those programs have had no direct market effect because no credits or payments have yet occurred, and that the larger immediate drivers appear to be market and capacity‑market rules and project delays.

What the PUC is doing and options lawmakers heard: DeFrank described the Reliability Resources Initiative (RRI), a FERC‑approved separate interconnection queue for shovel-ready projects designed to speed projects that reuse existing sites or infrastructure. The commission is also assessing transmission and interconnection reform and convening technical conferences. Barrow said the PUC is exploring transmission buildout, load‑shifting and other measures rather than relying solely on new merchant generation that can take several years to site and build. The commissioners and several members said faster approvals for projects that repower existing plants (for example converting retired coal sites where interconnection already exists) could be a faster path to capacity.

Lawmakers and commissioners noted tradeoffs. Building more in-state generation and transmission would support local jobs and energy exports but can take years; load management and demand response can buy time but require different market arrangements. The commission emphasized the need for a coordinated, multi-pronged approach: transmission upgrades, faster interconnection for shovel‑ready projects, new generation where feasible and demand‑management strategies for large users.

The committee requested more data from the PUC about projected load growth, the status of interconnection reform and how PJM market rules are being adjusted. The hearing did not produce legislation, but multiple members said comprehensive state energy policy and coordination with PJM should be priorities going forward.