As data centers upend electric grids, the largest operator in the US is facing down a revolt from state officials

On a serene road in Valley Forge, Pennsylvania, near the site where George Washington’s weary soldiers endured the winter of 1778, lies the headquarters of PJM Interconnection, the largest electricity grid operator in the U.S. Inside, operators combat harsh weather and power fluctuations to ensure the reliable delivery of electricity to 65 million consumers across 13 states and the District of Columbia. The control board, resembling something from a disaster film, covers the walls and spans nearly from floor to ceiling; however, it is intentionally designed to be a low-drama environment.

But as the U.S. faces a surge in electricity demand, this atmosphere might soon shift.

In late September, governors from 11 PJM member states gathered in Philadelphia to call for a greater influence in the grid’s energy decisions, driven by sharply rising costs affecting their constituents. Some even suggested the possibility of exiting the 13-state grid entirely.

Governor Josh Shapiro of Pennsylvania, who spearheaded the effort, stated, “We need states to have more of a voice in how PJM functions. We need to accelerate energy-producing projects and control costs. If PJM cannot meet these demands, then Pennsylvania will contemplate going solo.”

Pennsylvania, being a net exporter of electricity, could theoretically enact legislation to compel its generators to leave the nonprofit and join a new grid operator; however, such a move would require federal approval, and power generators would have to compensate PJM significantly for past payments. Shapiro’s strong statements likely aim to push for changes within PJM, seeking a more substantial role for public officials in the grid they depend on.

Ultimately, the governors are focused on securing lower retail electricity rates. Their goal is to curb the dramatic price hikes currently experienced by consumers, a situation exacerbated by tech companies pushing to establish energy-intensive data centers. This very concern was the impetus for PJM’s creation. About three decades ago, U.S. electric utility companies managed both energy generation via power plants and the infrastructure for transmission and distribution. As rising prices in the 1980s and 1990s led many states to restrict utility companies from owning power plants, it dismantled the monopoly control generators had in their regions. These changes coincided with federal initiatives to open grids to independent power producers capable of competing with utility-owned facilities.

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Currently, PJM functions as an intermediary. It operates a daily energy market that purchases power from the cheapest generators and sells it to local utilities to meet real-time demands. For this system to work, PJM must ensure that enough power plants (or renewable sources like solar arrays and wind turbines) are available to sell electricity at any given moment. Consequently, PJM also runs an annual capacity market that forecasts total electricity usage across the region for the next three years. This figure helps PJM compensate power plants for their commitment to be operational when needed.

To determine capacity needs, PJM assesses historical usage data, considers new load requests from potential customers seeking grid access, and adds extra capacity to avoid rolling blackouts during extreme weather events. Approximately 25% of each utility bill reflects this “capacity market,” the funds PJM expects to allocate to ensure service reliability during peak temperatures over the next three years.

While capacity auctions typically go unnoticed, the surge in Silicon Valley towards artificial intelligence is bringing these dynamics to the forefront. States like Pennsylvania, New Jersey, Ohio, and Virginia are actively pursuing the tech industry. In March, President Trump joined Pennsylvania Senator Dave McCormick at the Energy and Innovation Summit in Pittsburgh to unveil $90 billion in private investments, with the goal of establishing Pennsylvania as a national center for data centers and AI. Virginia boasts what is known as Data Center Alley, a collection of facilities handling 70 percent of global internet traffic, while Ohio is emerging as a key player in tech infrastructure. This growth has led to an influx of significant load requests inundating the grid.

A report from the Union of Concerned Scientists revealed that ratepayers in seven states within PJM’s footprint paid $4.4 billion for transmission upgrades necessary for data centers to operate. For instance, D.C. customers experienced a monthly electricity bill increase averaging $21.

Soaring prices at PJM’s capacity auctions continue to place pressure on consumer costs. In July, PJM reported that the recent capacity auction had reached $16.1 billion, compared to only $2.2 billion two years prior. According to Monitoring Analytics, a watchdog for PJM, this steep increase is “almost entirely due to existing and anticipated large data center load additions.” They also noted the “extreme uncertainty in the load forecasts” as a “unique and unprecedented situation” that warrants attention. Monitoring Analytics and the Natural Resources Defense Council (NRDC) have both advocated for PJM to implement a “bring your own generation” model, where high-consuming customers like data centers would need to develop their own power sources in advance, instead of drawing from the grid.

Much of the uncertainty regarding the future of the grid, experts from NRDC and the Sierra Club warn, stems from the fact that some of this seemingly boundless demand for electricity may be illusory. For example, a tech company planning to construct a single data center could apply to the utility operator in multiple locations before finalizing land acquisition. Ultimately, they may only create one data center, but ratepayers would still be responsible for the costs associated with the three applications considered in the capacity market. In fact, some estimates indicate that approximately 75 to 90 percent of data center load requests may never materialize.

PJM has also faced criticism for delaying new electricity sources, with many renewable energy projects languishing in its interconnection queue for years. Recently, 105 lawmakers signed a letter urging PJM to expedite these projects to capitalize on tax incentives set to expire soon. (The ongoing federal government shutdown may further complicate efforts to achieve this deadline.)

Robert Routh, the Pennsylvania policy director at NRDC, cites logistical challenges as part of the problem. “For a long time, PJM was used to receiving interconnection requests at a rather slow pace,” he explained. Historically, PJM dealt with large fossil fuel plants located near transmission lines and followed a standardized process for interconnection. However, as the cost of renewable energy decreased, the number of smaller projects attempting to connect to the grid surged. In 2022, PJM halted accepting new interconnection requests to address its backlog, which is expected to persist until late 2026.

“The overwhelming number of requests started to outpace their capacity,” Routh said. “They didn’t evolve to meet these new realities.”

Meanwhile, state governors are advocating for a more pronounced role in determining how PJM allocates resources and integrates new generation. Despite states actively pursuing tech investments and focusing on data centers, lawmakers are concerned this investment surge is contributing to unsustainable increases in electricity prices for consumers.

A PJM representative asserted, “We are doing everything within our authority to manage this unprecedented growth in expected electricity demand.” PJM is currently seeking public feedback on a program referred to as the Critical Issue Fast Path, aiming to expedite state-sponsored energy projects tied to massive load requests, instruct utilities to eliminate duplicate requests, and require states’ approval for capacity market estimates. This requirement for state consent places the responsibility back on governors, who are essentially pointing fingers at PJM, according to energy market analyst Rao Konidena.

Under the revised proposal, states could select significant energy projects that would be prioritized to support these data centers. However, critics argue this approach will likely favor more oil and gas projects, given the regulatory obstacles facing solar and wind under the Trump administration and the urgent push for building superintelligence, making it improbable that tech companies will wait for clean energy solutions. Shapiro’s office did not respond to a request for comment regarding how they plan to reconcile Pennsylvania’s emissions objectives with the considerable AI investment the state is courting.

“Many of these [tech] firms—like Google and Apple—promote unyielding commitments to sustainable energy and emissions reduction,” noted Nick Abraham, senior communications officer with the League of Conservation Voters, an environmental advocacy organization. “They cannot fulfill these promises if they are increasing fossil fuel dependence due to data centers.”

Editor’s note: The Natural Resources Defense Council is an advertiser with Grist. Advertisers do not influence Grist’s editorial choices.