FERC Freezes PJM's Data Center Power Plan as Utility Stocks Head for Worst Quarter Since COVID

The Federal Energy Regulatory Commission accepted but suspended a plan by PJM Interconnection, the country's largest grid operator, to fast-track new power supply for the AI data center boom, according to Bloomberg's report in Energy Connects. The suspension runs until February 28, 2027, with a paper hearing scheduled to sort out unresolved cost issues.

FERC Chairperson Laura Swett didn't mince words. "This Commission will not be forced into accepting a deeply flawed, 11th-hour procurement mechanism with billion-dollar implications for consumers," she said in the order, according to Bloomberg. Commissioner Lindsay See added that "existing customers should not be left paying costs attributable to new demand."

That's the crux of it. PJM wanted a one-time auction with 15-year contracts, pushed by the Trump administration earlier this year, to cover a 6.8-gigawatt shortfall after an earlier auction failed to attract enough commitments. Monitoring Analytics, PJM's independent watchdog, flagged that regular consumers could end up footing the bill if new data center demand doesn't pan out. FERC sided with that concern. PJM can refile a corrected plan and possibly shorten the delay, but for now the region's reliability is on hold while the paperwork gets fixed.

Utilities Stocks Are Already Pricing in the Doubt

While FERC was slamming the brakes on PJM, utilities stocks were already getting hammered. The sector is on pace for its worst quarter since the pandemic, according to Crypto Briefing, as investors question whether the data centers utilities planned to serve will actually get built.

The math is brutal. Community opposition has blocked, withdrawn, or stalled more than $170 billion in AI data center capacity since January 2024, according to energy advisory firm Relae, formerly known as Carbon Direct, cited by Utility Dive. That's against a backdrop of roughly $581 billion Goldman Sachs expects hyperscalers to spend building U.S. AI infrastructure this year alone.

Utilities are stuck in the middle. Rising interest rates make new infrastructure more expensive to finance. Equipment shortages and construction labor gaps slow down projects even when demand is real. And if utilities build capacity for data centers that never show up, regular customers get stuck holding the bag on stranded costs, exactly the scenario FERC just flagged in the PJM order.

Texas is the state to watch. The state has already paused new data center interconnections pending an audit, according to Utility Dive, and prediction markets are pricing in real odds of a legislative moratorium by the end of 2026. Whether Governor Greg Abbott or the Texas Legislature act, and what ERCOT and the Public Utility Commission of Texas say about grid reliability, will shape how this plays out nationally.

The Case for the AI Buildout Is Real

The demand projections aren't make-believe. Goldman Sachs expects U.S. data center power demand to more than double from 2025 levels to 66 gigawatts by 2027. The Electric Power Research Institute says data centers could represent 9% to 17% of U.S. electricity demand by 2030, and up to 20% by 2035. Only about half of the capacity scheduled for the next one to two years is expected to come online on time, per Goldman, meaning there's a genuine shortfall developing, not just speculative excess.

A new report from Texas-based research firm Zpryme, done in partnership with S&C Electric Company, found that 75% of North American utilities report higher operational risk today than five years ago, with three in four directly linking that shift to data center and AI growth. Anders Sjoelin, S&C Electric's CEO, said in a statement that "operational risk is rising, with electricity dependence and demand growing and affordability remains a significant constraint." Despite the financial strain, nearly 80% of utilities surveyed still expect resilience investments to increase over the next five years. Utilities are trying to figure out who pays for AI power demand.

Microsoft's own spending tells the same story. The company plans to invest more than $10 billion in Gulf-region cloud and AI infrastructure through 2030, and Stifel just upgraded Microsoft stock to Buy on expectations that Azure and Copilot revenue will keep climbing, according to MarketBeat. Big Tech isn't slowing down. The question FERC and state regulators are now asking is whether ordinary electricity customers should be forced to underwrite that bet.

Developers and some utility executives worry that overcorrecting through moratoriums, large-load tariffs, or FERC delays could leave the grid short of power exactly when AI demand actually materializes. That's a legitimate risk given the EPRI and Goldman projections. The counterpressure from regulators and communities responds to a specific, provable problem: speculative interconnection requests that inflate utility investment plans without binding commitments behind them.

PJM now has to decide whether to refile a corrected capacity plan before the February 28 deadline, or wait out the full suspension. Texas lawmakers haven't yet acted on a moratorium. Until one or both of those resolve, utilities investors are left guessing which data centers are real and which are vaporware, and stock prices are reflecting that uncertainty in real time.