FERC Gives PJM Until September to Fix Governance or Washington Will Do It For Them

FERC Chair Laura Swett didn't mince words Thursday. PJM Interconnection, the grid operator running power markets for 13 Mid-Atlantic and Midwest states plus Washington, D.C., has until the end of September to fix its own governance problems. If it doesn't, the Federal Energy Regulatory Commission will do it for them.

"PJM is facing a grave legitimacy crisis," Swett said at a FERC technical conference on the grid operator's governance issues, according to Utility Dive. "Some transmission owners are openly discussing leaving the RTO altogether. Put plainly, market participants have lost confidence in PJM's decision-making abilities."

Swett's statement carries weight from the federal agency that oversees PJM.

How We Got Here

Two years ago, PJM's capacity auction prices spiked as data center demand outpaced new power supply. Utilities in the region saw rate increases of 20% or more, according to Utility Dive. Governors and state regulators got loud, fast, because their constituents got the bill.

Since then PJM has run two more capacity auctions. Both came back with lackluster results for new generation, according to PJM President and CEO David Mills, who spoke at Thursday's conference as reported by insidelines.pjm. The grid operator isn't attracting enough new power plants to keep up with demand. The permitting, siting, interconnection and financing bottlenecks Mills cited aren't PJM's fault alone, but PJM's structure isn't helping either.

Mills, who took over as permanent CEO in May after months as interim leader, isn't fighting the pressure. "We are fully committed to rise to the challenge," he said, according to Utility Dive, including capacity market reform.

What's Actually Broken

Two structural problems got flagged repeatedly at the conference. First, PJM members can effectively fire the grid operator's own board. Second, the stakeholder process that's supposed to produce reforms can drag on for years and end with nothing.

PJM runs a sector-weighted voting system, splitting members into five groups: electric distributors, end-use customers, generation owners, other suppliers, and transmission owners. Passing anything requires a two-thirds majority of that sector-weighted vote. According to Utility Dive, the practical effect is that any two sectors can team up and block whatever they don't like. That's happened repeatedly on the issues that actually matter.

Jodi Moskowitz, PSEG's vice president for regulatory affairs and RTO strategy, said PJM's fumbling response to the sudden supply-demand shift made governance problems that had been simmering for years finally boil over, according to Utility Dive.

Reforms on the Table

Mills laid out specifics during a panel on board authority, states' role, and filing rights, according to insidelines.pjm. He wants a beefed-up Organization of PJM States (OPSI) that can speak for all the states with one voice, plus expanded rights for PJM's board to file directly with FERC, what's called a Section 205 petition, on operating agreement and transmission planning matters without waiting on the sluggish stakeholder process.

It's not just talk. It matches PJM's own written testimony submitted to FERC ahead of the conference, which stated plainly that "governance and stakeholder processes play a direct role in determining how quickly and effectively PJM can respond to changing system needs," and that PJM is "committed to meeting this moment."

Broader reforms floated at the conference include strengthening board independence, possibly through an advisory stakeholder model, and giving states more formal filing rights at FERC directly, not just influence through PJM.

A reasonable critic could look at all this and ask whether handing states more direct filing power just creates 13 new veto points instead of five sector-based ones, potentially making PJM slower, not faster. Nobody at the conference offered a clean answer to that trade-off, and it's a legitimate open question given how much is riding on speed right now with data center demand still climbing.

What Happens Next

After taking written comments from Thursday's conference, FERC plans to hold a dispute resolution forum in September to hammer out a governance reform package with PJM stakeholders, according to Swett. If PJM and its members can't reach agreement by the end of that month, FERC imposes its own reforms.

That's a real deadline with real teeth. FERC has the legal authority to force changes on PJM's governance structure if voluntary reform fails, and Swett made clear Thursday she's prepared to use it.

Two senior Trump administration energy officials attended the conference: James Danly, deputy secretary of the Department of Energy and a former FERC chair, and Peter Lake, senior director of power for the White House National Energy Dominance Council, according to insidelines.pjm. Their presence signals this isn't just a wonky FERC proceeding. The White House is watching how PJM handles the grid strain from AI-driven data center growth, and whether the nation's largest power market can actually deliver the new generation the country needs.

The unresolved question is simple: can 13 states, hundreds of utilities, and a board that answers to all of them agree on anything substantive in roughly nine weeks? PJM's stakeholder process has a documented history of gridlock. September will show whether that changes voluntarily, or whether FERC has to force it.