Sunday, May 31, 2026 · 03:52 PM
Federal Energy Regulatory Commission Chairman Laura Swett stood in front of PJM Interconnection's annual meeting in Baltimore on May 12 and declared the largest U.S. grid operator may be "too big to function" with an "unacceptable" governance structure. The grid operator serving 67 million people across 13 states faces "a serious legitimacy crisis" as confidence in its decision-making has "completely eroded," Swett said.
This isn't regulatory throat-clearing. Swett framed it as "a time for difficult, history-making decisions that are not for the faint of heart, decisions that may leave many unhappy, decisions that may make or break part of a nation". PJM just ran a capacity auction in December that cleared at the price cap for the third consecutive time and still fell short of its reliability target by 6,625 MW. Data center demand drove nearly 5,100 MW of the 5,250 MW load forecast increase between auctions.
Swett called PJM's stakeholder process "slow where it must be fast, opaque where it must be transparent, and vulnerable to vetoes and agenda control exactly when the region needs immediate action". On May 6, PJM released a white paper proposing three frameworks for market reform, including the option of shifting to a market focused on energy and ancillary services and away from the capacity market entirely. The grid operator froze its interconnection queue for four years starting in 2022. When it reopened in April, 811 projects totaling 220 GW applied—with natural gas dominating at 105.8 GW across 157 projects, while solar accounts for just 14.8 GW and wind 4.7 GW.
"We need NEW—not already planned or queued—generation and we need it NOW. There's no excuse for failure—companies are ready and willing to pay for more than their fair share of getting the power they require." — Laura Swett, FERC Chairman
PJM sits at the crossroads of 13 states and the District of Columbia with "fundamentally different regulatory structures, resource portfolios, and politics," divided between states with vertically integrated utilities and those with competitive markets. Translation: consensus governance doesn't work when Pennsylvania Governor Josh Shapiro threatens to pull out of PJM over electricity costs while hyperscalers want gigawatts of data center capacity yesterday. The capacity market faces a "credibility trap," with high prices that incentivize new construction being undermined by government intervention—FERC approved an extension of price caps for two upcoming auctions on April 28.
This echoes the 1927 moment when three utilities formed the world's first power pool. The difference: back then they were solving for economies of scale, not navigating AI buildout against state-level climate mandates while transformer lead times hit four years. American Electric Power CEO Bill Fehrman said in an earnings call that "if something is not done now, I expect we could still be having these same conversations in 10 years". Jefferies analysts expect reforms before PJM's May 2027 capacity auction, but that timeline assumes stakeholders can agree on anything.
- July 23 FERC conference: Swett announced a technical conference that "will not be another airing of grievances; it will be a work session to build a record eyed toward actionable change".
- Interconnection backlog: Of the roughly 300 GW backlogged in 2022, 95% was renewables and storage, but 74% of those projects withdrew over four years.
- Market design endgame: Watch whether PJM moves toward energy-only markets (Path C in the white paper) or tries to patch the capacity construct with longer hedging periods.