FERC sets a deadline for change at the nation’s largest grid operator
The Federal Energy Regulatory Commission has sharply escalated its response to mounting concerns around PJM Interconnection, the regional transmission organization that manages the power grid across 13 Mid-Atlantic and Midwest states and the District of Columbia. At a July 23 technical conference, FERC Chairman Laura Swett said PJM and its stakeholders have until the end of September 2026 to agree on governance and stakeholder reforms. If they do not, FERC will step in and impose changes of its own.
The warning is notable not only for its deadline, but for its tone. Swett said PJM is facing a “grave legitimacy crisis,” reflecting a view inside the commission that the organization’s current structure is no longer keeping pace with the market and reliability pressures building across its footprint. The conflict is no longer being framed as a procedural dispute over stakeholder rules. It is now being treated as a problem serious enough to threaten confidence in how one of the country’s most important electricity markets is run.
Why PJM is under pressure now
The immediate backdrop is a power system under strain from rising demand and sluggish supply growth. According to the conference discussion, PJM has struggled to bring significant new generation into its system through its last two capacity auctions. That challenge has become more urgent as electricity demand rises, especially from data center expansion, while the resource mix across the grid continues to change.
Those pressures spilled into consumer bills. The source material says capacity prices spiked in PJM about two years ago as demand growth outpaced any increase in supply, contributing to rate increases of 20% or more for some utilities. That sharpened attention from governors, state regulators, and lawmakers, many of whom have been frustrated with the pace and quality of PJM’s decision-making.
In that context, governance reform is being discussed not as an abstract institutional cleanup, but as a practical response to whether PJM can act quickly and credibly enough to manage a fast-changing grid. FERC’s view, based on the conference, is that the existing structure may be too slow, too contested, or too insulated from state concerns to carry that burden effectively.
The reforms now on the table
Several ideas emerged as leading candidates for a reform package. One is strengthening the independence of PJM’s board, a move intended to reduce the perception that decision-making can be skewed by entrenched stakeholder interests. Another is giving states a more formal role inside PJM’s governance process, reflecting the reality that state policy choices increasingly shape generation, transmission, demand growth, and reliability planning.
The conference also discussed whether states should receive filing rights at FERC, allowing them to formally advance proposals rather than relying on PJM or other parties to do so. Expanded filing rights for PJM itself were also part of the conversation. Together, those changes would alter how issues move from internal debate to federal review, potentially changing the balance of influence among utilities, market participants, state governments, and PJM management.
Swett said FERC plans to collect post-conference comments and then hold a dispute-resolution forum in September aimed at developing a governance package with stakeholders. That process creates a narrow window for a negotiated outcome. But the commission’s message was clear: negotiation is preferred, not optional, and delay will not be allowed to continue indefinitely.
A test for PJM’s new leadership
The deadline also lands at an important moment for PJM’s executive team. David Mills, who officially became PJM’s president and chief executive in May after serving as interim leader, said the organization is ready for major changes and is committed to addressing the challenge, including capacity market reform.
That matters because governance reform cannot be separated from the performance issues now under scrutiny. If PJM is failing to attract enough new generation, then the design of its decision process becomes part of the policy story. Critics argue that slow or contested governance makes it harder to respond to market imbalances in time. Supporters of reform believe a more independent board and stronger state role could help restore credibility and speed up decisions on market structure and system planning.
At the same time, any reform package will have to navigate competing interests. PJM’s footprint includes investor-owned utilities, generators, power marketers, public-interest voices, and states with very different energy priorities. Giving one set of actors more influence may be seen by others as a loss of leverage. That is one reason FERC’s public willingness to impose reforms is so significant: it changes the negotiating landscape by making inaction a riskier choice.
Why this matters beyond PJM
PJM is the largest grid operator in the United States, so its governance fights rarely stay local. Its market outcomes affect utility bills, generator investment, transmission planning, and reliability across a large section of the country. They also influence the national debate over whether organized power markets are adapting quickly enough to the dual pressures of electrification and digital infrastructure growth.
The mention of data centers is especially important. Rapid load growth from AI and cloud infrastructure has become a central issue for grid planners, and PJM is one of the clearest test cases for how regional markets respond when demand accelerates faster than supply additions. If governance reform is needed just to make the system more responsive, that will be watched closely by other grid operators and policymakers.
There is also a broader institutional question here. FERC’s stance suggests growing impatience with governance structures that may have worked under slower-moving market conditions but are now struggling under more complex and politically contested circumstances. In that sense, the September deadline is about more than PJM. It is a signal that federal regulators are prepared to intervene more directly when regional market institutions appear unable to reform themselves.
What comes next
The next two months will determine whether PJM can produce a reform package acceptable to FERC, its states, and its market participants. The likely points of contention are already visible: how independent the board should be, how much formal power states should receive, and how filing rights should be allocated.
If PJM reaches agreement, it could begin a reset under new governance rules while tackling capacity market problems in parallel. If it fails, FERC appears ready to write the next chapter itself. Either outcome would mark a consequential shift for the operator at the center of one of the country’s most important electricity systems.
This article is based on reporting by Utility Dive. Read the original article.
Originally published on utilitydive.com
