FERC targets PJM governance overhaul as 3 grid risks mount

FERC officials pushed for greater independence at PJM Interconnection on Thursday as 3 risks mount for the nation's largest power grid: transparency, blackout threats and surging data center demand.

"We are optimistic that people will be able to coalesce around identifying what should change in the market," FERC Chairman Laura Swett said during a Senate Energy and Natural Resources Committee oversight hearing.

PJM is "probably performing the worst" among US electricity markets, Swett said. The grid operator saves consumers billions of dollars a year by efficiently operating the grid, FERC Commissioner David Rosner said, but "none of that works if you don't have buy-in from states."

The push for reform comes as data center demand surges across PJM's 13-state footprint while few new power plants are added, raising blackout risks. FERC issued "show cause" orders in June requiring grid operators to study how they integrate large loads.

Fifteen years after FERC issued Order 1000 to inject competition into transmission, the push "has not yet fully materialized," Sen. Mike Lee, R-Utah and committee chair, said. Some regions have implemented competitive processes, but they are only beginning to bring efficiencies, Chang said.

FERC created a task force on grid-enhancing technologies, or GETs, which include dynamic line ratings and advanced power flow controllers, Swett said. The Federal Power Act bars FERC from requiring utilities to use GETs, but the agency can direct transmission owners to analyze them.

Chang said FERC could incorporate GETs into its incentive processes, asking utilities to explain what technologies they considered and why they are not using the best available options. Sen. Angus King, I-Maine, noted that transmission owners have an incentive to "gold plate" infrastructure to maximize returns, creating a disincentive for cheaper GETs.

"One of the things we need to look at is how do we provide shared savings," King said.

FERC's June orders also require grid operators to consider advanced transmission technologies in their study processes and to study load that may appear near generation, Swett said. "This will save our consumers a lot of money," she said.

"Utilities and markets do not want to change, with the exception of a few of them, and it requires aggressive instruction for them to innovate," Swett said.

The reforms could reshape how the nation's largest electricity market operates, potentially increasing costs for utilities and data center operators in PJM's footprint while benefiting grid modernization companies. Investors will watch for FERC's next steps after the technical conference comment period closes.

This article is for informational purposes only and does not constitute investment advice.