PJM's IRAS Filing Is the Most Consequential Data Center Grid Rule in a Decade

Two filings in six weeks have rewritten the rules for how data centers connect to the largest grid in the United States. The first, PJM's Reliability Backstop Procurement, landed at FERC on July 31. The second - the Interim Resource Adequacy Service, or IRAS - followed on August 13. Together they represent the most significant structural intervention PJM has attempted since the capacity market was redesigned after the 2014 polar vortex.

The engineering logic is straightforward. The policy execution is not.

The Shortfall That Forced the Filing

PJM's 2028/2029 Base Residual Auction cleared at the FERC-approved price cap of $325/MW-day for the third consecutive year, producing $16.4 billion in total capacity charges - with $6.3 billion, or 38%, attributable to data center load, according to the grid operator's independent market monitor. The auction left a 6,831 MW unmet capacity shortfall for the 2028/2029 delivery year^[1].

That gap is the direct product of two converging trends. PJM's Board of Managers cited a forecast of roughly 70 GW of new large-load demand by 2038, alongside approximately 15 GW of generation retirements since 2022^[1]. The math doesn't close without intervention on both the supply and demand sides simultaneously.

What the IRAS Proposal Actually Does

The IRAS filing, docketed as ER26-3515-000, introduces a new rung in PJM's emergency operating ladder^[1]. The mechanism works as follows:

A "Large Load" is defined as end-use customer demand with a cumulative peak of at least 50 MW at a single electrical site, including affiliated facilities within a one-mile radius^[1]. New Large Loads that enter service after June 1, 2027, and have not secured qualifying new capacity to cover their full peak demand, become subject to IRAS.

The curtailment sequence matters for planners. Under the proposal, PJM would first dispatch available generation and economic demand response, then curtail non-firm interchange and certain non-firm transmission service. Only after those steps would PJM call an IRAS action - and only before moving to Pre-Emergency Load Management reductions^[1]. That sequencing puts uncovered data center load ahead of paid demand-response resources in the emergency queue, which is a significant change in priority.

Critically, IRAS is not a blanket shutdown order. Only the portion of a large load's demand not covered by qualifying new capacity would be subject to reduction^[1]. A facility that has contracted for enough new generation, storage, or demand-side resources to match its registered peak faces no IRAS exposure at all. The filing also preserves state authority: PJM assigns a zone-level reduction quantity, and transmission owners, electric distributors, and state regulators determine which individual customers are actually curtailed^[1].

To support that state-level implementation, PJM is simultaneously establishing a Large Load Registry - a public-facing database tracking all sites at or above 50 MW by location, megawatt quantity, service area, and whether they have secured their own supply^[1]. States and utilities need that registry to know which customers are eligible for IRAS designation and to update their load-reduction plans accordingly.

The Backstop Auction Runs in Parallel

The IRAS filing is the second arm of a two-part intervention. The first, the Reliability Backstop Procurement, was filed July 31 and targets the 6,831 MW shortfall directly. PJM plans to hold the backstop auction from September 30 to October 21, 2026, procuring new generation, storage, demand response, or distributed energy resources on contracts of up to 15 years, with a MW-weighted average levelized cost cap of $555/MW-day^[1].

The RBP target is not fixed. PJM intends to reduce the 6,831 MW procurement target to reflect verified new capacity already being brought by large loads through bilateral contracts, self-supply, or qualifying demand-side arrangements^[1]. That creates a direct financial incentive for data center developers to move quickly on bilateral deals: every megawatt they self-supply reduces the backstop procurement pool and, in principle, the wholesale costs that flow back to load-serving entities.

NRDC estimates that without structural change, PJM consumers will pay an additional $163 billion through 2033 as new data centers exceed available power supplies - with annual capacity bills potentially reaching $27-$30 billion per year starting in mid-2028.

Pennsylvania Moves to Enforce It

PJM's framework is deliberately designed to avoid conflicts with state retail authority. That means its teeth depend entirely on states choosing to use them. Pennsylvania - home to one of the deepest data center interconnection queues in the PJM footprint - is the first to move decisively.

Governor Josh Shapiro signed Executive Order 2026-05 this week, establishing the state's Responsible Infrastructure Development (GRID) framework as binding law^[2]. The order applies to data center proposals with peak demand above 25 MW - a lower threshold than PJM's 50 MW definition, meaning Pennsylvania is casting a wider net.

The mechanics are a carrot-and-stick structure. Data centers that commit to sourcing electricity from new power supplies - including growing amounts of firm clean power - receive expedited state permitting review through the Department of Environmental Protection. Those that do not face removal from the PA Permit Fast Track Program and cannot use nondisclosure agreements in their development process^[2].

On the grid-cost side, the order directs Shapiro's Special Counsel for Energy Affordability to press the Pennsylvania PUC for a series of electricity-sector changes: curtailing data centers before other customers during grid emergencies unless they have secured incremental capacity for their full demand, preventing data centers from receiving critical-load exemptions from curtailment, and assigning them the costs associated with interconnection and PJM reliability measures^[2].

Pennsylvania's administration cited data from PJM's Independent Market Monitor showing that data center demand was responsible for $29.4 billion in capacity charges - 46% of total auction costs - across PJM's last four base residual capacity auctions.

The state's budget legislation adds a transparency layer. House Bill 1924, folded into Pennsylvania's 2026-2027 budget, requires data centers to compile annual reports covering estimated average hourly energy use at peak load, total energy consumption for the prior calendar year, and projected demand for the following year. The PUC will use that data to validate load-forecast inputs that utilities submit to PJM - a process that, until now, lacked independent state-level oversight.

What This Means for Planners and Operators

Photo: Lightsaber Collection / Unsplash

The combined PJM-Pennsylvania framework shifts the risk calculus for every large-load project in the region. A few implications worth tracking:

Bilateral contracting timelines compress. The BYONC (Bring Your Own New Capacity) pathway is the primary escape from IRAS exposure. Developers who have not already initiated bilateral capacity negotiations face a hard deadline: IRAS takes effect June 1, 2027, and FERC approval is targeted for October 12, 2026. That leaves a narrow window to structure, negotiate, and execute qualifying capacity agreements.

The 50 MW threshold aggregates. PJM's definition includes affiliated facilities within a one-mile radius as a single electrical site. Campus-style hyperscale deployments that might individually fall below the threshold could be aggregated into IRAS eligibility. Legal and interconnection teams need to audit site configurations now.

State authority is the variable. PJM's IRAS framework assigns zone-level reduction quantities but leaves retail implementation to states. Pennsylvania has moved. Virginia, Ohio, Illinois, and New Jersey - all states with substantial data center pipelines - have not yet issued comparable directives. The patchwork of state responses will determine whether IRAS functions as a uniform regional standard or a state-by-state negotiation.

The backstop auction is a one-time instrument. Aurora Energy Research's Julia Hoos described the combined procurement and curtailment plan as "a workable stopgap" but noted it is "a system that is designed to break within a year or two." PJM will still need to procure additional capacity for non-data center load through its central capacity auction, and the structural mismatch between load growth forecasts and generation interconnection timelines does not resolve by October.

The FERC comment deadline for the IRAS filing is September 3. The backstop auction opens September 30. Between now and then, every large-load developer, load-serving entity, and state regulator in the PJM footprint needs to know exactly where they stand in the new curtailment sequence.