By John Ainger and Mark Chediak, Bloomberg News
Power-hungry data centers have increased supply costs for the largest U.S. electric grid by more than 60%, the system watchdog said.
Read more What to know about the cyclosporiasis diarrhea outbreak, Taco Bell and California
PJM Interconnection LLC, which serves 13 states and Washington, DC, said Tuesday that its auction to procure power for the year starting June 2028 tied a $16.4 billion record set in late 2025. Data centers accounted for roughly $6.3 billion of that total, said Joseph Bowring, president of Monitoring Analytics, the grid’s independent market monitor.
That data-center burden on PJM ratepayers amounts to almost $30 billion when figures from three previous auctions are included, he said during an interview.
Meanwhile, the auction failed for a third straight time to secure enough future supply commitments to ensure reliability in coming years, underscoring the scale of the challenge posed by the artificial intelligence boom.
The failure to meet the reliability target is “not an acceptable way to go forward,” Bowring said. The grid needs to run an auction specifically for data centers so that consumers aren’t on the hook for the extra costs, he added.
The auction fell 6.8 gigawatts short of what PJM will need to guarantee system reliability during demand spikes. The shortfall is equivalent to almost seven traditional nuclear reactors.
“This year’s auction confirms an unacceptable trend: data center load growth is outpacing new electricity supply, degrading reliability, and keeping prices at the cap,” Claire Lang-Ree, a climate and energy advocate with the National Resources Defense Council, said in a statement. New power supplies “simply can’t keep up with the pace of data center load growth, and everyone is paying the price.”
The result ramps up the pressure on a grid that’s home to Virginia’s Data Center Alley and has borne the brunt of criticism for the struggle to manage the AI boom and sufficiently protect customers from soaring costs. Attention now shifts to an emergency procurement mechanism later this year that aims to shift the burden of ramping up power generation to hyperscalers.
“Such a shortage does not necessarily mean that the PJM system will be unable to serve load reliably in the delivery year,” the grid operator said in a statement. “It means that PJM would have to operate with slimmer reserves and a greater level of risk.”
The results released Tuesday show the daily cost of those payouts hit the price ceiling of $325 per megawatt-day, which will show up in users’ monthly utility bills.
Without the cap, the auction would have cleared at $554.72 for a total cost to ratepayers of almost $30 billion, PJM said. Prices in the Chicago area would have cleared at more than $775.
Read more Drained Reflecting Pool reveals Trump’s ‘American flag blue’ liner is now closer to gray
A searing heat dome earlier this month showed just how close the PJM grid is to reaching its limits, with power demand likely surpassing a record that had stood for over two decades. Without urgent action, the grid risks further deterioration with demand outstripping oncoming supply.
PJM already was under intense scrutiny with data centers and power generators saying they are not being connected fast enough as consumer groups and politicians hammer the grid for spiraling power bills. Those concerns are likely to come to a head at a July 23 conference called by the Federal Energy Regulatory Commission to discuss grid governance.
The latest auction result, intended to guarantee enough capacity is available for the few hours in a typical year when demand peaks, will also put further onus of an emergency measure slated for later this year to fill the supply gap and ensure data centers pay.
“PJM customers are left to pay high capacity costs while also facing the risks of undersupply,” Drew Maloney, president of the Edison Electric Institute, said in a statement. “America’s electric companies are working every day to lower costs and keep electricity as affordable as possible, but we need swift reform, in addition to the extraordinary measures currently underway, to get more power infrastructure of all types built across the region.”
PJM has yet to submit its proposal for exactly how that will work, but the process is set to get underway in September after heavy pressure from the White House and state governors. To meet that deadline, the grid operator will have to make a filing at FERC before the end of this month.
Costs would be even higher if not for the price cap first negotiated in 2024. While that has helped keep a lid on costs, PJM has noted that there’s a downside in that it deprives the market of a price signal to induce new plant construction.
PJM Chief Executive Officer David Mills recently described the situation as “untenable.”
PJM power prices jumped 76% during the first quarter due to rampant demand from data centers, according to a report from Monitoring Analytics, the grid’s independent market monitor.
©2026 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.
Read more Suspected cheating prompts DMV to require 11,000 drivers to retake written tests