Trump Administration and Mid-Atlantic Region Governors Announce Emergency Reliability Action Targeting Data Center Load Growth

Posted
by and

On Friday, President Donald Trump—together with governors across key Mid-Atlantic Region states—announced a new initiative aimed at addressing soaring electricity demand driven by large‑scale AI and cloud‑computing data centers. This joint federal-state initiative directs the regional wholesale power grid operator, PJM Interconnection, L.L.C. (PJM)1, to conduct an emergency auction to procure additional power plant capacity aimed at enhancing reliability and stabilizing power prices. Rather than issuing an executive order, as President Trump has done over the last year to address other energy issues, today’s action was issued instead as a non‑binding Statement of Principles, signed by the National Energy Dominance Council2 and participating governors.

This announcement comes less than a month after the Federal Energy Regulatory Commission (FERC) issued an order addressing the co-location of generating facilities with data centers and other large loads. FERC directed PJM to offer new transmission services for co-located facilities and modify its tariffs to accommodate large data centers and other large loads more efficiently, all while attempting to protect customers from unfair price increases.

PJM is expected to make its compliance filing by early next week in response to the FERC order.

Coincidently, one day before FERC’s order on December 18, 2025, PJM announced that its latest PJM Base Residual Auction results for the 2027–2028 delivery year showed a wholesale power market under significant supply pressure, with outcomes that set new records across the region with the highest capacity price in PJM history. Capacity prices cleared at the maximum capacity price of $333 per MW day, and PJM reported a 6.6 gigawatt shortfall of capacity compared to its reliability target.

Key Takeaways for Energy and Data Center Developers

  1. Data Center Operators Are Being Asked to Fund New Power Plants
    The Statement of Principles directs PJM to conduct a one‑time emergency reliability auction in which data center and hyperscale cloud operators bid on 15‑year capacity contracts, providing long‑term revenue certainty for new generation. These contracts are expected to support approximately $15 billion in new power‑plant construction across the PJM footprint, which is just $1 billion short of the $16 billion annual capacity costs now forecasted in PJM.

The Statement of Principles states that data center operators would be required to pay for the contracted capacity whether or not they ultimately use all of it, a major shift from current cost‑allocation practices. It remains unknown how PJM will respond and whether PJM will ask FERC to modify its tariff to allow for the requirements of the Statement of Principles.

  1. Not a Formal Executive Order—But Still a Major Policy Signal
    Despite speculation, President Trump issued no new executive order regarding energy on Friday. Instead, the policy takes the form of a “Statement of Principles” signed jointly by the Administration and several PJM‑region governors. This Statement urges PJM to act but it does not legally compel the regional transmission organization or establish enforceable federal mandates. To do so, FERC would have to pass a formal order to place legally enforceable mandates on PJM.

Nonetheless, for stakeholders in PJM operating energy assets or planning facilities that will require large-scale loads, the announced policy direction is high‑impact even though it is not yet binding. However, specific policy implementation will pivot on PJM’s response and subsequent FERC engagement.

The fact that governors from Ohio, Pennsylvania and Virginia participated in the announced Statement of Principles is also important in light of the shared jurisdiction of electricity policy and regulation in the United States. Under the Federal Power Act, FERC has jurisdiction over wholesale power sales in interstate commerce and interstate transmission while the states retain jurisdiction over in-state utilities and retail sales of power to end use customers. As of now, large data centers supporting AI and cloud computing remain subject to state jurisdiction, but FERC is currently considering a new policy that would allow large data centers over 20 MW to be subject to FERC jurisdiction when interconnecting to the high-voltage transmission level.

The Statement of Principles is significant because it suggests that state and federal jurisdictional authorities are coalescing to address a common concern in PJM—the skyrocketing rise in wholesale power prices and the perceived need to act before added costs are passed on to consumers.

  1. Drivers: Explosive AI‑Driven Load Growth and Consumer Bill Pressure
    The Trump administration emphasized that rapid expansion of AI‑focused data centers has strained PJM’s capacity market, leading to higher retail bills for households across the Mid‑Atlantic and Midwest. This includes:
    • Record increases in PJM capacity prices, with watchdogs attributing $23 billion in recent PJM capacity costs to data center demand.
    • Growing concerns over blackout risk, with PJM reportedly falling 6 GW short of its reliability requirement in its most recent auction.
    • Trump’s public commitment that Americans should not “pay higher electricity bills because of data centers.”
  1. Implications for Project Development and Interconnection Strategy
    Today’s announcement, combined with PJM’s existing capacity shortfalls, signals increased pressure on:
    • Large‑load interconnections, especially for 300+ MW AI campuses.
    • Co‑located generation models (which FERC addressed separately in the December 18 order to PJM affecting PJM’s tariff structure).
    • Long‑term Power Purchase Agreement structuring, given the potential requirement to lock in multiyear capacity obligations.
    • Large-load customers and developers seeking to develop or finance hyperscale facilities should anticipate accelerated regulatory changes at FERC resulting in PJM tariff changes, with an immediate focus on cost allocation and reliability needs. States will continue to have an impact on service especially as they regulate local electric distribution utilities.
  1. What Happens Next?
    PJM will need to evaluate the Statement of Principles and determine whether and how to initiate the emergency reliability auction. It appears likely that PJM will need to ask FERC to modify its tariff further to implement any new procedures for capacity auctions and any resulting new cost‑allocation structures.

States participating in the announcement may also pursue parallel state‑level approvals or policy alignments.

Pillsbury Insights and Recommended Actions

For Data‑Center Developers:

    • Prepare for significant new upfront capacity‑related costs in PJM, potentially applied uniformly across large‑load projects.
    • Bring your own generation if possible because PJM’s new tariff changes will likely offer flexibility, cost savings and expedited interconnection possibilities for data centers co-locating with behind-the-meter generation.
    • Revisit site‑selection assumptions as states participating more aggressively in the policy direction of the Statement may become more demanding on cost‑sharing.

For Energy Investors/Independent Power Producers

    • Expect an increase in demand for dispatchable generation, including gas‑fired and potentially nuclear assets, tied to 15‑year Power Purchase Agreements.
    • Monitor PJM stakeholder processes closely—early‑stage participation may shape contract and market design.

For Corporate Power Buyers

    • Consider whether on-site or co‑located generation may provide greater cost certainty in light of new PJM‑level capacity obligations.
    • Evaluate existing PPAs and load‑growth forecasts for exposure to capacity‑market reforms.

Pillsbury Can Assist
Pillsbury’s Energy & Infrastructure, Data Center, and Regulatory teams are actively advising multiple clients on:

  • PJM interconnection strategy and tariff reform;
  • Large‑load data‑center development and on‑site generation;
  • FERC implications of emerging reliability‑driven policy shifts; and
  • Federal and multistate energy regulatory alignment.

Please reach out to your Pillsbury contact or any member of our Energy and Data Center teams for guidance on how Friday’s announcement may impact your projects or investment plans.

1 PJM services wholesale power markets across 13 states and Washington, DC, with a service territory that stretches from New Jersey to Chicago. It acts as a central dispatcher for wholesale power generation, conducts long-term transmission planning, and runs day-ahead and real-time energy markets and capacity markets.
2 The National Energy Dominance Council is a White House-level energy policy body created by President Trump’s  February 14, 2025, executive order and is designed to coordinate and implement the administration’s “energy dominance” agenda. Among other things, its mission aims to streamline federal permitting, expand energy production and accelerate buildout of generation, transmission and distribution infrastructure. It is led by U.S. Department of the Interior Secretary Doug Burgum and Secretary of Energy Chris Wright.

RELATED ARTICLES

FERC’s New Order on Data Center Co-Location: What Utilities Need to Know

Pillsbury’s Guide to Data Centers