Powering the Surge: How PJM, the White House, and States Are Responding to Explosive Load Growth

Electricity demand across PJM is accelerating at a pace few anticipated, driven by AI, data centers, and advanced manufacturing. What was once a long-term planning challenge has become an immediate test of market design, grid reliability, and regulatory authority. 
 
In response, the White House has stepped in, urging faster generation development and greater investment certainty. PJM is deploying new reliability tools. States are increasingly acting to protect consumers as capacity prices rise. Yet despite gigawatts of generation approved for interconnection, much of that supply is not arriving fast enough — or in the right form — to meet near-term needs.

The result is a high-stakes question facing policymakers, developers, and market participants alike: how do we move faster without breaking the system we rely on?

In episode 11 of Accelerating Energy, Sidley partner Ken Irvin sits down with Terence Healey of Sidley’s Energy practice and Todd Snitchler, President and CEO of EPSA, to unpack PJM’s evolving approach to large loads, the implications of FERC’s co-location order, the White House’s intervention, and the expanding role of states in an increasingly stressed power market.

Executive Producer: John Metaxas, WallStreetNorth Communications, Inc.

Transcript

Ken Irvin:
Good afternoon, everyone. This is Ken Irvin, coming to you live from the Washington, D.C. office of Sidley Austin. In the midst of Winter Storm Fern, I made it in over the snow and ice and all of what winter brings to D.C. Welcome to Sidley’s webinar this afternoon and a special edition of our Accelerating Energy Podcast, Episode Number 11. We’re here today to unpack breaking developments in the wholesale power market. Hope everyone out there listening is doing all right suffering through Winter Storm Fern. It’s cold. Record peak demand is challenging our grid, and we’re going to get into some of that today. 

Across PJM and beyond, as everyone knows, electricity demand is surging, fueled by AI, data centers, advanced manufacturing, and other large loads arriving faster and at a greater scale than expected. Reflecting all this, of course, is, in the middle of Winter Storm Fern, PJM has issued a max gen alert, load management alert. The Department of Energy has issued FPA Section 202(c) orders for PJM and New York. We’ll talk about all that. What once upon a time was merely a long-term planning issue has become a near-term reliability and market challenging, forcing tough decisions around about timing, resources, and risk.

We’re going to get into all these topics today, talk about how federal policy is shaping things, PJM’s response, what the states are doing, and then we’re going to take a look ahead. The urgency of everything here involved was underscored just about 10 days ago, when the White House released a statement of principles aimed at accelerating the development of electric generation, strengthening investment certainty, and trying to clear a path to serve rapidly-growing electric demand. As I believe Commissioner See noted at the most recent FERC meeting, pretty remarkable that all of the member states of PJM signed onto this statement of principles. So, you got a combination of blues and reds there. Pretty impressive.

The message couldn’t be clearer. Large loads are coming fast in markets. Grid operators, states, and all of us are expected to move just as quickly. That announcement from the White House arrived just as PJM and its stakeholders were questioning whether and how to manage its current market issues. The most recent capacity auction came up short with regard to the reserve margin. Over the next several years, PJM is expecting gigawatts of incremental load, and over the longer term, we’re talking about additions of load measured in the 20s and 30s of gigawatts.

So, a scale of growth that’s intensifying and really kind of exacerbating concerns about timing, reliability, and whether our existing structures are up to the challenge today. At the same time, there are gigawatts of generation approved for interconnection. Not all of that capacity is arriving in the time frame needed or configuration needed to address these reliability risks. So, we’ll get into that today. At the heart of our debate today, our discussion today, is the central question, how do we balance speed, reliability, and affordability without overcorrecting in a way that distorts markets or creates new problems? Fortunately for you all, we’re joined today by two esteemed guests that will help us sort through all of this. First, is my colleague Terence Healey. Terence is a fellow partner in our global energy market joining us from the Bostin office. Say hi, Terence.

Terence Healey:
Hey, Ken. Good to be here.

Ken Irvin:
Thanks for joining us. We’re also joined by our very special guest Todd Snitchler, President and CEO of the Electric Power Supply Association, fondly known as EPSA. EPSA is a national trade group, representing America’s competitive suppliers for more than 25 years. I’m sorry to say I was at this before there was EPSA, but Todd, I’m glad to be here. Of course, I was just a mere teenager or something like that back then. Todd’s a lawyer by training. Previously served as vice president for market development at American Petroleum Institute, and also chair of both the Public Utilities Commission of Ohio and the Ohio Power Siting Board. Todd, thank you very much for joining us.

Todd Snitchler:
Thanks for having me, Ken. I’m looking forward to the conversation.

Ken Irvin:
I got to do a quick disclaimer. This is not legal advice. This is just an informational webinar. If you need legal advice, please come back to us after the fact. Thank you. Disclaimer done. Let’s dive into it here. As I mentioned, the White House issued a statement of principles about PJM, about the development, the need for development of new generation. The federal policymakers here are sending clear signals. The states are in alignment about this. You got a wide array of different political makeup there of these states, and they all signed up to agree to the statement of principles.

At the same time, you’ve got FERC responding to petitions, complains under Section 206 about PJM and co-location of load with data centers, and you’ve got PJM responding with its proposals on that. So, there’s a lot of messaging from the federal level. It’s setting expectations, setting expectations high. Now the hard work of execution shifts to PJM, the states, and all the markets. Terence, let’s start with you, if we can. Are all of these federal signals aligned in a way that truly unlocks this new investment and brings the new supply, or do we still have a lot of regulatory uncertainty or practical constraints?

Terence Healey:
I think, in general, the various items you mentioned are aligned, for the most part. You know, I think we have the White House set of principles. PJM’s upcoming response to FERC’s order determining the tariff is unjust and unreasonable with respect to co-location and behind-the-meter generation, I think it’s going to depend on execution. The new set of principles from the White House calls for a special auction to be dedicated for new resources to serve AI and for that to be backed by a 15-year PPA and for AI or that large load to take the costs or protect the ratepayers.

FERC’s co-location orders that, again, found the existing tariff to be unjust and unreasonable. You know, I think the directive to PJM is going to have them put forward rule that would allow for co-location of new and existing generation in a way that makes sense, and likewise, to address behind-the-meter generation, which is also unclear in the current construct for PJM, and then in the backdrop, you have, you know, what happened in October, which was Secretary Wright’s directive to have FERC initiate a NOPR, which begins an ANOPR to interconnect large load greater than 20 megawatts at transmission-level assets. That’s pending before the commission. We’ve had comments filed, both initial and responsive comments.

So, I think all of these actions and activities are aligned, in the sense that, to your wording, there’s a need, and it’s all about speed to power. How quickly can we get new generation online? How effectively can we use existing generation? And how can we continue to improve the interconnection queue and quicken the study of these assets and get them onto the grid as quickly as possible? And all in the background is, again, the issue of affordability, which I believe, again, these proposals, these directives, these orders all account for that, in some way or another.

Ken Irvin:
Thanks for that. Todd, let’s get you in the mix here. I know on the ANOPR, EPSA came out in support of that. I know you’re at the center of all these issues here. Tell us, from your perspective, president of EPSA, you know, when generation owners and investors look at all this, is it actually inspiring confidence? Are you ready to come and do new development? Are you happy with where things are going?

Todd Snitchler:
Yeah, Ken, you asked the 64-thousand-dollar-question, I think, and the answer is some degree of yes across the board. I think that our members are certainly very aware of the reality of the situation on the ground. I think we have some skepticism about maybe the scale of growth and the pace at which it’s going to arrive. We’ve seen really eye-watering load growth forecasts that are suggesting a phenomenal amount of growth in a short amount of time, and I think you’ve started to see people ask for a little more certainty around some of those load forecasts, and it’s pulled those forecasts back. In fact, PJM...the days are running together, but about a week ago, I think, PJM adjusted their load forecast over the next 10 years or so.

Ken Irvin:
Yeah. They’ve trimmed their sales a little bit there, right?

Todd Snitchler:
Yeah, they’ve brought it back a little bit, and I think that’s a recognition of the more reality-based evaluation they’re trying to do with regard to growth, and it mitigated the growth in the early years, but to your point in your opening comments, it certainly substantiates that there’s going to be a longer growth horizon well out into 2030 to 2035, where they envision the growth coming. So, that’s a good news story if you’re a utility or you’re an independent power producer, and frankly, if you’re a data center. I mean, it suggests to us that the market is ripe, that there is opportunity for us to achieve the outcomes that the country is looking for. I mean, this is not just a business opportunity. It’s a national security question. It’s a geopolitical question.

So, how we can be part of that solution is certainly very important. I think, to your more specific question, directionally, I think a number of the recent announcements point to what we have been looking for, which is some certainty around the marketplace to understand is this a spot to make a good investment? Is this the time to make the right investment? And getting the co-location order out of FERC I think was helpful to kind of set some guardrails around what FERC would deem to be an acceptable version of a co-location arrangement. I think the principles at the DOE and the administration put out are instructive about things that they want to see and the short-term implications that they view this as trying to address.

And then I think maybe the most overlooked portion of those principles is the fact that they expect to have a functional market in place by 2027 for future auctions coming out of that. So, yes, there’s a short-term problem that they want to have addressed, but there’s also the longer-term commitment to market-based solutions to deliver those outcomes. So, our members are keenly aware and are already actively working on that. I would point you to some work that we had done, along with our partners at the PJM Power Providers Group, P3, which made note of all the projects that have been announced since 2024 in the PJM region.

And it amounts to just north of 12 gigawatts of projects that have varying completion dates, but it does suggest that, even in the uncertainty that we’re facing, that there are generation owners and developers who are willing to put capital at risk, and they’re doing so in a way that will help achieve the policy outcomes of reliability and affordability, and I think, once we address some of the lingering market concerns, you'll continue to see a greater degree of certainty develop, and I think that's especially helpful for the longer-term investment thesis.

Ken Irvin:
That’s terrific and very positive to hear. A follow-up question to that, if the federal policy is so constructive, does that mean the bottlenecks, the kind of constraints or supply chain issues, labor issues, or maybe state and local permitting...you know, where are the real bottlenecks?

Todd Snitchler:
I’m tempted to say yes, but there are challenges that are across the value chain, and I think that’s true, and it's important to note that that’s true for us, and it’s true for our utility cousins that are the vertically-integrated utilities. It's true for our rural co-op and public power cousins, as well, in that we're all looking for the same turbines. We’re looking for the same equipment that has got longer lead times if you don't already own it. We’re all utilizing many of the same workers. We need a larger, well-trained workforce to be able to do the things that are needed, and though, the thing that we’re not always cognizant of is many of the workers that build our power plants can also build data centers.

So, there’s growing competition for the workforce that exists, and really stresses the urgency for a growing workforce of skilled labor, and then I think the third thing, and you pointed it out before, is that we’ve got a pretty long list of projects that are through the queue and have signed ISA agreements in PJM and in MISO, for that matter, as well, and those projects haven’t come online, and that suggests that there are other issues, outside of the queue process, that are slowing the development and this need for speed to market, and whether that’s local and state permitting level issues or that’s final investment decisions or some other barrier that is keeping those projects from being developed, those are the ones that you would expect to see arrive sooner rather than later.

And frankly, that’s one of the other areas that we probably ought to be focusing on, as well, because this is an all-hands effort if we’re going to deliver speed to power, and so, while we’re working on the federal-level issues on wholesale power markets and how we’re going to deliver the new electrons, at the state and local level, they should be focused on how we can accelerate the projects that already have approval and get them underway and connected to the grid sooner rather than later, because that’ll help achieve both the reliability and the affordability question that remains kind of the two twin drivers to much of this conversation.

Ken Irvin:
Those are very cogent points, very on target there. I know that, you know, the electricians and the competition for their services between data centers and generation is just one, you know, illustration of where this is really becoming a complicated issue.

Todd Snitchler:
Yeah.

Ken Irvin:
I forgot to mention, if folks have questions, please put them in the chat, and we’ll try and get through them as quickly as we can. One of the questions, Todd, before we move back to Terrence, was PJM’s backstop procurement. The board acknowledged a need for doing that. The capacity market BRA for ‘27 / ‘28 didn’t clear the reserve margin. What is that backstop procurement process? What is it going to look like? Is it going to get accelerated? Is that different than what the White House and the statement of principles is seeking?

Todd Snitchler:
I think they’re, in effect, one and the same. A lot of the details are TBD. How soon it will be done, what the actual mechanism will be I think are not yet decided. I think there was certainly recognition on the part of PJM that they understood the direction that the principles document was moving them towards, but I think there’s a little bit of room between here and we’re going to run a reliability backstop auction. What is it going to look like? How much are we actually going to have to try and procure? I mean, what is the target that we’re aiming for? And from our perspective, what is the least harmful way for us to administer this, hopefully, one-time process in order to get the market back on its regular cycle of procuring the capacity three years ahead, one-year tranches?

And so, I think there is still a lot of discussion that’s going to occur between now and when that finally comes to fruition, but I think the administration made it very clear how they would expect to see this move quickly, and I think PJM is trying to sort through the particulars about how they take that directive from the principles and put it into practice in a meaningful way as they try to operate the market, and we certainly want to be helpful in providing some good ideas about how they do that in a way that’s both beneficial and limits the out-of-market impacts that could occur if this were to become an ongoing phenomenon that has to be addressed.

Ken Irvin:
Mitigating the out-of-market effects, Terence, that brings us back to the regulatory side.

You know, admittedly, the statement of principles is non-binding, but it’s clearly intended to prompt speedy action here. How does this translate into actual authority? Is it through PJM filings, FERC review? You mentioned about the 206 complaint about co-location. What is it that happens to make the statement of principles become something actual, something actionable?

Terence Healey:
Todd kind of hit it on the head. There’s a lot that is TBD, but what's in the statement of principles, I think, are some pretty definitive concepts, right, that the White House and that bipartisan group of governors all signed onto. Ultimately, however, it would be PJM...it’s PJM’s tariff that would make what’s referred to as the 205 filing with FERC that would contain the revisions to address these principles, and you know, it would be fashioned by PJM and PJM stakeholders, open for public comment.

And what that looks like, ultimately, again, is TBD, but it’s going to begin with PJM reacting with a tariff revision. FERC, itself, does have what's referred to as Section 206 authority. So, it could initiate a proceeding and have a little more control over the process and implementation, but you know, FERC tends to, generally, not be overly prescriptive. It wants its markets, its RTOs, and ISOs to make the proposal. There are many different paths to take that are “just and reasonable,” what FERC has to make a determination on.

So, ultimately, I think we’re going to see PJM make the filing, FERC react, but PJM will, I would assume, attempt to recognize and address each of the principles that are outlined here. You know, I think the same could be true for the NOPR that’s pending for large load interconnection. That, too, had, effectively, a statement of principles, and what ultimately comes from FERC on that, we’ll see. You know, Secretary Wright has the authority to order that FERC consider something, but all FERC has to do is consider that and take a final action. What, ultimately, comes from that is TBD, as well.

Ken Irvin:
Secretary Wright has been very active, Todd. Not only did he direct FERC to do this consideration of the Advance Notice for Proposed Rulemaking, but they’ve been using the power of Section 202(c) under the Federal Power Act before this latest winter storm, and now, as we said, there’s a 202(c) order for PJM. There’s a 202(c) order for MISO. So, we’re seeing the secretary, and I guess, in coordination, the White House, really kind of intervening and really kind of putting their thumb on the scale of what they want to have happen here. Is that a good thing? Does that help advance the investor certainty that you were talking about, advance the opportunities, or does that kind of create one of those, you know, adverse out-of-market kind of impacts?

Todd Snitchler:
Yeah, I think you have to look at it in two separate buckets. So, the current slew of 202(c) orders...and I think we’re up to eight now. So, there were ones issued for New York and for PJM, but also Duke, and I think ISO New England had a couple issued, as well. Are really, I think, focused on ensuring system reliability. I mean, this weather system is similar, in some ways, to cold weather systems we’ve had in the past, but it’s also different in both the length and duration or duration and depth of the...

Ken Irvin:
Geographic scope of it is pretty...it’s a big footprint.

Todd Snitchler:
Yeah. I think their number one objective is to ensure that the lights stay on and that people can stay warm and people have their power, and so, if they believe these are the steps necessary to ensure that that takes place by taking the caps off emissions requirements to make sure units can run, then that’s certainly going to be job one. I mean, nobody wants to see the potential life and health implications of the lights going out because of an emissions limit on a unit that could otherwise have had the opportunity to continue to operate.

As to the prior 202(c)s that were utilized in other assets, I think it’s interesting that they are being applied in different places. So, one of them was in the PJM market. One was outside of the PJM market. I think it was in MISO for the unit that was in Michigan, and so, what you’re seeing is the administration signaling, I think, pretty clearly that they believe that we need to keep all of the megawatts on the system that we have until and unless there is something of equal value that can replace them because of the load growth that we’re experiencing and likely to experience going forward.

And so, this is one of the tools that’s available in order to ensure that you have sufficient resources on the system. Does it have the ability to impair the market to some degree? I suppose, yes. If you look at it from a purely economics textbook perspective, yes. If a unit is uneconomic and it should exit, then it should have the opportunity to do so, but if you need to keep those units on and the economics are changing almost in real time these days, as you see load growth coming on the system, then I think that’s a reason that the DOE might believe that it's justifiable to keep those units around longer, until we see some of the new megawatts come onto the system.

And so, I think it’s part of the tools that are in the toolbox, and the administration is very much interested in making sure that there are sufficient resources to ensure reliability, affordability, and from their perspective, to help us compete, and ultimately, win this AI race in the geopolitical perspective.

Ken Irvin:
It’s not the nameplate capacity of all this generation. It’s this effective load carrying capability.

Todd Snitchler:
Right, what can you deliver when I need it?

Ken Irvin:
Yeah. Terence, Chairman Swett and her colleagues have all been very encouraging and supportive. At the most recent meeting, they all expressed support. I mentioned Commissioner See already, but Commissioner Chang, Commissioner Rosner are supportive, and the chair herself has said they’re committed to it. This is a golden age for infrastructure development. FERC is prepared to move quickly. That all sounds very promising and like, very, very useful. How do you see FERC balancing urgency, though, with durability? How does acting quickly not get us locked in protracted litigation and caught up in some nettlesome questions that may just get stalled in the courts?

Terence Healey:
You know, again, I keep harping back to the NOPR by Secretary Wright that is out there, and I think we'll see what comes of that. That does...I’m not taking a position one way or another on the jurisdictional fight in that proceeding, but there is one, and probably is going to take a little bit longer to run through that process. I think both FERC and PJM have an appropriate sense of urgency, and the other items we've been talking about, the statement of principles, PJM’s reaction to the co-location orders, even what PJM’s board announced almost the same day the principles were issued to do certain things in 2026, right, to improve the current situation, including forecasting improvements, Bring Your Own Generation, creation of an accelerated interconnection track for state-sponsored resources. Those sorts of things, that are just squarely within FERC’s jurisdiction and less of a battle, as you might see in the NOPR proceeding, you know, are capable of being done, I think, relatively quickly, and you have two willing parties in PJM and FERC, seemingly, to hit that sort of schedule.

Ken Irvin:
You brought up Bring Your Own New Generation, BYONG. It always makes me want to say Bingo was his name. You know, I always want to sing that little childhood song. You know, Todd, the PJM process, maybe you could say more from your perspective about how does it work? How does it get utilities to go along? Everyone’s a member, so they commit to the terms and principles of being a member, but how does PJM make folks bring their own new generation to answer the call of all this demand? How does PJM interact, for example, with folks who have backup power and asking them to go into island mode so there’s less load showing up on the grid in the times of stress, like super cold nights here in the Mid-Atlantic?

Todd Snitchler:
Yeah, I think you asked the right question, especially as we’re still in the throes of Winter Storm Fern or whatever we’re calling it this time. I think...

Ken Irvin:
Isn't it great The Weather Channel gives us these names just abstractly?

Todd Snitchler:
Yeah, it’s not what I would name it, but okay, anyway. As you look at it, I mean, you have to remember that PJM can’t order anyone to build anything, and so, the ultimate obligation or opportunity for new supply to come on the system really comes from the response to price signals and demand as it’s growing, and so, you see people looking to what are some approaches that we can take to move faster? Everyone is trying to consider speed to power, and so, as you look at, you know, the ability to take existing resources and commit them to a data center, that’s maybe the most quick opportunity.

If you’ve got interconnection ability, they can do it quickly. If you can Bring Your Own Generation, which some folks seem interested in exploring, and that allows you to bypass some of the queue processes where you’ve got to wait in line and you can actually go ahead and move more quickly, assuming you can get interconnected to the system, that’s helpful. There's co-location broadly, but that also, you know, splits into several buckets.

Do you want to be completely islanded and behind the meter off the system, or do you want to have some interconnection because of the importance about reliability? I think the FERC order really tried to help provide some guardrails for commercial transactions to start to be firmed up and put into place for, really, quite some time, more than a year from the time that the Talen case was filed. At FERC, you saw that go from a behind-the-meter transaction to an in-front-of-the-meter transaction, actually, for more supply than the original contracted amount.

That tells you how quickly things are evolving on the ground and how people are looking at how they can best meet the needs of the system as well as meeting the customer needs that come from, you know, the new demands that are being put on the system. So, I think you’re going to see evolution of how that approach works itself out. Someone else asked me this last week, and I said, if you give me six months, I think we’ll have a much clearer line of sight about what may be kind of the more generally accepted approach that this takes, but I think it’s still fairly early in the game.

And the optionality that FERC provided I think is incredibly helpful to allow entities of all types, whether you’re a data center or a power generator or the utility that's going to connect them, to try to figure out the path of least resistance, the ability to move quickly and meet what your customer is trying to achieve, and this gives them multiple routes to get there, and so, I’ll reluctantly say, if you give me six months, I’ll have a better answer about where I think we’ll be, but I do think that the table has been set for optionality and the ability for parties to look at different alternatives to try and deliver sooner rather than later, which is what all of us are trying to accomplish in this whole speed to power discussion that we’ve been having.

Ken Irvin:
I hear you about six months, right? Like, you know, everyone’s got a plan until they get punched in the face. So, it's always nice to look...

Todd Snitchler:
Yeah, Mike Tyson was right about that.

Ken Irvin:
Yeah, it’s always nice to look in the rearview mirror and say, this is what we're doing, but six months is an eternity here in the national security race at AI. You know, the leaps and bounds that have been happening are just dramatic. Terence, how does PJM
follow through on this drive of urgency? We’ve noted that there’s a trigger on the Backstop Procurement Authority. We've noted that there's the support from the states and the White House, but how do you really put all this together? How do you actually effectuate it from a regulatory point of view?

Terence Healey:
Well, I think PJM is certainly acting with urgency, and you mentioned it earlier, the ‘27 / ‘28 BRA had a shortfall of, what, 6.6 gigawatts. That's significant and anticipated to continue. So, that alone, and keeping the lights on, I think is driving PJM to take these actions. I mentioned what the board announced on the 16th in terms of what it can do in the short term. It seems very determined to do that and do so with due haste. I think the pressure, if you will, from the statement of principles issued earlier this month is, likewise, spurring action by PJM, and of course, the co-location order, which, PJM is bound to make revisions in a particular timeframe. So, PJM recognizes the urgent need and the reliability concerns. FERC called that out directly in the co-location. I think they refer to it as acute, you know, resource adequacy shortfalls. So, steps have to be taken now, and I think PJM understands that and will, you know, react accordingly through tariff revision filings and other short-term actions it can take, which the board addressed on the 16th in its letter.

Todd Snitchler:
Ken, I’ll only add to that, if you’ll allow.

Ken Irvin:
Yeah.

Todd Snitchler:
If you look at what PJM’s shortfall was...and Terence is right. It was about 6.6 gigawatts, and then they adjusted down when they revised their load forecast, which shrank it by a little more than a third, approaching a half, I think, if my math is right, and it still resulted in a reserve margin of about 14.8 percent, and so, it missed the reserve margin by a bit. I mean, it depends on how you want to show your numbers, right? If it’s 6.6 gigawatts, it looks really big. If it's within eight-tenths of a point of your reserve margin, maybe it doesn’t look as big. I don’t mean to minimize, in any way, the need for resources or the need for people to act urgently.

I think everyone is acutely aware of that, to use your term and FERC’s term, but I think what it does suggest is there are ways for us to make sure that the system is reliable, while we sort out the particulars around this and deliver an outcome that’s actually going to be long-term successful and durable, to the point that it justifies the steps that are going to have to be taken to get there from here. So, yes, it’s important for us to focus on it, but yes, PJM has other tools, like incremental auctions and the revised load forecast and what resources may come on between now and the delivery year, that are going to help mitigate that shortfall as it’s been described.

And so, I would hate for somebody to hear the conversation and think, you know, that the lights are this close to going out, when the reserve margin is still fairly robust. It wasn’t too long ago that there were folks that were participating in the stakeholder process that were yelling about over-procurement and PJM at a 30 percent reserve margin and people were paying too much. So, I think it’s important to keep the context in view, and that enables us to make wise choices instead of reactionary ones that might lead to worse outcomes.

Ken Irvin:
I mean, this is America. We like to react and overreact, right? Like, this is what we do.

Todd Snitchler:
Not when you're making 40-year investment decisions. That’s not a great model.

Ken Irvin:
Well, that’s what makes it hard, right? If it was easy, anybody could do it, but no, Todd, seriously, how do, you know, your constituents, how do the IPPs position themselves here? How do you see the relationship of IPPs to the distribution utilities to load to all the market participants kind of evolving here? I mean, if we’re going to, potentially, bring on a whole bunch of new generation, and let’s just assume away that there’s enough labor, there’s enough parts, there’s enough even interconnection capacity, right? Those are just some minor problems we'll assume away. How do you position yourself? If you’re EPSA and your members, what do you guys want? How do you see the future?

Todd Snitchler:
I look at this as an opportunity, and it’s a sizable opportunity. I was with my friends from EEl at an event a couple of weeks ago, and as I said it then, and I’ll say it here. This is not a zero-sum game. We have real load growth for the first time in, you know, 20 or 30 years that is likely to be substantial, and the beneficiaries of that will include the wires utilities. It’ll include vertically-integrated utilities in portions of the country where they are the model. It’ll benefit competitive power suppliers in restructured portions of the country.

It'll benefit data centers who, ultimately, want to locate wherever they need to be around the country, but equally important, and sometimes overlooked, is it will benefit the consumers, who, ultimately, are the ones who are utilizing these data centers, and they're doing it for their remote healthcare. They’re doing it for their financial transactions. Yes, they’re doing it for their Netflix and for their Amazon Prime and all the things that we do and we've gotten so accustomed to, like watching these webinars over the internet when we’re at home.

I mean, those tools are all available, but this is an opportunity for all the sectors to collaborate in a way that will deliver the outcome that we want. Everyone’s balance sheet will come out just fine on the other end, and if we do it well and not waste time arguing about things that are not going to advance the ball, consumers will, ultimately, be able to mitigate that cost, because, in the end, you know, I feel duty bound to remind folks that EPSA’s members, when they make investments, don’t have captive customers that are going to pay that cost over 30 years.

If we spend 2.5 or 3 billion dollars on a new power plant and it’s the wrong investment at the wrong time and it goes bust, our shareholders and investors wear that risk, and they pay the price for that. It is not paid over by a non-bypassable charge for the next 20 or 30 years, which is the different model that’s utilized in other portions of the country, and I think that’s incredibly valuable at a time of uncertainty, as we’ve been talking about variable load forecasts and the pace of arrival and where will they locate? All those things scream for the ability for people who can bear the risk better to do that and to shield consumers from that additional risk. It might feel slow, or it might feel like consumers aren’t seeing the reaction as fast as they would like.

But to our point, we’ve had three auctions in PJM in the last year, where we hadn’t had a timely auction for four or five years before that, and the price signals were compressed, and now we’ve seen a sustained price signal that will lead people to make informed decisions going forward. At the same time, as I noted a moment ago, you don’t make a 40-year investment decision in six months or in three months between auctions. You have to have time for that to process and then be worked into your investment thesis, and you’re starting to see that happen, as I noted, the 12-plus gigawatts of projects announced since 2024 in PJM, but not just PJM.

In other parts of the country, as well, you’re seeing the wheels of development start to turn. It’s just going to take time for them to get from development to construction to operation, and that may feel unsatisfying to some, but I think it’s indicative of the fact that we are starting to see people respond, and they are moving quickly in relative comparison to how this industry normally moves. You know, the utility and electricity industry isn't known for moving incredibly fast because of the length and value of the investments that are made, but you’re seeing this industry, across the board, work at paces they have not done in quite a long time.

Ken Irvin:
I think that’s true. I mean, things have accelerated in a way that we’ve never seen in the history of electric and distribution utilities, et cetera. So, I think that’s a nice evolution. Terence, let me ask you this. It’s terrific that we're all having this consensus moment, but FERC still has to issue orders. If FERC goes too fast, maybe those orders suffer from deficiencies that people who would challenge them, we end up in litigation. You know, some of the most seminal orders out of FERC took a few times, a few swings at the ball, you know, a few times in the batter’s box before it came and got gelled. How does FERC manage that risk? How does everybody involved here not face the consequences of being locked in protracted litigation?

Terence Healey:
I think, to Todd’s point, PJM is facing reliability concerns, but it isn’t as dire as the lights are going to go off tomorrow. I think PJM is trying to be thoughtful here. The board and the actions it indicated it could take in the near term are helpful while they take that holistic view and think through what they’re going to propose. They, being PJM. It’s their tariff. It’s their market, but you don’t want to be in a position where you're picking winners or losers or somehow impacting the risk that the investment community sees and get that wrong.

So, with increased speed I think comes increased risk of litigation, and taking the time to get it right, get agreement, or as much as you can among the various stakeholders, is the right path. Obviously, it’s going to be iterative in nature, almost by definition. That's how we’ve seen these markets develop since, you know, the early 2000s, especially the capacity market. I guess that those have changed over the years. So, we should expect, you know...

Ken Irvin:
We still call it RPM, right?

Terence Healey:
Right. You know, there will be tweaks made, right? But I think PJM is going to try and take a holistic approach and balance the speed with getting it right.

Ken Irvin:
Todd, the White House is trying to drive this, the governors. One of the things that's interesting about the statement of principles is we’re going to hold an auction. We’re going to have this commitment from the buy side of the market for credit-worthy 15 billion or whatever, but we’re also going to have a cap on capacity prices for another two years, potentially. How do you see the way the White House and the states are framing things and driving things? Is that really going to help? Is that going to move things along, or does that create resistance and a snowstorm in which you have to drive through? To pardon the pun.

Todd Snitchler:
Well, I think there are some mixed messages, if you look at what we’re trying to accomplish. Clearly, the desire to get new megawatts on the system is vitally important,
and that has been made clear by virtually everyone. I mean, the states agree that that’s the case. There may be questions about what type of technology they want to utilize, and that's a state-level issue to be addressed, but clearly, the administration has made no bones about the fact that they want to see new megawatts added to the system.

To your point about the extension of the collar, if you’re muting price signals, it does make it difficult for people to be able to respond to what the appropriate price signal would be, but you also have to be mindful of the fact that there is an affordability question, and consumers are spun up about the price that they’re paying for utility service. It’s not an unreasonable question, when you look at what has happened over the last 10 years on utility bills.

They have been flat to increasing, but the generation component of bills has actually been flat to declining, and there have been charges for wires and for state policy choices and you know, all the things that come along with that, that have driven up the cost of bills, and so, at the end of the day, the way for us to get through this is to get through the short-term misalignment between supply and demand with the least disruptive tools available, and then have a fully functional market be in place in that 2027 and forward auction period.

That is no easy lift. I don’t mean to make it sound like, well, we’ll just pull this thing together and get it done. If it were that easy, it would’ve been done by now, but the urgency is clear. The fact that the political class across both parties, at the state and federal level, has shined a bright light onto it, I think is often a very big motivator and will hopefully move stakeholders off of discussing the issue and get more into the solutions-oriented mode. I’m confident that we’ll get there from here. I’m confident that we’ll do it in a timely fashion that’s responsive to what the political classes have asked for.

But there’s probably going to be some process between here and there, and it may be a little bit bumpy, but in the world of restructured markets, that’s a feature, not a bug. I mean, it’s very transparent. It may look messy if you’re on the outside looking in, but you’re at least seeing what is being argued about and debated, as opposed to having to see what comes out of the proverbial smoke-filled room and that’s going to be the new approach that we’re taking. So, it's just a different approach, but I’m confident that it is going to be the way that we can get through this and do so in a cost-effective and very reliable way.

Ken Irvin:
Definitely agree. I’m a fan of market forces allocate risk and reward in the most efficient way, but as you pointed out...and you know, I’m from Virginia. We have a new governor. Affordability featured in her election. New Jersey has a new governor. Affordability of energy prices was so prominent, she interrupted her inauguration to sign a couple executive orders. So, you know, it brings us back to that cooperative federalism point that we seem to talk about a lot. You see the states getting very involved here, changing the retail rate design, creating new classes of retail tariffs for large load, the rate freezes versus cost recovery. All of this seems to be happening, but then again, we have the backdrop of several pretty clear decisions that try and demark where the federal interests are and where the federal jurisdiction is. I remember...a lot of this is resonating with me when we go back to, like, the Hughes v. Talen case from...maybe that was several years ago, 10 years ago?

Todd Snitchler:
10 or 12.

Ken Irvin:
Where a state tried to influence the price in the wholesale market. Terence, it’s a good thing we got you here. Walk us through Hughes v. Talen and what that means. What did the Supreme Court teach us then? What does that mean for today’s activities?

Terence Healey:
Hughes v. Talen addressed a program that Maryland put forward when Maryland was expressing its desire for particular resources and what resources it wanted located where. The issue, however, was the program the state put forward, which was a Contracts for Differences type approach, it required the generators that received payment by the state under this program to clear the PJM capacity market. So, it directly tethered the wholesale rate, meaning the capacity rate paid to generation, which is fully within FERC’s jurisdiction, to the receipt of payment by the state, and the court found that that was too close.

It was directly tethered, the Maryland program, to the wholesale electric rate and therefore, preempted by the Federal Power Act. You know, I think the order was clear on recognizing the jurisdiction of the state, which is fulsome. The state does have the jurisdiction to elect or adopt a policy in terms of what and how many resources it wants in terms of generation in the state. They do have the jurisdiction over siting, but once you have that interconnection between the hunk of steel and the transmission grid, it becomes FERC jurisdictional, and so, there’s that line that Hughes v. Talen tried to draw, and I think you mentioned what New Jersey's governor proposed.

And up here in Massachusetts, we, likewise, heard some of that out of the Healey administration just this past week, in the sense that they’re working towards providing retail relief in billing credits and also opposing or trying to control future rate hikes by utilities in terms of their retail rates. I think, at first blush, those actions would probably survive the Hughes v. Talen type challenge because it’s not directly tethered to the wholesale rate, but instead, trying to address rate relief at the retail level within each of the individual states. So, I think that’s probably on the right side of the state’s jurisdiction, at least from what we see.

Ken Irvin:
Todd, what about from your perspective? You know, from a policy perspective, from the wholesale generator perspective, some of the things the states are talking about today, are they constructive? Are they taking us down the wrong path? Can they work all in harmony with the other positives we’ve talked about today?

Todd Snitchler:
As a former state legislator and a state regulator, I’ll try to strike right down the middle. I am sometimes puzzled by the states that have effectuated state policies, and then, when the bill comes due for the policy choices that they have made, they are unhappy with the prices that their constituents have to pay. I noted a couple of minutes ago, when PJM had a 30 percent reserve margin, you could kind of fiddle around the edges with state policies, and it was far less impactful than when your system is tight enough where we’re talking about, did you meet your reserve margin or not?

And so, those state policies that had been in place for some years have actually started to see their price be revealed, and it turns out consumers aren’t especially happy with the price increases, and so, the aspirational goals of many policymakers are meeting the operational realities of the system, and I think that’s forcing a recalibration, not an abandonment of state policy or we’re going to completely turn in the opposite direction, but I think policymakers are having to think a little bit about, are my timelines realistic? Is the policy objective, achievable? And if it is, at what price?

And that is going to, I think, shape some of the investment decisions that need to be made, because the technologies that can be deployed quickly and are relatively clean in comparison to some of the older resources that may be exiting the system are the ones that can power the system in a reliable fashion, especially when combined with solar and battery storage or other resources that may be part of an evolving power grid, and so, you see decisions being made by the states, but also by some of the companies that are the data center owners that had made pretty strong commitments about how quickly they would get to lifetime zero emissions or zero emissions in all of their operations... have had to recalibrate how soon maybe they can actually do that, if they want to achieve the construction and development of their infrastructure.

And I don't think that’s a bad outcome. Ultimately, if you look at what markets have delivered in the way of price, emissions, and reliability, restructured portions of the country have done outstanding on all three of those, and so, it’s not as if we’re returning to the era of smokestacks and black smoke that’s going to overwhelm parts of the country. I think what we’re going to see is thoughtful deployment of resources that are going to power the infrastructure we need for the future, and that may mean that state policy goals are slowed or recalibrated, but it doesn’t mean they're abandoned, and I think that’s just a recognition of reality that’s good for both the economy, it’s good for the environment, and it’s good for consumers.

Ken Irvin:
We’ve covered a lot here. So, I want to bring us back and work toward wrapping up here, and I want to turn our attention not from where we are in the immediate, but sort of the longer term here. As we look ahead, and as I said at the beginning, I always like to end on Accelerating Energy asking, you know, what do you think’s coming down the road? What do you see over the horizon? If we work on all these issues and we have the consensus and we’re applying ourselves to the recommendations you all have put forward today, what are the implications for the PJM ecosystem?

There's, clearly, no single solution. There’s lots of risks and issues. Are there concerns about overbuild, stranded assets? Do those need to be factored in? Are they being considered? You know, Todd, from your perspective, from the IPP’s perspective, the next 12 to 24 months feel pretty critical, but I know you said it’s a 40-year investment. So, you, obviously, got to measure not just the next 12 to 24 months, but all 40 years of that. So, what do you see coming down the pike for us? How do you want things to go if you could write the history going forward?

Todd Snitchler:
Yeah, I think we’re going to get through this successfully. That’s going to be the title of the chapter in the book we'd write 40 years from now. What I think is important is that we make sure that we know what we’re aiming for, and so, whether you call it your load forecast or you know, future demand, however you want to describe it...you know, I talked with David Hill, who’s at the Bipartisan Policy Center, a couple of months ago now, and David said, we know we’re going to be wrong, but we want to be wrong by as little as we possibly can be.

And you want to be wrong to the positive, because that’s how you ensure a reliable, affordable system, and I think that’s kind of where we're focusing. We’re trying to narrow the aperture on what we’re aiming for, because if you say, just go build and build as much as you possibly can, it’s not really achievable, because you’re going to struggle to get investment, or you’re going to have people invest that are agnostic to the cost, because they can recover it from captive customers, and that’s not good for affordability and doesn’t, necessarily, ensure reliability in the long term, and so, I think we’re going to sharpen people’s perspectives about how quickly and where investments can be made.

You’re going to see innovation and technology be deployed, because there are tools that are available that’ll allow us to meet the short-term bump in the road, if you wanna call it that, to get to the more fully functional approach that we’ll see post-2027, and I think those tools, taken in combination with new investment, with grid-enhancing technologies, with the deployment of commercial arrangements in front of, behind, around the meter, all the different approaches that will be utilized as we figure out the most attractive commercial approach, are all going to be pieces and parts of how we successfully achieve the outcome from here.

And we're going to need our state regulators to step up and utilize the authorities that you have at the state regulatory level if you’re going to try and make sure that you’re minimizing impacts to retail customers. The federal regulators have already signaled that they’re willing to engage and work on this. DOE has made very clear the administration is focused on this, and so, the governors and the states can also work on how they can accelerate those projects that are already approved to get constructed and get through to putting megawatts on the system.

So, I think if everyone does their part between now and 2030, let’s say, for round numbers, we actually have a pretty straightforward trajectory that can help us ensure a reliable, affordable system, and in the end, we have to keep in mind what is it we’re trying to accomplish? Is it just building power plants for power plants? Is it data centers for data center stake, or do we actually view this as a national security, geopolitical struggle that we need to be the winner at? Because, if we do, that will inform some of the decision-making that we make over the next four to five, as well.

Ken Irvin:
The number of gigawatts we’re talking about versus the number of generators, this is like a World War II level of production, right? Like, if we’re going to...

Todd Snitchler:
It’s a substantial amount that people are suggesting that we need.

Ken Irvin:
This is like a super cycle for a new generation, right?

Todd Snitchler:
Yeah.

Ken Irvin:
You don't have a concern that we’ll overbuild? You think that the network always benefits from having more generation, more connectivity?

Todd Snitchler:
No. Let me be very clear that I don’t want to see an overbuild situation. I think you can run into an overbuild situation if you adopt the let’s just take the highest forecast and aim for that, even if it’s not close to remotely accurate, and we have seen some policy advocates who have been suggesting that we’re not building enough, we’re not building it faster. In fact, what we need to do is allow parties that have been kept out of the generation game due to restructuring to be able to come back into the game, because they’ll do it faster. They’ll do it cheaper, and they’ll build as much as you want.

Well, they’re subject to the same supply chain, labor, permitting, siting, and all the other issues that a competitive power generator would be, and I’m still looking for the first project that was built faster or cheaper than an IPP-driven project, if you’re looking at other models in order to deliver the outcome. So, I don’t want anyone to walk away thinking that EPSA thinks just build for build's sake because that’s where we need to be. I think if we’re thoughtful about the target we’re aiming for, we can efficiently and cost-effectively get from here to there.

Ken Irvin:
Terence, how do we manage all of this? The regulatory certainty needs to be there, but we have this partisan overlay, especially now. It’s midterm elections this year. We've already decided that building this generation takes longer than the rest of the Trump administration. These gubernatorial elections, things are changing in the political landscape constantly. How do we get this going down a path from the regulatory point of view that we’re going to give Todd and his colleagues the certainty to make these 40-year capital investments?

Terence Healey:
I mean, what Todd said. Todd’s very hard to follow, follow his remarks. The one point I’d take that I think is extremely important that Todd made was at the state level and the fact that folks are going to have to sharpen their pencils on programs that have been initiated, not abandoning these programs, but there are a lot of line items on our retail bills, and there are a lot of ways to provide that retail relief in the short term, while working together to come to a holistic approach post-‘27.

So, I think we’ve talked about the White House. We’ve talked about PJM. I think the states are a critical piece of this, and they’re aware of it, and they’re reacting in kind, kind of an all-above approach where that wasn’t quite what was talked about in years past. Again, not abandoning various state policies and what they view to be important, but really considering affordability, and what changes can be made in the short term to give rate relief while the market, in general, is reshaped, resized, or can better accommodate the load that I think none of us really expected, or at least at this speed and at this level.

Ken Irvin:
Terence, Todd, thank you so much. I came away from this more optimistic than I thought I was going to when we started today’s discussion. It’s been very insightful. I appreciate the candid and in-depth analysis that you’ve given us. So, Todd, thank you so much for joining us.

Todd Snitchler:
Thank you, Ken.

Ken Irvin:
Terence, as always, you’re a scholar and a gentleman. Really appreciate your time here today. Look forward to continuing the dialogue. That’s all for today’s webinar. Thank you, guys, for attending. We’ll make the slide deck, and the audio will be published as the next episode of Accelerating Energy. If you like what you hear, like us and sign up and recommend Accelerating Energy to your friends and family. Thank you, all. Have a good afternoon. Talk to you again soon.

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