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PJM's Proposed Reliability Backstop Procurement Would Allocate Costs To EDCs, Not LSEs
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PJM has issued a paper setting forth its proposed Reliability Backstop Procurement in which PJM proposes that aggregate costs of the Reliability Backstop Procurement commitments will be allocated to the Electric Distribution Companies(EDCs) based on their
pro-rata share of the target megawatts.
The Reliability Backstop Procurement is proposed to procure capacity to meet forecast demand from large load customers due to the previously reported failure of the Reliability Pricing Model base residual auction to meet the target reserve margin
Unlike the existing Base Residual Auction, LSEs, such as competitive retail suppliers, would not be assigned capacity costs under the Reliability Backstop Procurement as proposed by PJM, with costs only assigned to EDCs
PJM proposes a two-phase Reliability Backstop Procurement (RBP): an initial phase in which bilateral contracting is encouraged, and a second phase in which a central procurement is conducted for any remaining megawatts needed under the RBP
The bilateral phase is planned from September 2026 through March 2027.
Any residual target megawatts not met during the bilateral phase would move to a PJM-administered central
procurement, with PJM Settlements Inc. as the counterparty on behalf of Electric Distribution Companies (EDCs).
To determine the amount of capacity to be procured in the RBP, PJM would provide initial load forecasts, with EDCs then providing input, along with state regulators, LSEs, and large customers.
PJM said that the final procurement targets in the RBP would be set by the EDCs, and PJM would aggregate such EDC-level forecasts into the RTO procurement requirement
PJM said that EDC forecasts should account for megawatts that do not need to be represented in
the backstop procurement due to bilateral contracting (BYONG) or willingness to be curtailed.
PJM is excluding Fixed Resource
Requirement (FRR) entities from the RBP target and from the Reliability Backstop Procurement.
The RBP central procurement would procure capacity from "new" resources
PJM is proposing to define "new" as resources that:
1. Demonstrate new ICAP and CIRs are being brought to the system;
2. Have not received an RPM commitment for a future delivery year where the BRA has already been run,
which -- at the time of the central procurement -- will be up to and including the 2029/2030 Delivery Year;
and
3. Have a commercial operation date (COD) no later than June 1, 2031, inclusive of network upgrades.
For generation resources, PJM said that this definition of new capacity can include new build, uprates, or repowering of currently deactivated generators. Delayed retirements, re-licensing, fuel switching, CIR-only uprates, and surplus resources
would be excluded from the definition of new
Demand Response (DR) and Distributed Energy Resources (DER) will also be considered eligible for participation in the Reliability Backstop Procurement
Aggregators who bid DR or DER into the Reliability Backstop Procurement will be required to show the identified
sites and associated contracts for participation for the length of term of their bid.
The RBP central procurement would be pay-as-bid.
"Given the
one-time nature of the proposed RBP and the procurement framework, the values of a single clearing price design,
allowing price discovery and long-term incentive signals, do not occur. A pay-as-bid procurement with a price cap is
better suited to achieve the goal and minimizes the complexity of this effort," PJM said
Each committed RBP resource will be settled as a contract for differences (CfD) based on the individual resource’s
offered price (which is equal to the RBP commitment price), against the resource’s weighted average resource
clearing price of applicable RPM auctions for all committed RPM megawatts. If an RBP commitment is for a delivery
year in which PJM has already conducted the BRA, the CfD will only be against the weighted average resource
clearing price in the applicable Incremental Auction(s).
The Reliability Backstop Procurement will procure long-term commitments for capacity-only UCAP, and will not procure energy or ancillary services
PJM stated, "PJM is viewing the Reliability Backstop Procurement as a one-time, transitional procurement of capacity designed to
begin to address the unprecedented load growth in the region. PJM does not believe the Reliability Backstop
Procurement is a long-term fix for its resource adequacy issues."
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April 13, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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