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PJM To Require LSEs To Post Credit Associated With Backstop Capacity Procurement
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PJM, in finalizing a proposed reliability backstop capacity procurement (RBP), will newly propose at FERC a new credit requirement for LSEs linked to LSEs' backstop procurement obligations
PJM proposes that, prior to the relevant delivery year, PJM will assess the RBP credit requirement of the LSEs’ allocated responsibility
for RBP Obligations. An LSE's allocated responsibility
for RBP Obligations (on which the credit requirement is based) is discussed further below.
The LSEs will be required to post the full RBP credit requirement for the duration of the
Reliability Backstop Obligation as defined below:
a) Within 90 days of the delivery year, LSEs must post $1.5 million x RBP Obligations.
b) If no RBP Obligations are reported in an Electric Distributor zone/area, and PJM will be allocated RBP
charges based on the PLC, PJM may apply credit processes to an LSE in accordance with the
Unreasonable Credit Risk provisions of Attachment Q, Section II.A.
"The RBP credit requirement may be reduced to a level acceptable to cover the remaining RBP obligations," PJM states
The backstop reliability capacity procurement is proposed to be held in September 2026, with an initial target equal to the capacity shortfall identified in the 2028/2029 Base Residual Auction, reduced to reflect documented bilateral
contracts and self-supply arrangements for new capacity serving new load.
PJM will also propose a narrowly limited "opt-out" for an Electric Distributor that
provides documented support from the relevant governor’s office, the Relevant Electric Retail Regulatory
Authority (RERRA, aka PSC etc), and the interconnecting customer.
More specifically, there will be a limited opt-out provision for 1) Electric Distributor (ED) zone/areas whose "rates" are not regulated by
the state (it was unclear if this refers to generation rates, or distribution rates) and that demonstrate a documented inability to address cost allocation associated with capacity procured in
the backstop that cannot be assigned to the Large Loads included in their load forecast; and 2) ED zone/areas that
are addressing their capacity needs through peak shaving adjustment programs that are codified in state law. The
first opt out will require written support from the relevant governor, RERRA, and the interconnecting customer from
their load forecast.
If a zone/area elects to opt out and provides the required written support, PJM will reduce the
area’s pro rata share obligation aligned with the interconnecting customer’s megawatts and decrement the RTO
Procurement Target accordingly
Costs of the backstop reliability capacity procurement will be allocated to Load
Serving Entities on a pro rata basis unless a state adopts another form of cost allocation
Notably, PJM states that, "Where the relevant RERRA [PSC etc] directs an allocation of Reliability Backstop Procurement
obligations and that allocation is reported to PJM by the Electric Distributor, PJM will apply that allocation."
In the absence of such direction on cost allocation from a PSC or similar state regulator, PJM will allocate backstop reliability costs among Load Serving Entities in the relevant zone/area based on Peak Load Contribution and the load adjustments reflected in the 2028/2029 load forecast.
EDs will be responsible for allocating assigned zone/area RBP target megawatts to customers via introduction of new
Reliability Backstop Obligation (RBO) megawatt assignment in Capacity Exchange (similar to existing PLC and NSPL
processes). If states have not established frameworks to "appropriately" allocate costs to new data center loads, PJM said that, "it is
unclear to which customers those costs would be assigned." As a backstop, if the ED does not allocate via RBO, PJM
will allocate to all load in the zone/area (including non-Large Loads) using existing PLC assignments.
PJM separately proposed that Electric Distributors will be required to implement an Interim Resource Adequacy Service (IRAS, formerly known as "Connect and Manage") for new Large
Loads that, as of June 1, 2027, do not bring sufficient capacity to serve their resource adequacy needs and
cannot otherwise be served at the 1-in-10 reliability standard.
Under IRAS, Large Loads
can interconnect without bringing their own new capacity. However, they must reduce their load or switch to on-site
backup resources under specific, limited circumstances
Concerning allocation of Interim Resource Adequacy Service, PJM proposes:
a. RTO Energy Shortage: Allocations will be performed pro rata by Interim Resource Adequacy Service load
ratio share across all TO zones.
b. Regional Energy Shortage (i.e., IROL/transfer issues): Only TO zones where the Interim Resource
Adequacy Service reduction is effective at mitigating the regional shortage would be issued a reduction.
Allocations would be performed pro rata by Interim Resource Adequacy Service load ratio share across the
TO zones where the reduction is issued.
In connection with the Interim Resource Adequacy Service, Electric Distributors would be required to
implement a FERC-approved compensation rate for Large Load customers that are directed to reduce their
consumption from the transmission system.
PJM states, "Determinations as to which retail customers may fund such a program or whether specific Large Loads
would be entitled to such compensation (or may waive such compensation consistent with the Ratepayer
Protection Pledge) will be determined by state authorities under state law or RERRA [PSC, etc] as may be applicable."
The IRAS program will be administered by the Electric Distributor in coordination with the relevant state authorities
or RERRA.
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PJM Proposes Allocation Of Backstop Capacity Procurement Costs To LSEs; Also Addresses Allocation Of New Interim Resource Adequacy Service To Retail Customers
July 28, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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