PA Environment Digest Blog: NRDC: Another Proposed PJM Plan To Deal With Massive A.I. Data Center Electricity Demands Fails To Protect Consumers, Will Increase Electricity Bills Up To $100 Billion From 2028 To 2032

On September 15, the PJM Interconnection presented another plan for dealing with the fallout from massive A.I. data center electricity demands in its service region that fails to protect consumers from ever-increasing electricity bills.

Electricity costs are already up $12 billion this year alone in PJM-- that includes Pennsylvania.

Based on calculations by the Natural Resources Defense Council using PJM data, under PJM's plan the public will pay over $20 billion every year from 2028 through at least 2032 as forecast data center energy use continues to drive up electricity prices.

This adds up to a $100 billion or higher bill over this period paid by PJM residents.

Virtually all of this will be windfall payments to existing power plants rather than investment in new ones.

Without PJM’s plan this bill would be about 20% higher.

However, NRDC outlines better alternatives that will protect consumers and require A.I. data centers and other large loads to bring their own generation capacity.

Click Here for the NRDC factsheet outlining their proposals.

Background From NRDC

Electricity demand from proposed data centers is the main reason for electricity bill spikes for residents living in PJM states.

Forecast data center growth was responsible for $9.3 billion of a $14 billion regional capacity bill in 2025/26, and likely for a similar share of the $16 billion bill for 2026/27.

If not for price caps negotiated between Pennsylvania and PJM, the 2026/27 bill would be $2.9 billion higher.

This has already hit residents with increases of up to $30 per month on their electricity bills.

Given delays in bringing new resources online, there is no sign of this trend slowing.

Due to PJM’s slow approval process, supply chain issues, transmission line delays, and local siting obstacles, power plant construction has recently been extremely slow.

Even plants approved under PJM’s recent fast track initiative may not reduce power prices before 2035.

Forecasts for data center growth far exceed the rate PJM can add power plants.

Between this and the removal of the current price caps after 2027/28, capacity costs are on track to hit between $24 and $36 billion per year starting in 2028 and lasting at least through 2032.

This adds up to a $100 billion or higher bill over this time period. PJM’s proposed response would only reduce these costs by around 20%.

Virtually all of this will be windfall payments to existing power plants rather than investment in new ones.

Data centers proposed by Microsoft, Google, Amazon, and Meta are forcing residents and small businesses to pay more for electricity every month.

Even though data center development is concentrated in three utilities, costs are spread across residents and businesses in all of PJM.

Nearly a third of the increased capacity costs will go to utilities with 1% or less of the data centers.

The three utilities that are home to eighty percent of proposed data centers will pay only 36% of the bill.

[The three utilities are PPL Utilities which estimates 5,328 MW of load will be added by data centers by 2032, Dominion which will add 15,632 MW by 2032 and American Electric Power which is expected to add 17,708 MW by 2032, according to the PJM load forecast tables.]

Data centers are also eroding reliability because construction is outpacing electricity supply and for other reasons.

In 2026/27, for the first time ever, PJM has just the amount of supply needed to meet reliability standards, with no surplus.

While this is acceptable, it means that without action, PJM will fall below reliability requirements, most likely beginning in 2027.

If data center developers do not add enough new capacity, PJM may have no choice but to order rolling blackouts.

PJM’s proposal acknowledges this.

PJM is creating rules for how to manage the reliability risk, essentially by proposing to shut off new data centers during any hour of the year when there is insufficient electricity.

While this approach would preserve reliability in a draconian way, it will do little to protect residents from rising bills and require highly-polluting backup generators to run many more hours each year.

NRDC Recommendations

Public interest organizations, including NRDC, recently submitted recommendations on PJM’s proposal.

The following are our main recommendations to PJM:

-- Protect ratepayers from unacceptably high electricity bills by separating out “large load additions,” the vast majority of which are data centers, from the rest of the PJM capacity market and making them financially responsible for their own energy supply.

The PJM market should support regular customers and general load growth, but not large additions that benefit individual customers like data center owners.

While PJM’s approach would leave most data centers in the market, we propose to protect consumers by requiring all new data centers to bring the needed supply.

This could be implemented immediately for the 2027/28 auction, which would likely bring prices back to normal levels within one to two years.

-- New large loads must “Bring Your Own Capacity.” In this approach, PJM would provide guaranteed electricity service to support the natural load growth of its utilities, but not new large loads.

New large loads could join the capacity market once they add enough new capacity to the grid to offset their own demand.

This could include new generation, distributed energy resources, storage, demand response, or consumer efforts to reduce energy use.

This approach will moderate prices. Even more important, it will ensure that data centers are responsible for the investments in new power plants needed to support them.

This is vastly more efficient than attempting to indirectly drive investment through high prices.

It also protects the public from paying high prices or covering the costs of stranded assets if proposed data centers don’t get built.

-- PJM should not create any new type of fast-track process for approving power supply generation devoted just to data centers. This would be grossly unfair to the projects that have been waiting for as long as eight years to be connected to the grid and would prioritize commercial interests over state clean energy policies.

PJM has shown no interest in a fast tracking process designed to meet state energy policies, even when those policies would help maintain grid reliability.

-- Until data centers add new capacity, PJM must work with states to plan out whose power gets cut when the grid is stressed. PJM should not make these decisions.

Recommendations For State Government

Battery storage is currently the fastest resource to build, taking just 20-30 months once PJM has approved it, so it is the ideal resource to pair with data centers to ensure grid reliability and prevent soaring electricity bills amidst the flurry of data center proposals.

Even better, battery storage located on-site at data centers avoids PJM’s lengthy queue, saving years of development time.

However, without state action, new power for data centers will likely be generated by gas.

States can take the following steps to incentivize battery storage, leverage data center flexibility, and protect residents--

-- Encourage data center developers to voluntarily include battery storage in project proposals equal to the amount of capacity they will need.

This could take the form of a public utility commission creating retail tariffs that prioritize connection of large loads with storage, putting loads without storage first in line to be shut off when there’s not enough power, and by ensuring distributed energy resource rules allow on-site storage to take advantage of all revenue opportunities.

-- Explore financial incentives for battery storage projects that reflect the flexibility and reliability value they bring to the grid.

-- Create and/or ensure a streamlined state and local process for evaluating and approving proposals for battery storage associated with data centers.

-- States should do everything in their power to take advantage of data center flexibility. PJM’s existing demand response rules have been perfected over many years and are the best tool to do this; PJM’s proposal to create a special type of demand response just for data centers is unfair and will likely bring unintended consequences.

Either way, state public utility commissions should develop tariffs for data centers that encourage flexibility and are integrated into PJM demand response programs.

-- Work closely with PJM to ensure that new data centers bear the brunt of shutdowns when blackouts must occur until they bring their own capacity.

State public utility commissions should ensure these plans do not undermine state air quality regulations or harm local communities through overreliance on emergency backup generators.

Click Here for a copy of the NRDC factsheet.

(Charts from a July 25 presentation by Partrick Cicero, former PA Consumer Advocates and now counsel to the Pennsylvania Utility Law Project on the electricity cost increases and its impact on lower income households. Read more here.)

Resource Links - A.I. Data Centers:

-- Gov. Shapiro To Convene 13-State Summit Sept. 22 On Critical Changes Needed At PJM To Keep Energy Costs Low, Bring New Electricity To Grid, Serve Power Demands Of A.I. Data Centers [PaEN]

-- Team PA Releases PA Energy, Data Center, A.I. RoadMap, Includes ‘Aggressively Streamlining Permitting,' Establishing Regional Permitting Commissions [PaEN]

-- PUC Chairman: Model Tariff For Connecting A.I. Data Centers To Local Electric Grid To Be Published For Comment By End Of September [PaEN]

-- Guest Essay: Rewriting The Energy Story — Together - By Stephen M. DeFrank, Chairman, Pennsylvania Public Utility Commission [PaEN]

-- NRDC: Another Proposed PJM Plan To Deal With Massive A.I. Data Center Electricity Demands Fails To Protect Consumers, Will Increase Electricity Bills Up To $100 Billion From 2028 To 2032 [PaEN]

-- PA Senate Republicans Introduce Bill To Eliminate Need For Any State Permits, Any Public Review Of Permits Before Construction Of A.I. Data Centers, Related Power Plants [PaEN]

-- PUC: Brace For Higher Electric Bills As A Result Of Soaring Power Use; Consumers Should Review Energy Options [PaEN]

-- Independent Fiscal Office: Residential Electricity Bills ‘Begin Surge:’ Natural Gas Prices Up 71%, PJM Prices Up Due To A.I. Data Center Demand [PaEN]

-- PJM Electricity Auction: PJM Lost 2.8 Gigawatts Of Power Due To Reduced Reliability Rating Of Natural Gas Power Plants; Could Gain 12.2 Gigawatts By Increasing Reliability From Less Than 75% Now To An Achievable 90% [PaEN]

-- 30 Stakeholder Comments Received By PUC On Adequacy Of Electricity Supplies In Pennsylvania; Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem

-- PJM Electric Auction Impacts: 1 In 5 PA Households Report Problems Now Paying Energy Bills; Electric Utility Shutoffs Up 38.1% So Far This Year [PaEN]