{"document":{"slug":"filing-20260821-5176","title":"Comments of PJM Industrial Customer Coalition on PJM Interconnection, L.L.C.’s Reliability Backstop Procurement Proposal","issued":"2026-08-21","accession":"20260821-5176","docket":"ER26-3380-000","group":"PJM filings","filer":"PJM Industrial Customer Coalition","kind":"comments","file":"sources/originals/20260821-5176_01.pdf","url":"https://elibrary.ferc.gov/eLibrary/filelist?accession_Number=20260821-5176","sha256":"7facc14dd714c14db8df5f21027365ffe4a1c4b526fc46feda950e2fa70abe87","pages":11,"tokens":2946,"emptyPages":[]},"pages":[{"page":1,"startToken":0,"endToken":213,"text":"UNITED STATES OF AMERICA \nFEDERAL ENERGY REGULATORY COMMISSION \n \n \n  \n \n \n \n \n \n       : \nPJM Interconnection, L.L.C.   \n \n       :  \n           Docket No. ER26-3380-000 \n  \n \n \n \n \n \n       : \n \n \nCOMMENTS ON PJM’S  \nRELIABILITY BACKSTOP PROCUREMENT PROPOSAL \nON BEHALF OF \nPJM INDUSTRIAL CUSTOMER COALITION \n \nPursuant to the Federal Energy Regulatory Commission’s (“Commission” or “FERC”) \nAugust 3, 2026, Combined Notice of Filings #1, the PJM Industrial Customer Coalition \n(“PJMICC” or “Coalition”)1 hereby files these Comments in response to PJM Interconnection, \nL.L.C.’s (“PJM”) July 31, 2026, filing, Reliability Backstop Procurement to Address Resource \nAdequacy Concerns Stemming from Large Loads (“RBP Proposal”), in the above-captioned \ndocket. \nI. \nINTRODUCTION \n \nAs described by PJM, the Reliability Backstop Procurement (“RBP”) is a “one-time \nprocurement of new capacity to address resource adequacy challenges in the PJM Region arising \nfrom insufficient commitments of capacity in the 2027/2028 and 2028/2029 Reliability Pricing \nModel (‘RPM’) Auctions, primarily driven by the unprecedented addition of large loads, most \nnotably data centers, in the PJM Region.”2 As proposed by PJM, “the RBP will commence upon \nCommission acceptance of this filing with the goal of obtaining commitments of new RBP \n[Unforced Capacity (‘UCAP’)] MW from eligible resources, called RBP Resources, for a fixed \n \n1 PJMICC filed a doc-less Motion to Intervene in Docket No. ER26-3380-000 on August 14, 2026. \n2 RBP Proposal at 1."},{"page":2,"startToken":213,"endToken":514,"text":"2 \nterm of up to 15 years, starting with the 2028/2029 Delivery Year and ending with the 2042/2043 \nDelivery Year.”3 The RBP is designed to operate in parallel with other initiatives being pursued \nby PJM, such as the interim resource adequacy service (“IRAS”), existing proceedings at the \nFERC on large load additions, co-located load, and holistic market reform, and internal \nimprovements to forecasting and bilateral contracting.4 \nII. \nBACKGROUND \nPJMICC is a coalition of large energy users in the PJM Region. Coalition membership \nincludes many large manufacturers and other entities that require significant volumes of electricity \nto support their operations—they include manufacturers of paper, cement, chemicals, metals, \npharmaceutical products, and consumer goods; institutional customers such as large hospitals and \nuniversities; and other energy-intensive retail electric customers. PJMICC members represent the \nbackbone of American manufacturing and core services that support the United States’ competitive \nstrength in a global economy.  \nAs a threshold matter, PJMICC wishes to express appreciation to PJM’s Board, Staff, and \nstakeholders for the intensive communication and collaboration over the past many months leading \nup to the RBP Proposal. As an ad hoc organization representing many traditional large energy \nusers in the manufacturing and institutional sectors, PJMICC emphasizes the importance of \nsecuring stable, reliable, and cost-effective power sources during a period of rapid load growth.  \nWhile PJMICC does not oppose the concept or general approach of the RBP, PJMICC \noffers concern that the RBP, as proposed, is incomplete—primarily insofar as its design leaves \n \n3 Id. at 8. \n4 See id. at 2-3, 22-25. See also id. at 29 (“the proposed RBP is intended to occur concurrently, on a parallel path, with \nan ongoing bilateral matching process that credits new capacity being brought by new large loads and therefore guards \nagainst double procurement in the RBP”)."},{"page":3,"startToken":514,"endToken":794,"text":"3 \nultimate retail cost allocation rudderless. PJMICC agrees with PJM that states are ultimately \nresponsible for retail pricing, but they cannot do so effectively in a vacuum. PJMICC offers the \nfollowing Comments regarding the RBP Proposal. \nIII. \nPJMICC COMMENTS \nA. \nThe RBP, as proposed, is incomplete because it lacks key protections and \ncomponents to enable alignment of wholesale and retail cost allocation.  \nPJM rightly recognizes that meeting the moment requires “cooperative federalism” – that \nis, both state-regulated and federally-regulated spheres.5 Like a large jigsaw puzzle, the picture \nwill only be complete when the necessary pieces are joined.  \nHere, PJM has proposed an approach that, if successful, will result in a substantial increase \nin capacity to address the resource adequacy challenges it faces. However, procuring the capacity \nis only part of the picture. The addition of this capacity is intended to be paid for by new large \nloads; however, as currently proposed, PJM’s filing lacks the tools needed to ensure that retail \ncosts are, and will be, allocated in a just and reasonable manner at the state level. \nWhile PJM appropriately recognizes that states oversee retail cost allocation, PJM neglects \nto recognize that the structure of how the wholesale rates are charged directly and substantially \nimpacts the practical ability for states to assign retail costs. Put simply, while RBP seeks to fill a \nresource adequacy need, the proposal should be amended to ensure it fills key “gaps.” Below, \nPJMICC addresses three interrelated but critical gaps: cost allocation, regulatory accountability, \nand information-sharing. Bridging these gaps is critical to ensuring both just and reasonable \nwholesale rates and just and reasonable retail rates that are consistent with the Ratepayer Protection \n \n5 Id. at 10."},{"page":4,"startToken":794,"endToken":1161,"text":"4 \nPledge and other state and federal efforts to protect existing customers from costs they did not \ncause. \nIn PJM’s urgency to respond to the pressures of the PJM Governors and other stakeholders \ndemanding action, PJM (and the FERC) should not allow these gaps to go unaddressed.     \nB. \nGap #1: Cost Allocation Alignment: Effective cooperative federalism must \nposition states and retail customers for success by providing appropriate \nalignment between wholesale and retail costs. \nPJM is correct that states are responsible for retail cost allocation. Yet meeting the moment \nrequires a cooperative federalism that reflects a reasonable alignment between wholesale and retail \npricing. Without appropriate alignment, states could be frustrated in their efforts to establish just \nand reasonable retail rates. \nUnder PJM’s proposal, each Load Serving Entity’s (“LSE”) specific share of costs within \na zone is determined by its RBP Obligation. From there, PJM explains that states are responsible \nfor allocating these costs.6 Yet, PJM does not recognize that its proposed cost allocation has a \ndirect impact on the states and their ability to allocate at the retail level.7 \nWholesale costs must be designed with retail allocation in mind; otherwise, simply \nclaiming that states can allocate costs to retail customers may prove inadequate. States will only \nsucceed if the rules in the wholesale market include sufficient tools to assign the costs of RBP to \nthe retail customers that are prompting the RBP procurement, consistent with the Ratepayer \nProtection Pledge and the principles of just and reasonable rates. \n \n6 Id. at 11. \n7 See id. at 99-100. While PJM says its “proposed methodology … sets the table for states and/or [Relevant Electric \nRetail Regulatory Authorities (‘RERRA’).” PJM also states that “PJM is not proposing a backup methodology for \nhow RBP Charges should be allocated to non-jurisdictional, retail customers served by each of the LSEs in any Electric \nDistributor’s zone/area. Even if Electric Distributors do not report any state and/or RERRA-determined [RBP \nObligations (‘RBO’)] in their zone(s)/area(s), and even if PJM subsequently applies the status quo allocation \nmethodology to PJM’s LSE customers, PJM would not, under the proposed methodology, determine any further \nallocation to retail customers served by those LSEs.” Id. at 99."},{"page":5,"startToken":1161,"endToken":1654,"text":"5 \nThis is a critical point. Just and reasonable federal/wholesale rates are connected to just \nand reasonable state/retail rates. This is logically apparent because both are connected to cost \ncausation, which is a bedrock principle in the Federal Power Act and many state laws.8 Just as an \nLSE purchasing capacity on behalf of its retail customers will be allocated costs based on its \nproportionate use of capacity in each zone, a retail customer should also be allocated costs similarly \nat the state level.  \nThis connection between wholesale and retail rates can be illustrated as follows: \n \nIf a wholesale food distributor sells barrels of apples for $100 and barrels of oranges for \n$500, a grocery store will not buy a barrel of each and then price apples and oranges the \nsame on the store shelves. Such an approach would result in very expensive apples and \nextremely cheap oranges. Assuming a normal competitive environment, such an approach \nwould result in apples going bad on the shelf, while oranges would sell out quickly without \ngenerating sufficient cash to re-order more oranges. \n \n \nSimilarly unrealistic would be a grocery store ordering a barrel of each fruit without seeing \nitemized pricing to understand the 5x price difference. A grocery store that treats both fruits \nas a “bundle” but does not distinguish the costs of each item will not be able to sustainably \nreplenish its supply, make a profit, or charge market-based rates to its customers. \n \n \nBottom line: the grocery store can only set its retail price by reference to the wholesale \nprice. While the grocery store has latitude to set retail prices and allocate its costs, it cannot \nsustainably act in a way that is contrary to the wholesale edifice on which it depends. \n \nSimilarly, the RBP creates a carveout from the normal capacity marketplace process. If \ncertain (present and future) retail customers are driving the need for more supply, PJM’s RBP must \noperate so that wholesale costs flow through. As a practical matter, this means that wholesale rates \nmust be developed with retail allocation in mind. Currently, this is facilitated by a cost allocation \n \n8 16 U.S.C. § 824d(a). See Old Dominion Elec. Coop. v. FERC, 898 F.3d 1254, 1255 (D.C. Cir. 2018) (“Under the \nAct, electric utilities must charge ‘just and reasonable’ rates. For decades, the Commission and the courts have \nunderstood this requirement to incorporate a ‘cost-causation principle’—the rates charged for electricity should reflect \nthe costs of providing it.”) The cost causation principle provides that all Commission-jurisdictional rates and charges \nmust “reflect to some degree the costs actually caused by the customer who must pay for them,” and that costs must \nbe allocated in a manner that is at least roughly commensurate with the benefits that entity receives. Midwest ISO \nTransmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004); see also Ill. Com. Comm’n v. FERC, 576 F.3d \n470, 476 (7th Cir. 2009)."},{"page":6,"startToken":1654,"endToken":1972,"text":"6 \ncalculation that, for many utilities, is on file as an Attachment M-2 in PJM’s tariff. Other utilities \npost their methodologies (e.g., 12CP or 5CP) on their website.9 While this provides transparency \n(an issue addressed below), it also illustrates the importance of costs being aligned with benefits \nat both the wholesale and retail levels. In the current Attachment M-2s, the wholesale costs are \ndesigned in such a way that each LSE’s responsibility can be determined and then further allocated \nat the retail level. Here, the RBP Proposal adds a significant complication to the normal process. \nThis must be taken into account in the design; otherwise, retail cost protections for existing \ncustomers will inevitably fail. \nC. \nGap #2: Regulatory Accountability: Assignment of costs to retail customers by \nutilities must be on file before a state commission or FERC. \nCurrently, many utilities in the PJM region include their cost allocation methodologies in \nthe Attachment M-2 on file at the FERC (as an attachment to the PJM Open Access Transmission \nTariff). However, this is not a universal process. To PJMICC’s knowledge, the FERC has not \nbroadly required utilities to file such methodologies. The Attachment M-2s address both federal \nand state jurisdictional cost allocation. For example, a typical Attachment M-2 format includes \nboth (1) calculation of LSEs’ respective shares of responsibility for system-wide transmission and \ncapacity charges and (2) how individual accounts are allocated responsibility. \nAttachment M-2s stand at the border between state and federal regulatory responsibility. \nWhile the FERC may not direct retail cost allocation, it has jurisdiction over rules and regulations \n“affecting or pertaining to [jurisdictional] rates and charges”10 Utilities must be required to set \n \n9 PJM keeps an inventory of methodologies on its website. See PJM.com, THEO, PLC & NSPL Methodology \nInventory, available at https://www.pjm.com/markets-and-operations/billing-settlements-and-credit/theo-plc-and-\nnspl.aspx.  \n10 16 U.S. Code § 824d. See also 16 U.S. Code § 824e."},{"page":7,"startToken":1972,"endToken":2321,"text":"7 \nforth their methodologies in the Attachment M-2 or some other filing subject to review by state \ncommissions.  \nThis transparency is also important because of the relative complexity of the RBP. To take \na straightforward example, the RBP Proposal states, “Capacity obtained through bilateral matching \nor other voluntary arrangements for new capacity, if reported to PJM within the RBP procurement \nwindow and supported by sufficient evidence, may be determined by PJM to be Qualifying RBP \nOffset UCAP MW.”11 Then, PJM may, as appropriate, “reduce the Final RBP Target by the \nQualifying RBP Offset UCAP MW and by the UCAP obligation value of load that have \nsuccessfully requested and obtained an opt-out pursuant to proposed Tariff, Attachment DD, \nsection 18.1(d).” In this case, a state retail authority must be able to determine which load has met \nthis requirement to appropriately allocate (or not allocate) costs. There are a variety of options and \ncarveouts present in the RBP Proposal. These must be clear to consumers at both a wholesale and \nretail level. While not mandating retail pricing, the FERC should require that methodologies be on \nfile with the FERC or a relevant state commission. \nD. \nGap #3: Information-Sharing: Clear tagging of RBP participation and relevant \ncarveouts. \nThe wholesale costs alluded to above can only be appropriately allocated at the state level \nif there is proper “information flow” from wholesale to retail. As the central coordinator of the \nregion’s wholesale markets, PJM alone is situated to provide the necessary tools and data to state-\nregulated entities, enabling states to fulfill their respective just and reasonable mandates at the \nretail level.12 Unfortunately, under the RBP Proposal, it is not clear if states will have the necessary \n \n11 RBP Proposal at 31. \n12 PJM has tools, such as (a) control of its billing system, which can be used to track key data points that serve as \ninputs to retail cost calculations; (b) the Reliability Assurance Agreement Among Load Serving Entities (“RAA”), \nwhich contractually obligates both PJM and all LSEs in its territory to take specific actions in collaboration with one"},{"page":8,"startToken":2321,"endToken":2674,"text":"8 \ninformation to appropriately develop cost-causation based mechanisms to protect existing \ncustomers. \nTo appropriately equip states and state-regulated authorities for this purpose, each \nsubstantive component of the RBP must be “tagged” so that information sharing reaches the state \nlevel for retail costs. Additionally, states must know well in advance what information they will \nhave access to as they design cost allocation at the retail level.  \nCurrently, there is a lack of clarity at the customer level regarding which loads are causing \nRBP-related costs and which are not. Such information must be clear. The following practices, at \nminimum, should be followed by PJM as an operational matter: \n \nEssential data needed for forecasting and cost assignment or allocation must be accessible \nto PJM, LSEs, and electric distribution companies (“EDC”). \n \n \nPJM Settlement should track critical data on PJM invoices to LSEs. PJM invoices already \ninclude a variety of zonal- and LSE-based charges. PJM should ensure that key costs for \nnew large retail loads impacting the RBP are tracked through a subaccount-like structure. \n  \n \nPJM should create a new billing line item (similar to how PJM separately reports \nTransmission Enhancement, Generation Deactivation, or other itemized costs) tagged \nspecifically as “Reliability Backstop Procurement” costs, broken out by the load growth \nthat caused the procurement (see below). This approach is relevant to RBP, IRAS, and \nother proposals affecting wholesale capacity and transmission costs. For example, such \nbilling line items should include itemized exemptions/credits for Bring Your Own New \nCapacity (“BYONC”) status (including co-located load additions). \n \n \nUnder each billing line item related to RBP, PJM should add subaccounts identifying each \nindividual large load customer by interconnection point. \n \nThe above information flow is not comprehensive, but it is illustrative of the kinds of \ninformation state-level authorities will need to ensure appropriate retail cost allocation. Ensuring \nthis information is available will be a critical step in positioning states for success, allowing them \n \nanother; (c) Section 205 filing rights to add modifications to the RAA; and (d) regional visibility. These tools must be \nused in support of the transparency needed for states to follow their own laws and standards regarding retail cost \nallocation."},{"page":9,"startToken":2674,"endToken":2806,"text":"9 \nto appropriately protect existing customers. It will (a) facilitate proactive retail cost allocation \nplanning by states, benefiting retail customers; (b) provide a roadmap for states to take action and \nbe accountable for actions they take; (c) make PJM’s plan for states to take responsibility realistic, \nallowing states to effectively complement PJM’s wholesale work; and (d) give stakeholders at all \nlevels an opportunity to propose innovative solutions. \nGiven the relative complexity of the RBP Proposal, PJM should also issue billing guidance \nto help states understand all components of RBP. \nBottom line – retail cost allocation requires information flow from wholesale costs. PJM, \nas the essential entity in position to make this information available to states, must signal to states \nwhat information will be available so state authorities can begin the cost allocation process."},{"page":10,"startToken":2806,"endToken":2879,"text":"10 \nIV. \nCONCLUSION \nWHEREFORE, the PJM Industrial Customer Coalition respectfully requests the \nCommission to consider these Comments when evaluating PJM’s Reliability Backstop \nProcurement proposal. \n \n \n \n \n \nRespectfully submitted, \n \nBy: \n/s/ Susan E. Bruce \n \n \n \nSusan E. Bruce \nKenneth R. Stark \nMatthew L. Garber \nMcNees Wallace & Nurick LLC  \n100 Pine Street \nHarrisburg, PA  17101 \nTel:  717-232-8000 \nE-mail: sbruce@mcneeslaw.com \n \n \nkstark@mcneeslaw.com \nmgarber@mcneeslaw.com \n \nCounsel to the PJM Industrial Customer Coalition \n \nDated:  August 21, 2026"},{"page":11,"startToken":2879,"endToken":2946,"text":"CERTIFICATE OF SERVICE \n \nI hereby certify that I have this day served, via first-class mail, electronic transmission or \nhand-delivery, the foregoing upon each person designated on the official service list compiled by \nthe Secretary in this proceeding.  \nDated this 21st day of August, 2026.  \n \n \n     /s/ Matthew L. Garber  \n \n \nMatthew L. Garber \nMcNees Wallace & Nurick LLC  \n100 Pine Street \nHarrisburg, PA  17101 \nTel:  717-232-8000 \nE-mail: mgarber@mcneeslaw.com"}],"sections":[{"p":1,"at":0,"title":"Opening text","method":"opening text","endPage":1,"endAt":761,"startToken":0,"endToken":93},{"p":1,"at":761,"title":"I. INTRODUCTION","method":"printed heading","endPage":1,"endAt":765,"startToken":93,"endToken":94},{"p":1,"at":765,"title":"INTRODUCTION","method":"printed heading","endPage":2,"endAt":437,"startToken":94,"endToken":283},{"p":2,"at":437,"title":"II. BACKGROUND","method":"printed heading","endPage":2,"endAt":442,"startToken":283,"endToken":284},{"p":2,"at":442,"title":"BACKGROUND","method":"printed heading","endPage":3,"endAt":244,"startToken":284,"endToken":550},{"p":3,"at":244,"title":"III. PJMICC COMMENTS","method":"printed heading","endPage":3,"endAt":267,"startToken":550,"endToken":553},{"p":3,"at":267,"title":"A. The RBP, as proposed, is incomplete because it lacks key protections and components to enable alignment of wholesale and retail cost allocation.","method":"PDF bookmark","endPage":4,"endAt":288,"startToken":553,"endToken":841},{"p":4,"at":288,"title":"B. Gap #1: Cost Allocation Alignment: Effective cooperative federalism must position states and retail customers for success by providing appropriate alignment between wholesale and retail costs.","method":"PDF bookmark","endPage":6,"endAt":733,"startToken":841,"endToken":1770},{"p":6,"at":733,"title":"C. Gap #2: Regulatory Accountability: Assignment of costs to retail customers by utilities must be on file before a state commission or FERC.","method":"PDF bookmark","endPage":6,"endAt":1530,"startToken":1770,"endToken":1887},{"p":6,"at":1530,"title":"Attachment M-2s stand at the border between state and federal regulatory responsibility.","method":"printed heading","endPage":7,"endAt":1212,"startToken":1887,"endToken":2167},{"p":7,"at":1212,"title":"D. Gap #3: Information-Sharing: Clear tagging of RBP participation and relevant carveouts.","method":"PDF bookmark","endPage":10,"endAt":4,"startToken":2167,"endToken":2807},{"p":10,"at":4,"title":"IV. CONCLUSION","method":"printed heading","endPage":10,"endAt":9,"startToken":2807,"endToken":2808},{"p":10,"at":9,"title":"CONCLUSION","method":"printed heading","endPage":11,"endAt":0,"startToken":2808,"endToken":2879},{"p":11,"at":0,"title":"CERTIFICATE OF SERVICE","method":"printed heading","endPage":11,"endAt":471,"startToken":2879,"endToken":2946}]}