The biggest US power grid will start disconnecting data centers first. Everyone else in its territory is already paying for the shortage that forced that decision.
PJM Interconnection says it will begin temporarily disconnecting data centers that haven't secured their own power as soon as mid-2027, after its capacity auction failed for the first time in the grid's history. The shortage behind that decision is already showing up in utility bills across PJM's 13-state footprint — data center project or not.
PJM Interconnection, the country's largest power grid, told stakeholders this week it will start temporarily disconnecting data centers that haven't secured their own new power supply — as soon as mid-2027, whenever the grid hits an emergency. The public gets protected first; large loads that didn't bring their own power get cut first. But the shortage forcing that policy is already showing up in utility costs across PJM's 13-state footprint, on projects that have nothing to do with AI.
Why is PJM cutting data centers off first?
Because it ran out of other options. PJM's most recent capacity auction failed to procure enough future supply to guarantee reliability for the 2027 delivery year — the first time that's happened in the grid operator's history, falling roughly 6 gigawatts short of what's needed. PJM's board traced the shortfall to data center demand growing faster than new generation could be built to serve it, and decided the fix has to land on the loads causing the problem before it lands on residential and commercial customers who had no say in it.
What is the emergency auction, and who gets to bid?
Starting in September 2026, PJM will run a backstop process where data center developers negotiate directly with new power generators for long-term contracts — up to 15-year power purchase agreements — outside PJM's normal capacity market. The target is as much as 15 gigawatts of new generation. A data center that locks in one of those contracts, or brings its own on-site generation, counts as having secured its own power. One that doesn't is first in line to be curtailed the next time PJM declares an emergency.
Does this only matter for data center construction?
No, and that's the part worth flagging past the data-center trade press. The demand growth behind this whole episode is already priced into utility bills across PJM's territory — Delaware, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and more. PJM's independent Market Monitor attributed 63% of a recent capacity price increase to data center load, adding roughly $9.3 billion in costs that get spread across all ratepayers, not billed only to data center operators. Wholesale power costs across the grid rose 75.5% year-over-year in the first quarter of 2026, and capacity prices have climbed from $28.92 per megawatt-day two years ago to $329.17 per megawatt-day now — the FERC-approved cap. Any project connecting to a PJM-territory utility is financing that increase through its rate class, whether it's a warehouse, a hospital, or a distribution center.
What should you actually check before your next bid?
The specifics depend on what you're building:
| If you're building... | What to check before you commit |
|---|---|
| A data center in PJM territory | Confirm the owner has a signed power purchase agreement or on-site generation lined up before mobilizing crews — a project without secured power now risks getting curtailed in operation, not just delayed at interconnection |
| Any other project connecting to a PJM utility | Ask the utility about its current rate case and how much of the increase it's passing to your customer class before finalizing operating-cost assumptions in the pro forma |
| Either kind of project | Track PJM's September backstop auction results — the volume of new generation it actually secures determines how tight power stays through 2028 |
None of this is speculative. PJM's board has approved the disconnection framework, and the September auction is scheduled. What's still open is which generators sign contracts and how fast the new capacity gets built — and that's the number to watch before pricing anything that depends on power in PJM's footprint over the next two years.
We covered FERC's ride-through standard for data centers after a single downed line knocked 3 gigawatts offline in PJM territory last week — this auction is the other half of that story: who pays, and who gets cut, when the grid runs short.
Forward this to whoever on your team is pricing utility costs for a project inside PJM's footprint — data center or not.
- What did PJM announce about disconnecting data centers?
- PJM Interconnection, the largest US grid operator, told stakeholders on July 27, 2026 that data centers which haven't secured their own new power supply may be temporarily disconnected first during grid emergencies, starting as soon as mid-2027. The policy is meant to protect residential and commercial ratepayers from being cut before large, discretionary loads.
- Why is PJM taking this step now?
- PJM's most recent capacity auction failed to procure enough supply to meet 2027 reliability requirements — the first such failure in the grid operator's history — falling roughly 6 gigawatts short, driven largely by data center demand growth.
- What is PJM's emergency power auction and when does it happen?
- Starting in September 2026, PJM will run a backstop auction process in which data center developers negotiate directly with new power generators for up to 15-year power purchase agreements, targeting as much as 15 gigawatts of new generating capacity.
- Does this only affect data center construction projects?
- No. Data centers accounted for 63% of a recent PJM capacity price increase, per PJM's independent Market Monitor, adding roughly $9.3 billion in costs that get spread across all ratepayers in PJM's 13-state footprint through utility rate cases — not just data center customers.
- How much have PJM electricity costs actually risen?
- PJM capacity prices rose from $28.92 per megawatt-day in the 2024/2025 delivery year to $329.17 per megawatt-day for 2026/2027 — the FERC-approved price cap — and total wholesale power costs jumped 75.5% year-over-year in the first quarter of 2026.