ER26-3380-000 · 2026-08-21 · PJM Industrial Customer Coalition

Comments of PJM Industrial Customer Coalition on PJM Interconnection, L.L.C.’s Reliability Backstop Procurement Proposal

UNITED STATES OF AMERICA 
FEDERAL ENERGY REGULATORY COMMISSION 
 
 
  
 
 
 
 
 
       : 
PJM Interconnection, L.L.C.   
 
       :  
           Docket No. ER26-3380-000 
  
 
 
 
 
 
       : 
 
 
COMMENTS ON PJM’S  
RELIABILITY BACKSTOP PROCUREMENT PROPOSAL 
ON BEHALF OF 
PJM INDUSTRIAL CUSTOMER COALITION 
 
Pursuant to the Federal Energy Regulatory Commission’s (“Commission” or “FERC”) 
August 3, 2026, Combined Notice of Filings #1, the PJM Industrial Customer Coalition 
(“PJMICC” or “Coalition”)1 hereby files these Comments in response to PJM Interconnection, 
L.L.C.’s (“PJM”) July 31, 2026, filing, Reliability Backstop Procurement to Address Resource 
Adequacy Concerns Stemming from Large Loads (“RBP Proposal”), in the above-captioned 
docket. 
I. 
INTRODUCTION 
 
As described by PJM, the Reliability Backstop Procurement (“RBP”) is a “one-time 
procurement of new capacity to address resource adequacy challenges in the PJM Region arising 
from insufficient commitments of capacity in the 2027/2028 and 2028/2029 Reliability Pricing 
Model (‘RPM’) Auctions, primarily driven by the unprecedented addition of large loads, most 
notably data centers, in the PJM Region.”2 As proposed by PJM, “the RBP will commence upon 
Commission acceptance of this filing with the goal of obtaining commitments of new RBP 
[Unforced Capacity (‘UCAP’)] MW from eligible resources, called RBP Resources, for a fixed 
 
1 PJMICC filed a doc-less Motion to Intervene in Docket No. ER26-3380-000 on August 14, 2026. 
2 RBP Proposal at 1.

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term of up to 15 years, starting with the 2028/2029 Delivery Year and ending with the 2042/2043 
Delivery Year.”3 The RBP is designed to operate in parallel with other initiatives being pursued 
by PJM, such as the interim resource adequacy service (“IRAS”), existing proceedings at the 
FERC on large load additions, co-located load, and holistic market reform, and internal 
improvements to forecasting and bilateral contracting.4 
II. 
BACKGROUND 
PJMICC is a coalition of large energy users in the PJM Region. Coalition membership 
includes many large manufacturers and other entities that require significant volumes of electricity 
to support their operations—they include manufacturers of paper, cement, chemicals, metals, 
pharmaceutical products, and consumer goods; institutional customers such as large hospitals and 
universities; and other energy-intensive retail electric customers. PJMICC members represent the 
backbone of American manufacturing and core services that support the United States’ competitive 
strength in a global economy.  
As a threshold matter, PJMICC wishes to express appreciation to PJM’s Board, Staff, and 
stakeholders for the intensive communication and collaboration over the past many months leading 
up to the RBP Proposal. As an ad hoc organization representing many traditional large energy 
users in the manufacturing and institutional sectors, PJMICC emphasizes the importance of 
securing stable, reliable, and cost-effective power sources during a period of rapid load growth.  
While PJMICC does not oppose the concept or general approach of the RBP, PJMICC 
offers concern that the RBP, as proposed, is incomplete—primarily insofar as its design leaves 
 
3 Id. at 8. 
4 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 
an ongoing bilateral matching process that credits new capacity being brought by new large loads and therefore guards 
against double procurement in the RBP”).

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ultimate retail cost allocation rudderless. PJMICC agrees with PJM that states are ultimately 
responsible for retail pricing, but they cannot do so effectively in a vacuum. PJMICC offers the 
following Comments regarding the RBP Proposal. 
III. 
PJMICC COMMENTS 
A. 
The RBP, as proposed, is incomplete because it lacks key protections and 
components to enable alignment of wholesale and retail cost allocation.  
PJM rightly recognizes that meeting the moment requires “cooperative federalism” – that 
is, both state-regulated and federally-regulated spheres.5 Like a large jigsaw puzzle, the picture 
will only be complete when the necessary pieces are joined.  
Here, PJM has proposed an approach that, if successful, will result in a substantial increase 
in capacity to address the resource adequacy challenges it faces. However, procuring the capacity 
is only part of the picture. The addition of this capacity is intended to be paid for by new large 
loads; however, as currently proposed, PJM’s filing lacks the tools needed to ensure that retail 
costs are, and will be, allocated in a just and reasonable manner at the state level. 
While PJM appropriately recognizes that states oversee retail cost allocation, PJM neglects 
to recognize that the structure of how the wholesale rates are charged directly and substantially 
impacts the practical ability for states to assign retail costs. Put simply, while RBP seeks to fill a 
resource adequacy need, the proposal should be amended to ensure it fills key “gaps.” Below, 
PJMICC addresses three interrelated but critical gaps: cost allocation, regulatory accountability, 
and information-sharing. Bridging these gaps is critical to ensuring both just and reasonable 
wholesale rates and just and reasonable retail rates that are consistent with the Ratepayer Protection 
 
5 Id. at 10.

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Pledge and other state and federal efforts to protect existing customers from costs they did not 
cause. 
In PJM’s urgency to respond to the pressures of the PJM Governors and other stakeholders 
demanding action, PJM (and the FERC) should not allow these gaps to go unaddressed.     
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. 
PJM is correct that states are responsible for retail cost allocation. Yet meeting the moment 
requires a cooperative federalism that reflects a reasonable alignment between wholesale and retail 
pricing. Without appropriate alignment, states could be frustrated in their efforts to establish just 
and reasonable retail rates. 
Under PJM’s proposal, each Load Serving Entity’s (“LSE”) specific share of costs within 
a zone is determined by its RBP Obligation. From there, PJM explains that states are responsible 
for allocating these costs.6 Yet, PJM does not recognize that its proposed cost allocation has a 
direct impact on the states and their ability to allocate at the retail level.7 
Wholesale costs must be designed with retail allocation in mind; otherwise, simply 
claiming that states can allocate costs to retail customers may prove inadequate. States will only 
succeed if the rules in the wholesale market include sufficient tools to assign the costs of RBP to 
the retail customers that are prompting the RBP procurement, consistent with the Ratepayer 
Protection Pledge and the principles of just and reasonable rates. 
 
6 Id. at 11. 
7 See id. at 99-100. While PJM says its “proposed methodology … sets the table for states and/or [Relevant Electric 
Retail Regulatory Authorities (‘RERRA’).” PJM also states that “PJM is not proposing a backup methodology for 
how RBP Charges should be allocated to non-jurisdictional, retail customers served by each of the LSEs in any Electric 
Distributor’s zone/area. Even if Electric Distributors do not report any state and/or RERRA-determined [RBP 
Obligations (‘RBO’)] in their zone(s)/area(s), and even if PJM subsequently applies the status quo allocation 
methodology to PJM’s LSE customers, PJM would not, under the proposed methodology, determine any further 
allocation to retail customers served by those LSEs.” Id. at 99.

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This is a critical point. Just and reasonable federal/wholesale rates are connected to just 
and reasonable state/retail rates. This is logically apparent because both are connected to cost 
causation, which is a bedrock principle in the Federal Power Act and many state laws.8 Just as an 
LSE purchasing capacity on behalf of its retail customers will be allocated costs based on its 
proportionate use of capacity in each zone, a retail customer should also be allocated costs similarly 
at the state level.  
This connection between wholesale and retail rates can be illustrated as follows: 
 
If a wholesale food distributor sells barrels of apples for $100 and barrels of oranges for 
$500, a grocery store will not buy a barrel of each and then price apples and oranges the 
same on the store shelves. Such an approach would result in very expensive apples and 
extremely cheap oranges. Assuming a normal competitive environment, such an approach 
would result in apples going bad on the shelf, while oranges would sell out quickly without 
generating sufficient cash to re-order more oranges. 
 
 
Similarly unrealistic would be a grocery store ordering a barrel of each fruit without seeing 
itemized pricing to understand the 5x price difference. A grocery store that treats both fruits 
as a “bundle” but does not distinguish the costs of each item will not be able to sustainably 
replenish its supply, make a profit, or charge market-based rates to its customers. 
 
 
Bottom line: the grocery store can only set its retail price by reference to the wholesale 
price. While the grocery store has latitude to set retail prices and allocate its costs, it cannot 
sustainably act in a way that is contrary to the wholesale edifice on which it depends. 
 
Similarly, the RBP creates a carveout from the normal capacity marketplace process. If 
certain (present and future) retail customers are driving the need for more supply, PJM’s RBP must 
operate so that wholesale costs flow through. As a practical matter, this means that wholesale rates 
must be developed with retail allocation in mind. Currently, this is facilitated by a cost allocation 
 
8 16 U.S.C. § 824d(a). See Old Dominion Elec. Coop. v. FERC, 898 F.3d 1254, 1255 (D.C. Cir. 2018) (“Under the 
Act, electric utilities must charge ‘just and reasonable’ rates. For decades, the Commission and the courts have 
understood this requirement to incorporate a ‘cost-causation principle’—the rates charged for electricity should reflect 
the costs of providing it.”) The cost causation principle provides that all Commission-jurisdictional rates and charges 
must “reflect to some degree the costs actually caused by the customer who must pay for them,” and that costs must 
be allocated in a manner that is at least roughly commensurate with the benefits that entity receives. Midwest ISO 
Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004); see also Ill. Com. Comm’n v. FERC, 576 F.3d 
470, 476 (7th Cir. 2009).

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calculation that, for many utilities, is on file as an Attachment M-2 in PJM’s tariff. Other utilities 
post their methodologies (e.g., 12CP or 5CP) on their website.9 While this provides transparency 
(an issue addressed below), it also illustrates the importance of costs being aligned with benefits 
at both the wholesale and retail levels. In the current Attachment M-2s, the wholesale costs are 
designed in such a way that each LSE’s responsibility can be determined and then further allocated 
at the retail level. Here, the RBP Proposal adds a significant complication to the normal process. 
This must be taken into account in the design; otherwise, retail cost protections for existing 
customers will inevitably fail. 
C. 
Gap #2: Regulatory Accountability: Assignment of costs to retail customers by 
utilities must be on file before a state commission or FERC. 
Currently, many utilities in the PJM region include their cost allocation methodologies in 
the Attachment M-2 on file at the FERC (as an attachment to the PJM Open Access Transmission 
Tariff). However, this is not a universal process. To PJMICC’s knowledge, the FERC has not 
broadly required utilities to file such methodologies. The Attachment M-2s address both federal 
and state jurisdictional cost allocation. For example, a typical Attachment M-2 format includes 
both (1) calculation of LSEs’ respective shares of responsibility for system-wide transmission and 
capacity charges and (2) how individual accounts are allocated responsibility. 
Attachment M-2s stand at the border between state and federal regulatory responsibility. 
While the FERC may not direct retail cost allocation, it has jurisdiction over rules and regulations 
“affecting or pertaining to [jurisdictional] rates and charges”10 Utilities must be required to set 
 
9 PJM keeps an inventory of methodologies on its website. See PJM.com, THEO, PLC & NSPL Methodology 
Inventory, available at https://www.pjm.com/markets-and-operations/billing-settlements-and-credit/theo-plc-and-
nspl.aspx.  
10 16 U.S. Code § 824d. See also 16 U.S. Code § 824e.

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forth their methodologies in the Attachment M-2 or some other filing subject to review by state 
commissions.  
This transparency is also important because of the relative complexity of the RBP. To take 
a straightforward example, the RBP Proposal states, “Capacity obtained through bilateral matching 
or other voluntary arrangements for new capacity, if reported to PJM within the RBP procurement 
window and supported by sufficient evidence, may be determined by PJM to be Qualifying RBP 
Offset UCAP MW.”11 Then, PJM may, as appropriate, “reduce the Final RBP Target by the 
Qualifying RBP Offset UCAP MW and by the UCAP obligation value of load that have 
successfully requested and obtained an opt-out pursuant to proposed Tariff, Attachment DD, 
section 18.1(d).” In this case, a state retail authority must be able to determine which load has met 
this requirement to appropriately allocate (or not allocate) costs. There are a variety of options and 
carveouts present in the RBP Proposal. These must be clear to consumers at both a wholesale and 
retail level. While not mandating retail pricing, the FERC should require that methodologies be on 
file with the FERC or a relevant state commission. 
D. 
Gap #3: Information-Sharing: Clear tagging of RBP participation and relevant 
carveouts. 
The wholesale costs alluded to above can only be appropriately allocated at the state level 
if there is proper “information flow” from wholesale to retail. As the central coordinator of the 
region’s wholesale markets, PJM alone is situated to provide the necessary tools and data to state-
regulated entities, enabling states to fulfill their respective just and reasonable mandates at the 
retail level.12 Unfortunately, under the RBP Proposal, it is not clear if states will have the necessary 
 
11 RBP Proposal at 31. 
12 PJM has tools, such as (a) control of its billing system, which can be used to track key data points that serve as 
inputs to retail cost calculations; (b) the Reliability Assurance Agreement Among Load Serving Entities (“RAA”), 
which contractually obligates both PJM and all LSEs in its territory to take specific actions in collaboration with one

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information to appropriately develop cost-causation based mechanisms to protect existing 
customers. 
To appropriately equip states and state-regulated authorities for this purpose, each 
substantive component of the RBP must be “tagged” so that information sharing reaches the state 
level for retail costs. Additionally, states must know well in advance what information they will 
have access to as they design cost allocation at the retail level.  
Currently, there is a lack of clarity at the customer level regarding which loads are causing 
RBP-related costs and which are not. Such information must be clear. The following practices, at 
minimum, should be followed by PJM as an operational matter: 
 
Essential data needed for forecasting and cost assignment or allocation must be accessible 
to PJM, LSEs, and electric distribution companies (“EDC”). 
 
 
PJM Settlement should track critical data on PJM invoices to LSEs. PJM invoices already 
include a variety of zonal- and LSE-based charges. PJM should ensure that key costs for 
new large retail loads impacting the RBP are tracked through a subaccount-like structure. 
  
 
PJM should create a new billing line item (similar to how PJM separately reports 
Transmission Enhancement, Generation Deactivation, or other itemized costs) tagged 
specifically as “Reliability Backstop Procurement” costs, broken out by the load growth 
that caused the procurement (see below). This approach is relevant to RBP, IRAS, and 
other proposals affecting wholesale capacity and transmission costs. For example, such 
billing line items should include itemized exemptions/credits for Bring Your Own New 
Capacity (“BYONC”) status (including co-located load additions). 
 
 
Under each billing line item related to RBP, PJM should add subaccounts identifying each 
individual large load customer by interconnection point. 
 
The above information flow is not comprehensive, but it is illustrative of the kinds of 
information state-level authorities will need to ensure appropriate retail cost allocation. Ensuring 
this information is available will be a critical step in positioning states for success, allowing them 
 
another; (c) Section 205 filing rights to add modifications to the RAA; and (d) regional visibility. These tools must be 
used in support of the transparency needed for states to follow their own laws and standards regarding retail cost 
allocation.

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to appropriately protect existing customers. It will (a) facilitate proactive retail cost allocation 
planning by states, benefiting retail customers; (b) provide a roadmap for states to take action and 
be accountable for actions they take; (c) make PJM’s plan for states to take responsibility realistic, 
allowing states to effectively complement PJM’s wholesale work; and (d) give stakeholders at all 
levels an opportunity to propose innovative solutions. 
Given the relative complexity of the RBP Proposal, PJM should also issue billing guidance 
to help states understand all components of RBP. 
Bottom line – retail cost allocation requires information flow from wholesale costs. PJM, 
as the essential entity in position to make this information available to states, must signal to states 
what information will be available so state authorities can begin the cost allocation process.

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IV. 
CONCLUSION 
WHEREFORE, the PJM Industrial Customer Coalition respectfully requests the 
Commission to consider these Comments when evaluating PJM’s Reliability Backstop 
Procurement proposal. 
 
 
 
 
 
Respectfully submitted, 
 
By: 
/s/ Susan E. Bruce 
 
 
 
Susan E. Bruce 
Kenneth R. Stark 
Matthew L. Garber 
McNees Wallace & Nurick LLC  
100 Pine Street 
Harrisburg, PA  17101 
Tel:  717-232-8000 
E-mail: sbruce@mcneeslaw.com 
 
 
kstark@mcneeslaw.com 
mgarber@mcneeslaw.com 
 
Counsel to the PJM Industrial Customer Coalition 
 
Dated:  August 21, 2026

CERTIFICATE OF SERVICE 
 
I hereby certify that I have this day served, via first-class mail, electronic transmission or 
hand-delivery, the foregoing upon each person designated on the official service list compiled by 
the Secretary in this proceeding.  
Dated this 21st day of August, 2026.  
 
 
     /s/ Matthew L. Garber  
 
 
Matthew L. Garber 
McNees Wallace & Nurick LLC  
100 Pine Street 
Harrisburg, PA  17101 
Tel:  717-232-8000 
E-mail: mgarber@mcneeslaw.com