{"document":{"slug":"filing-er26-3380-pjm-original","title":"PJM proposes its first reliability backstop procurement","issued":"2026-07-31","accession":"20260731-5214","docket":"ER26-3380-000","group":"PJM filings","filer":"PJM Interconnection, L.L.C.","kind":"filing","file":"sources/originals/20260731-5214_01.pdf","url":"https://elibrary.ferc.gov/eLibrary/filelist?accession_Number=20260731-5214","sha256":"e96deb3b5cbe4ed23eb3ee234a27c6d4a38b887bc1d6aa507dba9f90856e4b65","pages":142,"tokens":43966,"emptyPages":[]},"pages":[{"page":1,"startToken":0,"endToken":119,"text":"UNITED STATES OF AMERICA  \nBEFORE THE  \nFEDERAL ENERGY REGULATORY COMMISSION  \n  \n  \nPJM Interconnection, L.L.C. \n) \n \nDocket No. ER26-____-000  \n  \n  \n  \n \n \n \nRELIABILITY BACKSTOP PROCUREMENT TO ADDRESS RESOURCE \nADEQUACY CONCERNS STEMMING FROM LARGE LOADS   \n \n \n \n \n \n \n \n \nCraig Glazer \nVice President–Federal Government Policy \nPJM Interconnection, L.L.C. \n1200 G Street, NW, Suite 600 \nWashington, D.C.  20005 \n(202) 423-4743  \ncraig.glazer@pjm.com \n \nRyan J. Collins \nVivian W. Chum \nWright & Talisman, P.C. \n1200 G Street, NW, Suite 600 \nWashington, D.C.  20005 \n(202) 393-1200  \ncollins@wrightlaw.com \nchum@wrightlaw.com \n \nChenchao Lu \nAssociate General Counsel \nPJM Interconnection, L.L.C.  \n2750 Monroe Blvd. \nAudubon, PA  19403 \n(610) 666-2255  \nchenchao.lu@pjm.com \n \n \nAttorneys for PJM Interconnection, L.L.C. \n \n \nJuly 31, 2026"},{"page":2,"startToken":119,"endToken":369,"text":"TABLE OF CONTENTS \n \nI. \nTHE RBP IS A LEGALLY DURABLE REFORM THAT \nINCORPORATES ONGOING AND FORTHCOMING, \nCOMPLEMENTARY STATE ACTIONS TO ADDRESS RBP COST \nALLOCATION. ...................................................................................................... 6 \nA. \nThe RBP Is a Just and Reasonable, Interim Step to Address \nResource Adequacy Challenges .................................................................. 6 \nB. \nThe RBP Is Consistent with the PJM Governors’ Principles ..................... 9 \nC. \nThe Success of the RBP Requires State Participation .............................. 10 \nD. \nThe RBP Adheres to the Legal Precedent on Jurisdiction ........................ 13 \nE. \nThe RBP Requires Cooperation from Numerous Sectors in Order \nto Meet the Goals of the NEDC/PJM Governors’ Principles \nDocument .................................................................................................. 16 \nII. \nBACKGROUND .................................................................................................. 19 \nA. \nThe Critical Issue Fast Path Stakeholder Process ..................................... 19 \nB. \nPJM Board Determination ........................................................................ 21 \nC. \nPJM’s Large Load Matters........................................................................ 22 \nIII. \nTHE PROPOSED REFORMS TO THE TARIFF AND THE RAA ARE \nJUST AND REASONABLE AND NOT UNDULY DISCRIMINATORY \nOR PREFERENTIAL ........................................................................................... 25 \nA. \nOverview of the RBP ................................................................................ 25 \n1. \nThe RBP is a Reliability Backstop solution tailored to meet \na specific challenge in the context of a reliability \nrequirement shortfall in PJM’s BRAs stemming, in part, \nfrom the influx of large loads, including data centers .................. 27 \n2. \nAn ongoing bilateral matching process is a parallel path to \nsupporting efforts to bring new capacity to PJM in order to \nmeet the PJM Region Reliability Requirement shortfall .............. 30 \nB. \nThe RTO-Wide RBP Target Is Equal to the Initial RBP Target \nMinus Qualifying RBP Offset UCAP MW and Opt-Out UCAP \nMW (Proposed Tariff, Attachment DD, section 18.1) .............................. 31 \n1. \nInitial and Final RBP Targets ....................................................... 31"},{"page":3,"startToken":369,"endToken":620,"text":"ii \n2. \nQualifying RBP Offset UCAP MW (proposed Tariff, \nAttachment DD, section 18.2) ...................................................... 35 \na. \nNew load and new demand ............................................... 35 \ni. \nLoad (demand) must be new (proposed \nTariff, Attachment DD, section 18.2(c)) ............... 35 \nii. \nCapacity must be new (proposed Tariff, \nAttachment DD, section 18.2(a)) .......................... 35 \niii. \nMatching new load with new capacity \nsupports reliability and avoids over-\nprocurement, under-procurement, and \ndouble-counting (proposed Tariff, \nAttachment DD, section 18.2(b)) .......................... 37 \nb. \nSigned bilateral contracts or Self-Supply generation \nresources (proposed Tariff, Attachment DD, \nsections 18.2(c)(i) and 18.2(c)(ii)) .................................... 39 \nc. \nLoads participating as Annual Demand Resources \nor DER Aggregation Resources (proposed Tariff, \nAttachment DD, section 18.2(c)(iii)) ................................ 40 \nd. \nCapacity eligible to provide Qualifying RBP Offset \nUCAP MW (proposed Tariff, Attachment DD, \nsection 18.2(b)) ................................................................. 40 \ne. \nElectric Distributors and other entities provide \nevidentiary support for Qualifying RBP Offset \nUCAP MW (proposed Tariff, Attachment DD, \nsection 18.2(c)) ................................................................. 42 \n3. \nOpt-out (proposed Tariff, Attachment DD, section 18.1(d)) ........ 44 \nC. \nThe Procurement Process:  RBP Resources, Offers, RPM Must \nOffer, Clearing, Settlement, and Cost Responsibility (proposed \nTariff, Attachment DD, sections 18.4, 18.5, and 18.6) ............................. 46 \n1. \nThe scope of the RBP (proposed Tariff, Attachment DD, \nsection 18.4) .................................................................................. 46 \n2. \nOverview of seller and buyer obligations ..................................... 49 \n3. \nResources eligible to participate in the RBP must bring new \ncapacity to PJM (proposed Tariff, Attachment DD, \nsections 18.5(a) through 18.5(d)) .................................................. 51"},{"page":4,"startToken":620,"endToken":852,"text":"iii \n4. \nRBP Sell Offers (proposed Tariff, Attachment DD, \nsection 18.5(e)) ............................................................................. 54 \n5. \nRBP Sellers Responsible for Actual Network Upgrade \nCosts (proposed Tariff, Attachment DD, section 18.5(e)) ............ 56 \n6. \nMust-offer obligation in the RPM for RBP committed \nresources (proposed Tariff, Attachment DD, \nsections 18.6(a) and 18.6(b)) ........................................................ 56 \n7. \nRBP UCAP MW shortfalls or failure to materialize \n(proposed Tariff, Attachment DD, sections 18.6(c) through \n18.6(e)) .......................................................................................... 60 \n8. \nClearing structure (proposed Tariff, Attachment DD, \nsection 18.5(f)) .............................................................................. 61 \na. \nThe MW-weighted average of the levelized \nprocurement cost of all selected RBP Sell Offers \nshall not exceed $555/MW-day UCAP............................. 61 \nb. \nThe proposed maximum willingness is just and \nreasonable ......................................................................... 62 \nc. \nThe pay-as-bid approach is just and reasonable for \npurposes of the RBP.......................................................... 65 \nd. \nNo direct market power screens or mitigation .................. 66 \ne. \nStage 1:  gating criteria—ensuring the viability of \nthe resource to be developed (proposed Tariff, \nAttachment DD, section 18.5(f)(i)) ................................... 71 \nf. \nStage 2:  selection assessment........................................... 75 \n9. \nContract for difference settlement structure (proposed \nTariff, Attachment DD, section 18.5(g)) ...................................... 79 \na. \nRBP Settlement Credits and RBP Charges ....................... 82 \nb. \nExamples of RBP Resource Settlements .......................... 82 \nc. \nSettlement of RBP Resources with MW Shortfalls, \nRBP shortfall charges, RPM Commitment \nDeficiency MW, and RPM Commitment Charges \n(proposed Tariff, Attachment DD, section 18.6(d)) ......... 86"},{"page":5,"startToken":852,"endToken":1105,"text":"iv \nd. \nExample of RBP Resource Settlements of RBP MW \nShortfalls, RBP shortfall charges, RPM \nCommitment Deficiency MW, and RPM \nCommitment Charges (proposed Tariff, \nAttachment DD, section 18.6(d)) ...................................... 87 \n10. \nNon-payment of RBP Charges and RBP shortfall charges \n(proposed Tariff, Attachment DD, section 18.9) .......................... 89 \n11. \nChange in ownership of RBP Resource (proposed Tariff, \nAttachment DD, section 18.6(f)) .................................................. 90 \nD. \nTreatment of RBP Commitment in Event of Transmission Owner \nExit During Term of the Commitment (proposed Tariff, \nAttachment DD, section 18.7) .................................................................. 90 \n1. \nCommitted RBP Resources in exiting Transmission Owner \nterritory (proposed Tariff, Attachment DD, section 18.7(a)) ........ 92 \n2. \nLoad allocated RBP Charges in exiting Transmission \nOwner territory (proposed Tariff, Attachment DD, \nsection 18.7(b)) ............................................................................. 94 \n3. \nRules governing treatment of RBP Resources or load \nallocated RBP Charges in the event of Transmission Owner \nexit are appropriately submitted with this filing ........................... 95 \n4. \nThe proposed rules governing treatment of RBP Resources \nor load allocated RBP Charges in the event of Transmission \nOwner exit are appropriately set forth in Tariff, \nAttachment DD ............................................................................. 96 \nE. \nAllocation of Costs Associated with Resources Procured Through \nthe RBP (proposed Tariff, Attachment DD, section 18.3) ........................ 96 \n1. \nThe proposed cost allocation methodology .................................. 96 \n2. \nThe proposed method of allocating costs to Electric \nDistributor zones/areas and LSEs within those zones/areas \nis just and reasonable .................................................................. 100 \n3. \nThe proposed allocation methodology recognizes that \nallocation to retail customers, including data centers, is \nwithin the states’ and/or RERRAs’ purview ............................... 104"},{"page":6,"startToken":1105,"endToken":1342,"text":"v \nF. \nCredit Requirements of RBP Resources and LSEs Commensurate \nwith Risks (Proposed Tariff, Attachment DD, Section 18.8) and \nManagement of RBP Defaults (Proposed Tariff, Attachment DD, \nSection 18.9) ........................................................................................... 108 \n1. \nSellers must provide collateral with RBP Sell Offers \n(proposed Tariff, Attachment DD, section 18.8(a)) .................... 112 \n2. \nReturn of RBP Collateral (proposed Tariff, \nAttachment DD, section 18.8(a)(ii)) ........................................... 113 \n3. \nCollateral requirements for RBP Resources traded to a \ndifferent entity than the RBP Seller (proposed Tariff, \nAttachment DD, section 18.8(a)(v)) ........................................... 113 \n4. \nBuyers (LSEs) allocated cost responsibility for RBP \nCharges must provide collateral (proposed Tariff, \nAttachment DD, section 18.8(b)) ................................................ 114 \na. \nDetermining the inputs to the RBP credit \nrequirement ..................................................................... 115 \nb. \nDetermining an LSE’s RBP credit requirement.............. 118 \nc. \nPosting and maintenance of RBP Collateral ................... 120 \nd. \nChanges to the RBP credit requirement associated \nwith intra-Delivery Year transfers of load and RBP \nUCAP MW cost responsibility ....................................... 121 \n5. \nManagement of defaults of obligations to pay RBP Charges \nand RBP shortfall charges (proposed Tariff, \nAttachment DD, section 18.9) .................................................... 122 \nG. \nMiscellaneous and Conforming Changes ............................................... 123 \n1. \nReliability Backstop Auction (Tariff, Attachment DD, \nsection 16.2) ................................................................................ 123 \n2. \nPlanned Generation Capacity Resource (Tariff, \nAttachment DD, section 5.5A).................................................... 125 \n3. \nNotice of intent (Tariff, Attachment DD, section 5.5) ................ 127 \n4. \nMinimum Offer Price Rule (proposed Tariff, \nAttachment DD, section 5.14(h-2)) ............................................ 129 \nIV. \nCORRESPONDENCE ........................................................................................ 130"},{"page":7,"startToken":1342,"endToken":1366,"text":"vi \nV. \nREQUESTED EFFECTIVE DATE AND CONSENT TO \nMODIFICATION OR SEVERANCE OF ISSUES ............................................ 130 \nVI. \nDOCUMENTS ENCLOSED .............................................................................. 133 \nVII. \nSERVICE ............................................................................................................ 134 \nVIII. \nCONCLUSION ................................................................................................... 135"},{"page":8,"startToken":1366,"endToken":1660,"text":"1200 G Street, N.W., Suite 600 \nWashington, D.C.  20005-3898 \nPhone: 202.393.1200 \nFax: 202.393.1240 \nwrightlaw.com \nJuly 31, 2026 \n \nThe Honorable Debbie-Anne A. Reese \nSecretary \nFederal Energy Regulatory Commission \n888 First Street, N.E., Room 1A \nWashington, D.C.  20426 \n \nRe: \nPJM Interconnection, L.L.C., Docket No. ER26-__-000 \nReliability Backstop Procurement to Address Resource Adequacy Concerns \nStemming from New Load Adjustments  \n \nDear Ms. Reese: \n \nPJM Interconnection, L.L.C. (“PJM”), pursuant to section 205 of the Federal Power \nAct (“FPA”), 16 U.S.C. § 824d, hereby submits revisions to the PJM Open Access \nTransmission Tariff (“Tariff”) and the Reliability Assurance Agreement Among Load \nServing Entities (“RAA”) to establish the Reliability Backstop Procurement (“RBP”)—a \none-time procurement of new capacity to address resource adequacy challenges in the PJM \nRegion1 arising from insufficient commitments of capacity in the 2027/2028 and \n2028/2029 Reliability Pricing Model (“RPM”) Auctions, primarily driven by the \nunprecedented addition of large loads, most notably data centers, in the PJM Region.  The \nRBP framework, as the PJM Board of Managers (“PJM Board”) recognized in a \nJanuary 16, 2026 letter,2 is one part of a multi-pronged, ongoing effort by PJM to respond \nto the challenges stemming from the influx of large loads into the PJM Region.  It is also \n \n1 Capitalized terms not otherwise defined herein have the meaning as defined in the Tariff, Amended and \nRestated Operating Agreement of PJM (“Operating Agreement”), RAA, and Consolidated Transmission \nOwners Agreement (“CTOA”). \n2 David E. Mills, PJM Board Chair, Board Decisional Letter on Critical Issue Fast Path - Large Load \nAdditions, PJM Board (Jan. 16, 2026), https://www.pjm.com/-/media/DotCom/about-pjm/who-we-\nare/public-disclosures/2026/20260116-pjm-board-letter-re-results-of-the-cifp-process-large-load-\nadditions.pdf [https://perma.cc/P57T-ZXYJ] (“January 2026 Board Letter”)."},{"page":9,"startToken":1660,"endToken":1936,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 2 \n \n \n \njust one part of a multi-pronged implementation of the Statement of Principles Regarding \nPJM issued on January 16, 2026, by the National Energy Dominance Council (“NEDC”) \nand the 13 governors of the PJM states.3  The proposed RBP in this filing is consistent with \nthe NEDC/PJM Governors’ Principles, which urged PJM to, inter alia,  \n• “procure new capacity resources” through a backstop auction, \n• “commencing no later than September 2026,” \n• “[p]rovide 15-year price certainty for new capacity resources,” and  \n• “allocate the cost of any new capacity procured through the aforementioned \n[RBP] to [Load Serving Entities (“LSE”)] with new data centers that have \nnot self-procured new capacity or agreed to be curtailable.”4     \nThe RBP proposal is a just and reasonable means to address the influx of large loads \nwhile maintaining resource adequacy, reliability, and affordability in a manner that respects \nthe divide between state and federal authorities and avoids disrupting existing commercial \narrangements.  Given the pressing resource adequacy concerns arising from the pace and \nvolume of large load additions in the PJM Region, PJM requests that the Federal Energy \nRegulatory Commission (“Commission” or “FERC”) issue an order on this filing, and \nmake this proposal effective, by no later than September 29, 2026, which is 60 days after \n \n3 Statement of Principles Regarding PJM, National Energy Dominance Council, 1 (Jan. 16, 2026), \nhttps://www.energy.gov/documents/statement-principles-regarding-pjm \n[https://perma.cc/35HJ-W56E] \n(“NEDC/PJM Governors’ Principles”).  The PJM states include the 13 states of Delaware, Illinois, Indiana, \nKentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and \nWest Virginia, and the District of Columbia. \n4 Id."},{"page":10,"startToken":1936,"endToken":2346,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 3 \n \n \n \nthe date of this filing.  Commission action by such date, plus the requested effective date, \nwill allow PJM to commence the RBP immediately thereafter.5       \nEach element of this proposal is just and reasonable.  Nevertheless, in the event the \nCommission deems necessary, and to help facilitate the Commission’s acceptance of this \nfiling without delay so that the RBP can commence as soon as possible, PJM provides \nnotice that it consents to the Commission’s exercise of authority to modify and/or sever \nany element of the proposed Tariff and RAA language to the extent necessary and \npermitted under section 205 of the FPA and NRG Power Marketing, LLC v. FERC,6 where \nsuch modification and/or severance is consistent with PJM’s overarching objectives in this \nfiling.  PJM cautions, however, to the extent that modification and/or severance of specific \nprovisions of the proposal gives rise to complications, it may delay the opening of the RBP \nprocurement window, and such delay could cause downstream impacts such as the need to \ndelay the Base Residual Auction (“BRA”) for the 2029/2030 Delivery Year that is currently \nscheduled for December.   \nAs further discussed infra Part V, to the extent the Commission exercises such \nauthority to modify the proposed Tariff or RAA language herein pursuant to the FPA and \nNRG Power Marketing, PJM respectfully requests that the Commission expressly prescribe \n \n5 The RBP procurement window will open if and when a Commission order accepts PJM’s proposed RBP \nframework.  To the extent the RBP framework is accepted by September 29, 2026, and absent significant \nrevisions or developments, PJM intends to open the procurement window on September 30, 2026.   \n6 NRG Power Mktg., LLC v. FERC, 862 F.3d 108 (D.C. Cir. 2017).  As the Commission has repeatedly stated, \n“[t]he United States Court of Appeals for the District of Columbia Circuit has held that, in certain \ncircumstances, the Commission has ‘authority to propose modifications to a utility’s [FPA section 205] \nproposal if the utility consents to the modifications.’”  N.Y. Indep. Sys. Operator, Inc., 188 FERC ¶ 61,051, \nat P 22 n.36 (2024) (alteration in original) (citing NRG Power Mktg., 862 F.3d at 114-15); see Midcontinent \nIndep. Sys. Operator, Inc., 180 FERC ¶ 61,141, at P 26 n.29 (2022) (same), order on reh’g, 182 FERC \n¶ 61,096 (2023); ISO New Eng. Inc., 175 FERC ¶ 61,172, at P 16 n.20 (2021) (same)."},{"page":11,"startToken":2346,"endToken":2808,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 4 \n \n \n \nthe revised language to provide the “necessary predictability” for PJM to implement such \nchange(s) even before issuance of an order on compliance.7  PJM’s submittal of any \ncompliance filing implementing such modifications would further constitute PJM’s \nconsent and acceptance of the Commission’s modifications.  PJM has the authority to \nconsent to modifications to PJM’s proposal by the Commission, pursuant to the FPA and \nNRG Power Marketing.  In contrast to the underlying facts in NRG Power Marketing, the \nproposal submitted in this filing was authorized by the PJM Board and was not the result \nof a stakeholder-endorsed proposal.8 \nSignificantly, while this FPA section 205 filing is focused on the RBP framework, \nPJM intends to quickly follow this filing with another FPA section 205 filing to propose \nan interim resource adequacy service (“IRAS”).  That forthcoming 205 filing will explain \nhow load in an Electric Distributor’s zone/area that has brought its own new capacity or \nhas had capacity allocated to it through the RBP framework will be at lower risk of load \nreduction through the IRAS structure.  Furthermore, IRAS will support ongoing state \n \n7 PJM Interconnection, L.L.C., 175 FERC ¶ 61,137, at P 110 (2021) (first quoting Aera Energy LLC v. FERC, \n789 F.3d 184, 190-92 (D.C. Cir. 2015) “affirming the Commission, finding ‘FERC’s conditional acceptance \n. . . simply required Kern River to substitute one number for another when allocating costs to the rolled-in \nshippers. . . . Because this mechanical change gave Kern River no discretion to adjust its rate models, FERC \nprovided sufficient notice to ratepayers’”, and then quoting Elec. Dist. No. 1 v. FERC, 774 F.2d 490, 493 \n(D.C. Cir. 1985) “vacating when the ‘effective date of an order set[] forth no more than the basic principles \npursuant to which the new rates are to be calculated’” (alteration in original)).  As the Commission elaborated \nfurther in PJM Interconnection, 175 FERC ¶ 61,137 at P 110, mere “direction” without “sufficient detail on \neach element [of the replacement rate] that [customers/market participants] could determine when their \ntransactions would be subject to [the new rule],” would mean that implementation of the compliance directive \nprior Commission approval would violate the filed rate doctrine.  Id. (quoting Elec. Dist. No. 1, 774 F.2d at \n493 “[P]urchasers of electricity cannot plan their activities unless they know the cost of what they are \nreceiving, ‘providing the necessary predictability is the whole purpose of the well-established filed rate \ndoctrine.’” (citing Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981))). \n8 NRG Power Marketing, 862 F.3d at 112 (noting that PJM developed proposed revisions filed with the \nCommission through its stakeholder process and that the proposed revisions “received overwhelming support \nfrom PJM’s stakeholders”)."},{"page":12,"startToken":2808,"endToken":3173,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 5 \n \n \n \nefforts to create operational procedures to reduce large loads that have not brought their \nown new capacity ahead of residential and traditional industrial customers.  The interim \nresource adequacy filing will provide further information to the Commission and \nstakeholders as to the multipronged PJM initiatives to address large load additions.9  \nAlthough the forthcoming IRAS proposal may refer to the RBP, the two filings are \nindependent of each other.  In short, the RBP can and should proceed as requested in this \nfiling even if the Commission wishes to further examine portions of an IRAS filing that \nmay be pending before the Commission at the time.   \nMoreover, the RBP is among the stop-gap solutions being proposed by PJM while \nPJM continues to make progress on a broader, holistic review of its capacity market, the \nRPM, to identify durable, more permanent solutions to concerns stemming from large load \nadditions.10   \nOn May 9, 2026, PJM issued a white paper, Powering Reliability Through Market \nDesign: Addressing Rising Demand and Constrained Supply, and Stimulating Investment \nto Support Durable Reliability, which inter alia, posed foundational questions facing \nPJM’s capacity market today and proffered three distinct, albeit not mutually exclusive, \n \n9 PJM anticipates that the forthcoming section 205 filing proposing an IRAS will also address the recent \nannouncement by the PJM Board that “[i]ncremental new Large Loads relative to the forecast utilized for the \n2028/2029 BRA will be excluded from the forecast used in future RPM auctions for the 2029/2030 Delivery \nYear and beyond unless and until there are new supply resources offered into an RPM auction in sufficient \nquantity to cover the new Large Load.”  CIFP Framework for Service During Periods of Insufficient \nResource Adequacy – PJM Proposal, PJM Interconnection, L.L.C., 5 (July 27, 2026), https://www.pjm.com/-\n/media/DotCom/about-pjm/who-we-are/public-disclosures/2026/20260727-cifp-framework-for-service-\nduring-periods-of-insufficient-resource-adequacy-executive-summary.pdf [https://perma.cc/46RD-UQBC]. \n10 See Powering Reliability Through Market Design: Addressing Rising Demand and Constrained Supply, \nand Stimulating Investment to Support Durable Reliability (May 9, 2026), https://www.pjm.com/-\n/media/DotCom/library/reports-notices/special-reports/2026/20260506-powering-reliability-through-\nmarket-design.pdf [https://perma.cc/3W8Z-M4TQ] (“Powering Reliability Through Markets White Paper”)."},{"page":13,"startToken":3173,"endToken":3588,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 6 \n \n \n \npaths forward.11  These foundational questions and proposed paths forward are a starting \npoint towards more permanent solutions to PJM’s resource adequacy concerns.12  This \nongoing holistic review is in line with the NEDC/PJM Governors’ Principles, which urged \nPJM to “embark on a stakeholder process to reform the capacity market to ensure long-\nterm viability and prevent consumers from bearing excessive ongoing costs,” with an \nultimate goal of returning PJM to market fundamentals.13  \nI. \nTHE RBP IS A LEGALLY DURABLE REFORM THAT INCORPORATES \nONGOING \nAND \nFORTHCOMING, \nCOMPLEMENTARY \nSTATE \nACTIONS TO ADDRESS RBP COST ALLOCATION \nA. \nThe RBP Is a Just and Reasonable, Interim Step to Address Resource \nAdequacy Challenges.  \nPJM hosts the largest concentration of data center load in the world.14  “PJM’s load \nforecast predicts peak load growth of 32 gigawatts [(“GW”)] from 2024 to 2030, 30 GW \nof which is projected to be from data centers.”15  Year-over-year, the shortfall of capacity \n \n11 Id. \n12 PJM Interconnection, L.L.C., PJM to Lead Market Reform Effort to Support Generation Investment and \nReliability, PJM Inside Lines (May 6, 2026), https://insidelines.pjm.com/pjm-to-lead-market-reform-effort-\nto-support-generation-investment-and-reliability/ [https://perma.cc/J2KW-LRW2]. \n13 NEDC/PJM Governors’ Principles at 1; see also PJM Interconnection, L.L.C., CIFP Reliability Backstop \nProcurement – PJM Proposal, 1 (June 11, 2026), https://www.pjm.com/-/media/DotCom/committees-\ngroups/cifp-rbp/2026/20260611/20260611-item-04a---pjm-reliability-backstop-proposal---post-meeting-\nmaterials.pdf [https://perma.cc/X7T7-5RPB] (providing background on stakeholder engagement). \n14 See, e.g., Laila Kearney, Biggest US power grid operator moving forward with plan to manage data \ncenters, Reuters (Nov. 20, 2025), https://www.reuters.com/business/energy/biggest-us-power-grid-operator-\nmoving-forward-with-plan-manage-data-centers-2025-11-19/ [https://perma.cc/7M34-52V4]. \n15 PJM Interconnection, L.L.C., 195 FERC ¶ 61,211, at P 8 & n.24 (2026) (“June 2026 Order to Show Cause”) \n(citing Letter from David E. Mills, PJM Board Chair, PJM Interconnection, L.L.C. to PJM Stakeholders \n(Aug. \n8, \n2025), \nhttps://www.pjm.com/-/media/DotCom/about-pjm/who-we-are/public-\ndisclosures/2025/20250808-pjm-board-letter-re-implementation-of-critical-issue-fast-path-process-for-\nlarge-load-additions.pdf [https://perma.cc/F9KV-B7HK] (“August 2025 Board Letter”)).  Since the issuance \nof the August 2025 Board Letter, PJM has published its 2026 Long-Term Load Forecast Report, which \nanticipates lower peak demand in the near term due to forecasting improvements, revising the peak load \nforecast for 2030 downward by 875 megawatts (“MW”), but confirms significant growth in the next 20 years.  \nPJM Interconnection, L.L.C., PJM’s Updated 20-Year Forecast Continues to See Significant Long-Term"},{"page":14,"startToken":3588,"endToken":3937,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 7 \n \n \n \nsupply needed to meet demand (plus a reasonable reserve margin) has grown despite a net \nincrease of 1,294.4 MW Installed Capacity (“ICAP”) of supply between the 2027/2028 and \n2028/2029 BRA.16  In other words, the addition of new supply has not kept pace with rapid \nlarge load demand growth, thus giving rise to the significant tightening of the capacity \nmarket in recent years and the subsequent resource adequacy shortfalls.  To mitigate the \npotential reliability risks associated with resource adequacy shortfalls, PJM is proposing \nthis RBP as a one-time, supplementary mechanism to procure additional supply to meet \nthe resource adequacy needs of the PJM Region. \nThe 2028/2029 BRA Report, dated July 14, 2026, indicates PJM’s BRA cleared \nshort of the PJM Region Reliability Requirement17 for a second consecutive year.18  \nSpecifically, PJM’s BRA for the 2028/2029 Delivery Year, which ran from June 30, 2026, \nto July 7, 2026, cleared 6,831.3 MW (in Unforced Capacity (“UCAP”)) short of PJM’s \nRegional Transmission Organization (“RTO”)-wide reliability requirement at the market \nprice cap of $325/MW-day.19    \n \nLoad Growth, PJM Inside Lines (Jan. 14, 2026), https://insidelines.pjm.com/pjms-updated-20-year-forecast-\ncontinues-to-see-significant-long-term-load-growth/ [https://perma.cc/W3UY-F9HE]. \n16 2028/2029 Base Residual Auction Report, PJM Interconnection, L.L.C., 8 (July 14, 2026), \nhttps://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2028-2029/2028-2029-bra-\nresults-report.pdf [https://perma.cc/A53K-TXXY] (“2028/2029 BRA Report”). \n17 Tariff, Part I, section 1, Definitions – O, P, Q—PJM Region Reliability Requirement (“‘PJM Region \nReliability Requirement’ shall mean, for purposes of the Base Residual Auction, the Forecast Pool \nRequirement multiplied by the Preliminary PJM Region Peak Load Forecast, less the sum of all \nPreliminary Unforced Capacity Obligations of [Fixed Resource Requirement (“FRR”)] Entities in the PJM \nRegion; and, for purposes of the Incremental Auctions, the Forecast Pool Requirement multiplied by the \nupdated PJM Region Peak Load Forecast, less the sum of all updated Unforced Capacity Obligations of FRR \nEntities in the PJM Region.”). \n18 2028/2029 BRA Report at 3. \n19 Id."},{"page":15,"startToken":3937,"endToken":4336,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 8 \n \n \n \nLast year, PJM’s BRA for the 2027/2028 Delivery Year, which ran from \nDecember 4, 2025, through December, 10, 2025, likewise cleared 6,623 MW short of the \nPJM Region Reliability Requirement, at the market  price cap of $333.44/MW-day \n(UCAP).20  As both the Commission and the Department of Energy have recently \nhighlighted, the pace of “growth [in electricity demand] is now higher than at any point in \nthe past two decades, driven in part by increasing quantities of large commercial and \nindustrial load, most notably data centers, connecting rapidly to the transmission system.”21   \nAs proposed, the RBP will commence upon Commission acceptance of this filing \nwith the goal of obtaining commitments of new RBP UCAP MW from eligible resources, \ncalled RBP Resources, for a fixed term of up to 15 years, starting with the 2028/2029 \nDelivery Year and ending with the 2042/2043 Delivery Year.  The commitment term for \nRBP Resources that are scheduled to commence service after the 2028/2029 Delivery Year \nwill be shortened by a commensurate number of years, as no commitment will extend \nbeyond the 2042/2043 Delivery Year.  The RBP will aim to procure capacity equal to the \nFinal RBP Target, which, as discussed below, will initially be based on the observed MW \nUCAP shortfall in the BRA for PJM’s 2028/2029 Delivery Year, i.e., the Initial RBP \nTarget.  The Initial RBP Target will be adjusted to reflect qualifying new capacity serving \n \n20 PJM Auction Procures 134,479 MW of Generation Resources, PJM Interconnection, L.L.C., 1 (Dec. 17, \n2025), https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/2025-releases/20251217-pjm-auction-\nprocures-134479-mw-of-generation-resources.pdf [https://perma.cc/A89W-W99B]. \n21 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 6 & n.18 (citing Interconnection of Large Loads \nto the Interstate Transmission System, Secretary of Energy’s Direction that the Federal Energy Regulatory \nCommission Initiate Rulemaking Procedures and Proposal Regarding the Interconnection of Large Loads \nPursuant to the Secretary’s Authority Under Section 403 of the Department of Energy Organization Act, \nDocket No. RM26-4-000, Advance Notice of Proposed Rulemaking at 2 (Oct. 23, 2025) (“DOE ANOPR”) \n(citing 2024 Long- Term Reliability Assessment, Northern American Electric Reliability Corporation, 8 (Dec. \n2024, \ncorrected \nJuly \n11, \n2025), \nhttps://www.nerc.com/globalassets/our-work/assessments/2024-\nltra_corrected_july_2025.pdf [https://perma.cc/Z4D4-AMQT]))."},{"page":16,"startToken":4336,"endToken":4622,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 9 \n \n \n \nnew load and certain qualifying Electric Distributors that elect and meet requirements to \nopt-out of the RBP.22   \nB. \nThe RBP Is Consistent with the PJM Governors’ Principles. \nKey aspects of the RBP—including the timing of the RBP, the fixed 15-year term \nfor newly procured RBP Resources, the Final RBP Target, and cost allocation—are \nconsistent with and informed by the NEDC/PJM Governors’ Principles.  Specifically, the \nNEDC and the 13 governors of the PJM states expressly urged PJM to:  \n• “expeditiously” file revisions to PJM’s Tariff;   \n• “[p]rovide 15-year price certainty for new capacity resources”;  \n• hold an “[a]uction to procure new capacity resources commencing no later \nthan September 2026”;  \n• “[a]llocate [c]osts to [d]ata [c]enters”;   \n• “allocate the cost of any new capacity procured through the \naforementioned . . . [a]uction to load serving entities (LSEs) with new data \ncenters that have not self-procured new capacity or agreed to be \ncurtailable”; and   \n• allocate any remaining costs “to LSEs based on their remaining net short \npositions.”23      \nThe RBP, as proposed herein, reflects the due consideration given to the NEDC/PJM \nGovernors’ Principles.  At the same time, the RBP reflects the input of stakeholders, as \nwell as PJM’s judgment and analyses in shaping the specific means to implement the \nPrinciples document.  The resulting proposal is a just and reasonable and not unduly \ndiscriminatory or preferential set of reforms aimed at securing new capacity resources to \naddress the recently observed PJM Region Reliability Requirement shortfall.   \n \n22 Since this Spring, PJM has been concurrently facilitating a bilateral matching process to encourage \nvoluntary, bilateral agreements between supply and demand for new capacity.   \n23 NEDC/PJM Governors’ Principles at 1."},{"page":17,"startToken":4622,"endToken":4928,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 10 \n \n \n \nC. \nThe Success of the RBP Requires State Participation.  \nThe PJM states24 will each play a central role in protecting their respective \nresidential customers from cost shifts.  Indeed, as a product of cooperative federalism, the \nRBP specifically contemplates a framework in which both PJM and the PJM states have \ndistinct roles, within the boundaries of their respective jurisdictional authorities.   \nThe proposed RBP framework is the result of a carefully considered effort to \nrespect the line between federal and state jurisdiction while simultaneously embracing \nPJM’s significant role in (1) meeting the region’s resource adequacy needs and \n(2) supporting the reliable and orderly interconnection of large loads in the region.  As “a \ncreature of statute,” the Commission “has jurisdiction over only those matters that \nCongress has given it authority to regulate.  That authority includes jurisdiction over the \nwholesale sale and transmission of electricity in interstate commerce, including all \nfacilities used for such sale and transmission.”25  PJM cannot “confer jurisdiction where \nthe Commission otherwise lacks jurisdiction.”26   \nIn a letter to PJM on June 30, 2026, Chair of the Virginia State Corporation \nCommission (“VA SCC”) Judge Kelsey Bagot and the President and CEO of the Data \nCenter Coalition (“DCC”) Josh Levi recently highlighted that the goals of the PJM states’ \npublic utility commissions “to ensure reliable electric service, just and reasonable retail \nrates, and to protect residential and traditional industrial customers from undue cost shifts,” \n \n24 The District of Columbia did not sign the NEDC/PJM Governors’ Principles. \n25 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 46 (citing Atl. City Elec. Co. v. FERC, 295 F.3d \n1, 8 (D.C. Cir. 2002); 16 U.S.C. § 824(b)(1)). \n26 PJM Interconnection, L.L.C., 114 FERC ¶ 61,191, at P 17 (2006)."},{"page":18,"startToken":4928,"endToken":5262,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 11 \n \n \n \nneed not be incompatible with the goal of “serving emerging large loads.”27  However, as \nthe VA SCC and DCC Letter recognizes, serving emerging large loads while meeting the \nmandates of the PJM state utility commissions will “require proactive collaboration among \nstates, industry, and PJM to develop standardized regulatory tools and model retail tariff \nstructures that individual state commissions may consider as they address the integration \nof new large electric loads.”28  \nIndeed, the RBP framework relies on each of the PJM states to refine, for purposes \nof cost allocation, which retail loads—including which “large loads,” as each state defines \nsuch loads—should be allocated the costs of resources procured through the RBP.  The \nRBP framework furthermore affords the PJM states with the flexibility needed to carry out \nthe recent pledge of the PJM states’ 13 governors to “[u]se their [a]uthorities to [a]llocate \n[c]osts to [d]ata [c]enters and [p]rotect [r]esidential [c]ustomers.”29   \nPursuant to the cooperative federalism framework that underpins the FPA, federal \nand state counterparts are already working to address challenges in the PJM Region \nstemming from the rapid addition of large loads, including data centers.  As the \nCommission recently noted with approval, “efforts taken by states to reform retail tariffs \nto address the potential for retail cost shifting as large loads come online,” have been \n“encourag[ing].”30   \n \n27 Letter of Chair of Virginia State Corporation Commission, Kelsey Bagot and President and CEO of Data \nCenter Coalition, Josh Levi to Ms. Paula Conboy, Chair of PJM Board of Managers, and Mr. David Mills, \nPresident and CEO of PJM Interconnection, L.L.C., at 1 (June 30, 2026), https://www.pjm.com/-\n/media/DotCom/committees-groups/cifp-rbp/2026/20260630/20260630-written-comments---va-scc-and-\ndata-center-coalition.pdf [https://perma.cc/S7C6-C86H ] (“VA SCC and DCC Letter”). \n28 Id. \n29 NEDC/PJM Governors’ Principles at 2. \n30 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 69."},{"page":19,"startToken":5262,"endToken":5514,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 12 \n \n \n \nFirst, in the NEDC/PJM Governors’ Principles, the PJM states’ 13 governors \npledged to: \n[u]se all available authorities to ensure that their state public \nutility commissions design rate class structures to ensure that \ntheir states’ LSEs allocate their share of the cost to procure \nnew capacity through the . . . [a]uctions to new data center \nloads that have not otherwise procured capacity or agreed to \nbe curtailable.31   \nSecond, the VA SCC and DCC have agreed to work collaboratively to “develop \nmodel state tariff provisions addressing the retail allocation of costs associated with PJM’s \nReliability Backstop Procurement” by “no later than January 1, 2028.”32  According to the \nVA SCC and DCC, the objective of this collaborative effort is to “develop transparent retail \nmechanisms that appropriately align reliability backstop costs to the large load customers \nwhose demand contributes to the need for those procurements, while protecting existing \nresidential and traditional industrial customers from inappropriate cost shifts.”33  \nThe VA SCC and DCC have also pledged to convene a joint working group with \nother states to develop model retail emergency load reduction programs that will establish \nthe retail mechanisms needed to authorize curtailment of designated large commercial and \nindustrial customers before the implementation of broader manual load shed, and to \ndevelop retail interruptible service tariffs by “no later than February 1, 2027.”34 \n \n31 NEDC/PJM Governors’ Principles at 2. \n32 VA SCC and DCC Letter at 3. \n33 Id. \n34 Id. at 2."},{"page":20,"startToken":5514,"endToken":5982,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 13 \n \n \n \nD. \nThe RBP Adheres to the Legal Precedent on Jurisdiction.  \nThe jurisdictional divide embedded in the RBP proposal adheres to the relevant \nprecedent on jurisdiction.  First, on October 23, 2025, the Department of Energy issued an \nAdvanced Notice of Proposed Rulemaking (“ANOPR”), which called on the Commission \nto consider “potential reforms to ensure the timely and orderly interconnection of large \nloads to the transmission system.”35  The Commission’s subsequent Order Regarding Intent \nto Act on the ANOPR (“Order on DOE ANOPR”),36 found, inter alia, that large loads \npresent an urgent need for reforms to ensure their timely, orderly, and non-discriminatory \nconnection to the transmission system.37  Nevertheless, “the addition of and service to large \nloads” and the associated rates, terms, and conditions “implicate both federal and state \ninterests.”38  Accordingly, the Commission observed, “resolution of issues related to large \nload additions will require the involvement of both federal and state actors, including the \nCommission, state public utility commissions, and other state and local entities.”39  Indeed, \n \n35 DOE ANOPR at P 1 (citations omitted). \n36 Interconnection of Large Loads to the Interstate Transmission System, 195 FERC ¶ 61,045 (2026). \n37 Id. at P 2. \n38 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 44; see also PJM Interconnection, L.L.C., 193 \nFERC ¶ 61,217, at P 165 (2025) (“December 2025 Show Cause Order”) (Issues pertaining to large loads \n“implicate both federal and state interests, and their resolution will require the involvement of both federal \nand state actors, including the Commission, state public utility commissions, and other state and local \nentities.”); PJM Interconnection, L.L.C., 195 FERC ¶ 61,197, concur op. (Commissioner Rosner) at P 2 \n(2026) (“[P]ublic utility commissioners, governors’ offices, and state legislatures are all necessary partners \nin ensuring that energy infrastructure is built at the pace needed to stay ahead of demand and keep energy \naffordable and reliable for PJM customers.”). \n39 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 44.  See also id. at P 48 (Notably, the Commission \nhas expressly “recognize[d] that states will continue to regulate:  (1) the specific terms of retail sales to large \nload; (2) which entities may make retail sales within their borders; . . . and (3) any siting decisions and \nconstruction associated with the large load project.” (citations omitted)); December 2025 Show Cause Order, \n193 FERC ¶ 61,217 at P 165 (issues pertaining to large loads “implicate both federal and state interests, and \ntheir resolution will require the involvement of both federal and state actors, including the Commission, state \npublic utility commissions, and other state and local entities.”); PJM Interconnection, 195 FERC ¶ 61,197, \nconcur op. (Commissioner Rosner) at P 1 (“[P]ublic utility commissioners, governors’ offices, and state"},{"page":21,"startToken":5982,"endToken":6364,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 14 \n \n \n \nas the Commission’s Order on DOE ANOPR points out, in the last several years, the \nCommission has accepted proposed tariffs and agreements “related to large loads \nconnecting to the transmission system . . . while rejecting those that exceed the \nCommission’s jurisdiction or failed to reasonably allocate costs.”40   \nSecond, the proposed RBP framework also recognizes that the PJM states and other \nPJM stakeholders must also act to address cost allocation concerns stemming from new \nlarge loads.41  The division of authority and responsibility between PJM and the PJM states \nis firmly rooted in the Supreme Court’s holding in FERC v. EPSA.42  There, the Supreme \nCourt held that the Commission’s regulation of demand response “addresses—and \naddresses only—transactions occurring on the wholesale market” and takes aim at \n“enhanc[ing] the wholesale, not retail, electricity market.”43  The Supreme Court \naccordingly held that the Commission’s rules for demand response withstood EPSA’s \njurisdictional challenge by respecting the division of federal/state authority set forth in the \nFPA.44  Even though the FPA’s drafters could not have anticipated demand response, its \nregulation was nevertheless consistent with the division of jurisdictional authority \n \nlegislatures are all necessary partners in ensuring that energy infrastructure is built at the pace needed to stay \nahead of demand and keep energy affordable and reliable for PJM customers.”). \n40 Order on DOE ANOPR, 195 FERC ¶ 61,045 at P 2 (citation omitted). \n41 PJM recognizes that the Commission’s June 18, 2026 Order to Show Cause in Docket No. EL26-67-000 \nfound that PJM’s Tariff may be unjust and unreasonable and unduly discriminatory or preferential because \nit does not include a definition of large load for the PJM Region.  June 2026 Order to Show Cause, 195 FERC \n¶ 61,211 at P 58.  PJM intends to propose a definition of Large Load for the PJM Region in a subsequent \nfiling.  However, for purposes of the RBP framework, “large load,” as used herein, refers broadly to the \nrecent influx of load, including data centers or, in the context of retail cost allocation, refers to the term to \nthe extent defined by each of the PJM states.   \n42 FERC v. Elec. Power Supply Ass’n, 577 U.S. 260 (2016) (“EPSA”). \n43 Id. at 282, 287. \n44 Id. at 288-91."},{"page":22,"startToken":6364,"endToken":6663,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 15 \n \n \n \ncontemplated by the FPA—in which the Commission, and thereby RTOs/Independent \nSystem Organizations (“ISO”), retain authority over wholesale transactions, while states \nregulate retail transactions.45   \nThe reforms in this filing address issues that the FPA’s drafters would have \ncertainly considered science fiction—the impact of large loads, including data centers, \ndriven primarily by exponential technological advancements in artificial intelligence.  \nNevertheless, PJM has taken care to divide responsibilities between PJM and the states in \na manner consistent with the FPA’s basic division of authority.  PJM’s resulting proposal \nis therefore legally durable.   \nThird, while the Commission recently noted that it, too, shares concerns “about the \nimpact that large load additions can have on retail ratepayers, particularly the concern that \nother retail ratepayers may be forced to subsidize Network Upgrades needed to add large \nloads to the transmission system,” the Commission also recognized that the scope of its \nregulatory authority is nevertheless limited.46  “Specifically,” it is the PJM states that “have \nauthority over how the wholesale costs of providing electricity, including transmission of \nsuch electricity, to those retail customers are recovered through retail rates.”47   \nLikewise, an order to show cause issued by the Commission on February 20, 2025, \non aspects of the co-location of large loads held that:  \nstates retain exclusive jurisdiction over the terms of retail \nsales . . . including . . . how the costs of the wholesale sale \nand transmission of electricity assigned to a wholesale \n \n45 See Matthew R. Christiansen, FERC v. EPSA: Functionalism and the Electricity Industry of the Future, 68 \nStan. L. Rev. (Apr. 2016), https://www.stanfordlawreview.org/online/ferc-v-epsa/ [https://perma.cc/6QRP-\nKXET] (citing EPSA, 577 U.S. at 265-68). \n46 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 69. \n47 Id."},{"page":23,"startToken":6663,"endToken":6966,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 16 \n \n \n \ncustomer are allocated among that wholesale customer’s \nretail customers.  Thus, while a State may not conclude in \nsetting retail rates that the FERC-approved wholesale rates \nare unreasonable, it is within a state’s exclusive jurisdiction \nto determine how those FERC-approved rates are collected \namong the relevant retail customers.48   \nAt bottom, “exclusive jurisdiction”49 rests with the states to ensure that the \nappropriate retail customers, i.e., new large loads, including data centers—and not \nresidential customers or small industrial customers—are suballocated costs associated with \nthe wholesale costs of RBP Resources procured through the RBP.  As part of the RBP \nframework, PJM proposes to allocate the wholesale costs of RBP Resources to wholesale \ncustomers based on longstanding cost allocation principles (see infra Part III.E).  But PJM \ncan only do so much; thus, the PJM states must subsequently allocate the costs allocated \nby PJM by dividing them further among the appropriate retail customers, including data \ncenters and other large loads, in accordance with state policies, laws, and regulatory \nauthority over retail rates and customers. \nE. \nThe RBP Requires Cooperation from Numerous Sectors in Order to Meet \nthe Goals of the NEDC/PJM Governors’ Principles Document.  \nFor the PJM Region to address the RBP Target—and more broadly, to meet the \nmoment—suppliers of capacity must contribute by voluntarily supplying Qualifying RBP \nOffset UCAP MW or submitting RBP Sell Offers in the RBP.  The success of the RBP also \nrequires the participation and cooperation of LSEs serving large loads.  PJM recognizes \nthat large loads, including data center developers, have committed to “build, bring, or buy \n \n48 PJM Interconnection, L.L.C., 190 FERC ¶ 61,115 at P 68, order directing compliance, December 2025 \nShow Cause Order, 193 FERC ¶ 61,217 (2025). \n49 Id. (emphasis added)."},{"page":24,"startToken":6966,"endToken":7297,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 17 \n \n \n \nthe new generation resources and electricity needed to satisfy their new energy demands” \nand to pay “the full cost of those resources.”50   \nBecause the success of the procurement effort turns on them, at least in part, PJM \nhighlights several of the representations, pledges, and commitments from various entities \nthat have been made in the past year.  First, in its June 2026 Order to Show Cause, the \nCommission highlighted the “voluntary efforts by transmission owners to protect retail \nratepayers through cost recovery agreements with large loads” and “the execution of the \nPresident’s Ratepayer Protection Pledge, through which data center developers have \ncommitted to shield retail ratepayers from increased electricity prices.”51   \nSecond, in the President’s Ratepayer Protection Pledge, Amazon, Google, Meta, \nMicrosoft, OpenAI, Oracle, and xAI pledged, on March 4, 2026, to: \n• build, bring, or buy the new generation resources and electricity needed \nto satisfy their new energy demands, paying the full cost of those \nresources whether by building, or buying from, new or otherwise \nadditive power plants.  Where possible, these companies will also add \nmore capacity that serves the broader public by increasing supply;52 and \n• negotiate new, separate rate structures with their utilities and relevant \nState governments wherever they build data centers.  Importantly, they \nwill pay these rates for the power and related infrastructure that are \nbrought online to service their data centers, whether they use the \nelectricity or not.53 \n \n50 \nRatepayer \nProtection \nPledge, \nThe \nWhite \nHouse \n(Mar. \n4, \n2026), \nhttps://www.whitehouse.gov/releases/2026/03/ \nratepayer-protection-pledge/ [https://perma.cc/N8PH-K82T] (“Ratepayer Protection Pledge”). \n51 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 69. \n52 Ratepayer Protection Pledge; see also Fact Sheet: President Donald J. Trump Advances Energy \nAffordability \nwith \nthe \nRatepayer \nProtection \nPledge, \nThe \nWhite \nHouse \n(Mar. \n4, \n2026), \nhttps://www.whitehouse.gov/fact-sheets/2026/03/fact-sheet-president-donald-j-trump-advances-energy-\naffordability-with-the-ratepayer-protection-pledge/ [https://perma.cc/N366-NGF4] (listing the companies \nwho joined the Ratepayer Protection Pledge).  \n53 Id."},{"page":25,"startToken":7297,"endToken":7560,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 18 \n \n \n \nSubsequently, on July 23, 2026, the signatories to the Ratepayer Protection Pledge \nexpanded to include more than 200 utilities, data center developers, and cooperatives, and \nstate governors, including the governors of PJM states Tennessee, West Virginia, Ohio, \nand Indiana.54 \nThird, there is robust appetite for new capacity to serve new large loads, as shown \nby the representations made by LSEs, large loads, Transmission Owners, and suppliers of \nRBP UCAP MW in response to a Request for Information (“RFI”) issued in April of this \nyear.55  The RFI revealed substantial large load interest from 21 entities representing 47 \npotential projects in the PJM Region averaging 850 MW each, with a median size of 300 \nMW.56  The supply-side response to the RFI was also significant, with 397 potential \nprojects by 87 entities and approximately 136 gigawatt in total potential capacity.57  Of the \nsupply-side projects, 72% indicated a readiness to engage with their large load counterparts \nimmediately, while 91% of the large load projects represented a readiness to engage now.58 \n \n54 See President Trump’s Ratepayer Protection Pledge Secures American AI Dominance, Protects \nConsumers, The White House (July 23, 2026), https://www.whitehouse.gov/releases/2026/07/president-\ntrumps-ratepayer-protection-pledge-secures-american-ai-dominance-protects-consumers/ \n[https://perma.cc/9VDB-B4EH] (“Ratepayer Protection Pledge Announcement”). \n55 PJM Reliability Backstop RFI Summary, Charles River Associates (May 27, 2026), https://www.pjm.com/-\n/media/DotCom/committees-groups/cifp-rbp/2026/20260527/20260527-informational-only---reliability-\nbackstop-rfi-summary---charles-river-associates.pdf \n[https://perma.cc/UM8V-FAC5] \n(“Charles \nRiver \nAssociates Presentation”). \n56 Id. at 4. \n57 Id. at 5. \n58 Id. at 4-5."},{"page":26,"startToken":7560,"endToken":7840,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 19 \n \n \n \nII. \nBACKGROUND  \nA. \nThe Critical Issue Fast Path Stakeholder Process  \nOn January 16, 2026, the PJM Board issued a letter announcing its decision on the \nCritical Issue Fast Path Process (“CIFP”) addressing large load issues in PJM, which set \nforth the roadmap for a multi-pronged approach to addressing resource adequacy \nchallenges, including “accelerat[ing] and execute[ing]” a backstop capacity procurement \nand “address[ing] cost allocation for any such procurement, including consideration of \nmechanisms that assign costs to those LSEs that are short as a result of incremental load \ngrowth within their service areas.”59  The NEDC/PJM Governors’ Principles were issued \non the same day.   \nIn a Members Committee meeting convened one week later, on January 22, 2026, \nPJM’s President and CEO and the PJM Board raised the RBP with stakeholders and sought \ninput regarding the timing and process for engaging stakeholders on issues relevant to a \nbackstop procurement.  Based on feedback during the January 22 meeting, PJM’s President \nand CEO and the PJM Board initiated a series of discussions about RBP, which began in \nearly February 2026 and concluded in March 2026.60  Simultaneously, through a survey, \nPJM sought and obtained detailed stakeholder feedback on the scope and process of an \nRBP.61  \n \n59 January 2026 Board Letter at 6. \n60 \nSee \nReliability \nBackstop \nProcurement \nWorkshop, \nPJM \nInterconnection, \nL.L.C., \nhttps://www.pjm.com/committees-and-groups/workshops/rbpw [https://perma.cc/6RPD-YPZK] (last visited \nJuly 25, 2026).  \n61 See Reliability Backstop Procurement Workshop: Survey Responses and Additional Feedback, PJM \nInterconnection, \nL.L.C., \nhttps://www.pjm.com/committees-and-groups/workshops/rbpw \n[https://perma.cc/6RPD-YPZK] (last visited July 25, 2026)."},{"page":27,"startToken":7840,"endToken":8226,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 20 \n \n \n \nOn April 8, 2026, the PJM Board issued a letter initiating the CIFP to engage \nstakeholders in the development of an RBP proposal (“RBP CIFP”).62  Subsequently, on \nMay 19, 2026, the PJM Board issued a second related letter, directing that the scope of the \nRBP CIFP be expanded to incorporate a separate stakeholder process to identify and reduce \nlarge load in the PJM Region, when necessary, to maintain required RTO/Zonal Primary \nReserves and Interconnection Reliability Operating Limits within limits if available \neconomic generation is not sufficient.  This “connect and manage” solution, in its new \niteration, is now referred to as an IRAS.63  The PJM Board determined that it would be \nappropriate to address both the RBP and IRAS in a single CIFP process in light of the \nsubstantive link between these two proposals.   \nThe expanded scope RBP and IRAS CIFP concluded on June 30, 2026, following \neight days of stakeholder meetings over the course of three months.  On June 30, 2026, \nStakeholders submitted advisory votes on 13 different RBP proposals.  Of the 13 proposals, \nonly the voluntary RBP framework proposed by the Joint Electric Distribution Companies \nand Data Center Coalition (“Coalition RBP Proposal”) received greater than two-thirds \nsector-weighted member support.64   \n \n62 Letter of David E. Mills, Interim President and CEO, PJM Interconnection, L.L.C. (Apr. 8, 2026), \nhttps://www.pjm.com/-/media/DotCom/about-pjm/who-we-are/public-disclosures/2026/20260408-cifp-\nrbp-initiation-letter.pdf [https://perma.cc/8LM5-9VX3] (stating the intent of the letter was to addresses the \ninitiation of the Critical Issue Fast Path (CIFP) – Reliability Backstop Procurement (RBP) accelerated \nstakeholder process by the PJM Board).  \n63 See Paula Conboy, PJM Board Chair, Reliability Backstop Procurement / Connect and Manage, PJM \nInterconnection, L.L.C., 1 (May 19, 2026), https://www.pjm.com/-/media/DotCom/about-pjm/who-we-\nare/public-disclosures/2026/20260519-pjm-board-letter-re-reliability-backstop-procurement-connect-and-\nmanage-cifp.pdf [https://perma.cc/2CQC-8KYS]. \n64 PJM Members Committee, MC Voting Results for RBP Proposals Agenda Items 3L through 3X (June 30, \n2026), https://www.pjm.com/committees-and-groups/committees/mc [https://perma.cc/5CSQ-DP4K] (scroll \nto “Meeting Materials” and search for 2026, click on link for “6.30.2026 Special Meeting,” scroll to MC \nVoting Results – Agenda Items 3L to 3X and click on each to view the PDF) (last visited July 29, 2026)."},{"page":28,"startToken":8226,"endToken":8573,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 21 \n \n \n \nB. \nPJM Board Determination \nThe PJM Board reviewed the results of the June 30, 2026 stakeholder advisory \nvotes.65  Ultimately, “[i]n light of the deteriorating resource adequacy outlook, and \nconsistent with the PJM Board letter issued to stakeholders on May 19, 2026, the PJM \nBoard “concluded that a voluntary subscription framework would not provide sufficient \nassurance that capacity equal to the identified near-term shortfall would actually be \nprocured.”66   \nOn July 27, 2026, after weeks of careful deliberation, which considered the merits \nof the Coalition RBP Proposal, as well as other stakeholder proposals and various letters \nto the PJM Board, the PJM Board issued a decisional letter directing PJM to submit the \nRBP proposal set forth in this filing, and to also submit an IRAS proposal.67  PJM intends \nto submit the IRAS proposal in a separate FPA section 205 filing in the coming weeks.   \nAs for the RBP proposal that is the subject of this filing, the PJM Board \n“determined that PJM must take timely action within its control to begin restoring resource \nadequacy.”68  Thus, the PJM Board directed that PJM file with the Commission an RBP \n \n65 As PJM reported in a recent July 20, 2026 informational filing to the Commission, PJM sought additional \nfeedback on the RBP proposal from stakeholders on specific topics through further polling, which concluded \non July 10, 2026.  PJM Interconnection, L.L.C., PJM Informational Report on Stakeholder Processes \nAddressing Resource Adequacy for Large Loads, Docket No. EL26-67-000, at 4 (July 20, 2026) (citing PJM \nInterconnection, L.L.C., CIFP – Reliability Backstop Procurement / Connect & Manage, Summarized Poll \nResults \n(2026), \nhttps://www.pjm.com/-/media/DotCom/committees-groups/cifp-rbp/postings/cifp-poll-\nresults-with-comments.pdf [https://perma.cc/T2X8-NKGD]).   \n66 Paula Conboy, Chair, PJM Board of Managers, Board Decisional Letter on Critical Issue Fast Path – \nReliability Backstop Procurement and Connect and Manage, 1 (July 27, 2026), https://www.pjm.com/-\n/media/DotCom/about-pjm/who-we-are/public-disclosures/2026/20260727-board-decisional-letter-on-cifp-\nreliability-backstop-procurement-and-connect-and-manage.pdf \n[https://perma.cc/V9Z7-83AH] \n(“PJM \nBoard July 2026 Decisional Letter”). \n67 Id. \n68 Id."},{"page":29,"startToken":8573,"endToken":8884,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 22 \n \n \n \nproposal that, unlike the voluntary subscription framework of the Coalition RBP Proposal, \nwill procure for the identified near-term shortfall.69  At the same time, the PJM Board \nadopted various concepts from the Coalition RBP Proposal that received a sector-weighted \nmajority of stakeholder support.  Specifically, the proposed (1) maximum volume weighted \naverage of all selected RBP Sell Offers, (2) credit requirement for Load Serving Entities, \nand (3) opt-out from the RBP Initial Procurement Target all had their roots in the Coalition \nRBP Proposal.70  The proposal in this section 205 filing reflects the RBP framework \nultimately approved by the PJM Board on July 27, 2026. \nC. \nPJM’s Large Load Matters  \nThe RBP proposal is just one of numerous filings that PJM has submitted or will \nshortly be submitting to the Commission, pursuant to section 205 of the FPA, to address \nthe region’s resource adequacy issues.   \nAs of today’s filing, the following matters have already been filed with the \nCommission: \n• An Expedited Interconnection Track temporary pathway for advanced projects \nof significant size interconnected more quickly to address PJM’s urgent need \nfor additional Capacity Resources by facilitating the interconnection of those \nnew generation resources—outside of PJM’s Cycle Process—that commit to \n \n69 More specifically, the PJM Board directed that the RBP proposal set “an initial target equal to the capacity \nshortfall identified in the 2028/2029 Base Residual Auction, excluding Fixed Resource Requirement load \nand supply” and “reduced to reflect documented bilateral contracts and self-supply arrangements for new \ncapacity serving new load.”  PJM Board July 2026 Decisional Letter at 2. \n70 Joint EDCs & Data Center Coalition (“Coalition”) Reliability Backstop Procurement Package Executive \nSummary, PJM Interconnection, L.L.C., https://www.pjm.com/-/media/DotCom/committees-groups/cifp-\nrbp/2026/20260630/20260630-item-02f---joint-edcs-and-data-center-coalition---rbp---executive-\nsummary.pdf [https://perma.cc/YP8C-ASVB] (last visited July 31, 2026)."},{"page":30,"startToken":8884,"endToken":9134,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 23 \n \n \n \nfirm commercial in service dates and have a commitment from the Primary \nSiting Authority (or a state executive officer in certain circumstances) to \nexpedite consideration of applicable siting, which was accepted by the \nCommission on June 9, 2026;71 \n• An extension of a price collar on RPM Auction outcomes through the \n2029/2030 Delivery Year, which was accepted by the Commission on April 8, \n2026;72 \n• A one-time, reliability-based expansion, known as the Reliability Resource \nInitiative, of the eligibility criteria for PJM’s Transition Cycle #2 of PJM’s \nexisting interconnection queue, which the Commission accepted73 and resulted \nin PJM selecting 51 projects that can come online quickly and provide more \nthan 9,300 MW of reliable capacity;74 \n• An extension of the capacity must-offer requirement to all available Existing \nCapacity Resources so as to allow RPM Auction outcomes to more accurately \nreflect the actual quantity of Existing Generation Capacity Resources, while \ncontinuing to safeguard against the potential exercise of market power that may \n \n71 See PJM Interconnection, 195 FERC ¶ 61,197 at P1. \n72 See PJM Interconnection, L.L.C., 195 FERC ¶ 61,076, at P 51 (2026).   \n73 See PJM Interconnection, L.L.C., 190 FERC ¶ 61,084, reh’g denied, 192 FERC ¶ 61,085 (2025). \n74 See PJM Interconnection, L.L.C., PJM Chooses 51 Generation Resource Projects To Address Near-Term \nElectricity Demand Growth, PJM Inside Lines (May 2, 2025), https://insidelines.pjm.com/pjm-chooses-51-\ngeneration-resource-projects-to-address-near-term-electricity-demand-growth/ \n[https://perma.cc/4BBH-\nYR3F]."},{"page":31,"startToken":9134,"endToken":9441,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 24 \n \n \n \nbe exerted by the withholding of such resources, which was accepted by the \nCommission;75 and \n• A compliance filing and illustrative Tariff revisions to provide that the Eligible \nCustomer taking transmission service on behalf of a co-located load may take \na transmission service that reflects the co-located load’s ability and willingness \nto limit its use of the transmission system, which, if utilized, would reduce the \namount of capacity required to meet the region’s resource adequacy needs.  The \nCommission ruled on PJM’s Tariff revisions and directed a future compliance \nfiling to implement these new transmission services that PJM will soon \nsubmit.76 \nThe following filings aimed at addressing the impacts of new large loads on the \nPJM Region are forthcoming: \n• An “IRAS” proposal following the CIFP stakeholder process to facilitate the \ninterconnection and integration of large loads that are not backed by capacity \nsuch that, in certain circumstances, the withdrawals from the transmission \nsystem by some new large loads would be reduced for resource adequacy \npurposes; \n \n75 PJM Interconnection, L.L.C., 190 FERC ¶ 61,117, order on reh’g, 191 FERC ¶ 61,221 (2025). \n76 See PJM Interconnection, L.L.C., 195 FERC ¶ 61,209 (2026).  On July 28, 2026, PJM submitted a motion \nto extend its compliance filing with respect to, among other things, the Tariff revisions implementing these \nnew transmission services to allow for the concurrent development of the compliance language with the \ndevelopment of a new section 205 filing to propose new transmission services for Eligible Customers taking \ntransmission services on behalf of large loads that are not part of a co-location arrangement.  PJM \nInterconnection, L.L.C., Motion for Extension of Time for Specified Compliance Requirements and Request \nfor Expedited Treatment of PJM Interconnection, L.L.C., Docket Nos. EL25-49-002, et al. (July 28, 2026)."},{"page":32,"startToken":9441,"endToken":9700,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 25 \n \n \n \n• A fulsome FPA section 205 filing addressing the issues the Commission raised \nin its June 18, 2026 Order to Show Cause that will set forth the non-rate terms \nand conditions for Eligible Customers to take transmission service on behalf of \nlarge loads that are willing and able to limit their energy withdrawals from the \ntransmission system, which, if utilized, will reduce the amount of capacity \nrequired to meet the region’s resource adequacy needs; and \n• Future enhancements to reserve products and updated reserve demand curves \nto better account for ramping and uncertainty and better align reserve pricing \nwith operational practice.77  \n• In addition, PJM has undertaken the following initiatives: \n• Improved load forecasts that include state review of large load additions, \naddressing duplicative requests, the use of additional third-party review and \nincreased transparency;78 and \n• Facilitating bilaterals by providing a voluntary matching service that helps \nconnect potential buyers with sellers of capacity, as further explained below. \nIII. \nTHE PROPOSED REFORMS TO THE TARIFF AND THE RAA ARE JUST \nAND REASONABLE AND NOT UNDULY DISCRIMINATORY OR \nPREFERENTIAL \nA. \nOverview of the RBP \nThe RBP is designed to be a one-time mechanism for procuring new capacity (i.e., \nUCAP MW only) to address the PJM Region shortfall observed in the BRA for the \n \n77 See PJM Interconnection, L.L.C., Informational Report on Stakeholder Process Addressing Resource \nAdequacy for New Large Loads of PJM Interconnection, L.L.C., Docket No. EL26-67-000, at 8 (July 20, \n2026). \n78 See January 2026 Board Letter at 2."},{"page":33,"startToken":9700,"endToken":10001,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 26 \n \n \n \n2027/2028 and 2028/2029 Delivery Years caused by the rapid load growth in the PJM \nRegion.  PJM’s proposed rules governing the RBP are primarily set forth in proposed \nTariff, Attachment DD, section 18, with additional conforming revisions and new \nprovisions in other sections of:  (1) Tariff, Attachment DD; (2) RAA, Article 7, \nsections 7.2B and 7.2C; (3) RAA, Schedule 8.1.D; and (4) Tariff, Definitions.  \nThe RBP represents a critical safety net designed to address current resource \nadequacy shortfalls.  The RBP’s function is limited to procuring the capacity needed to \nmeet the reliability requirement shortfall observed in the 2028/2029 Delivery Year BRA \nand only to the extent that new load coming online in the 2027/2028 or 2028/2029 Delivery \nYears do not voluntarily procure sufficient new capacity to address that shortfall.79  In other \nwords, the RBP is a one-time mechanism that will only procure the capacity necessary to \ncover any remaining shortfall from the 2028/2029 BRA after PJM has accounted for new \ncapacity being brought by new load or that otherwise qualify for a limited opt-out from the \nRBP.  In this way (among others) it is consistent the NEDC/PJM Governors’ Principles, \nwhich call for a one-time auction followed by a subsequent “return to market \nfundamentals.”80 \nIn the context of RBP, this new capacity brought voluntarily by new load is referred \nto as Qualifying RBP Offset UCAP MW, a new defined term for capacity that meets \nparameters set forth in the proposed Tariff, Attachment DD, section 18.2.  Qualifying RBP \nOffset UCAP MW is further described in this transmittal letter, below, see infra \n \n79 In addition, as discussed below, PJM is proposing two limited opt-out provisions. \n80 NEDC/PJM Governors’ Principles at 1."},{"page":34,"startToken":10001,"endToken":10352,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 27 \n \n \n \nPart III.B.2.  To the extent the Commission accepts this filing, PJM is targeting to \ncommence the procurement window for the one-time RBP on September 30, 2026.81   \n1. \nThe RBP is a Reliability Backstop solution tailored to meet a \nspecific challenge in the context of a reliability requirement \nshortfall in PJM’s BRAs stemming, in part, from the influx of large \nloads, including data centers. \nAccording to the Commission, when market design measures alone prove \ninsufficiently effective, “the Commission is willing to consider specific proposals to \nprovide an appropriate last resort process such as an RTO/ISO administered auction to \ncreate a long-term commitment which can support cost-effective financing where the \nproblem is projected to be a long-term one.”82  The RBP is such a proposal.   \nThe current PJM Tariff already contemplates the need for a backstop procurement \nwhen three consecutive auctions fail to procure the reliability requirement.83  But in this \ncase, as the record reflects, there is a clear need for an RTO/ISO-administered backstop \nsolution to be implemented now.  First, due to a variety of factors,84 the RPM has not \nprocured sufficient capacity to meet the PJM Region Reliability Requirement two \nconsecutive Delivery Years in a row.  Moreover, given the pace of new supply and the \nlatest load forecast that will be used in the next BRA, in December 2026, all evidence \npoints to the December auction also clearing short.   \n \n81 In the event the Commission accepts this filing subject to modification, PJM will endeavor to commence \nthe RBP as soon as practicable, but depending on what the changes are, the commencement date may not \nremain September 30, 2026. \n82 PJM Interconnection, L.L.C., 107 FERC ¶ 61,112, at P 21 (2004), order on reh’g, 110 FERC ¶ 61,053 \n(2005). \n83 Tariff, Attachment DD, section 16. \n84 See 2027/2028 Base Residual Auction Reserve Target Shortfall Report, PJM Interconnection, L.L.C. (Feb. \n9, \n2026), \nhttps://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2027-2028/2027-\n2028-bra-reserve-target-shortfall-report.pdf [https://perma.cc/TA3Y-95AX] (“2027/2028 BRA Report”)."},{"page":35,"startToken":10352,"endToken":10670,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 28 \n \n \n \nSecond, the undisputed evidence and observable trends to date argue for not simply \nwaiting for a third auction to clear short .  it is well-documented and recognized that supply \nand demand in the PJM Region have converged, as a significant portion of PJM’s thermal \ngeneration fleet have retired while replacement resources are arriving at a slower pace than \nthe unprecedented load growth, particularly in light of the exponential growth in demand \nfrom data centers.  Together, these factors have strained the RPM Auction’s ability to \nprocure sufficient capacity to meet the PJM Region Reliability Requirement in recent \ncapacity auctions.  Third, the NEDC/PJM Governors’ Principles expressly call for a \nbackstop procurement auction to commence this September.  Fourth, the Commission was \n“encouraged by” and recently noted that PJM’s efforts to implement the RBP is among the \n“processes to ensure resource adequacy and faster interconnection.”85  In short, the \nevidence supports a clear need for a one-time RBP.86  Indeed, the NEDC/PJM Governors’ \nPrinciples urged PJM to “hold[] a Reliability Backstop Auction” and suggested that PJM \nhad already received sufficient stakeholder input prior to running a procurement.87 \n“[B]ackstops to . . . market design based solutions that are required to insure \nreliability” are nothing new to PJM.88  In fact, the RBP bears several significant similarities \nto the existing Reliability Backstop Auction provisions set forth in Tariff, Attachment DD, \nsection 16.  A Reliability Backstop Auction would similarly “seek commitments of \nadditional generation resources for a term of up to fifteen years,” where “PJM [would] \n \n85 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 103. \n86 PJM is also proposing to reset the Reliability Backstop Auction trigger by revising the Tariff, as discussed \nbelow, in Part III.G.1 of this transmittal letter. \n87 NEDC/PJM Governors’ Principles at 1. \n88 PJM Interconnection, 107 FERC ¶ 61,112 at P 21."},{"page":36,"startToken":10670,"endToken":10990,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 29 \n \n \n \nenter into long-term purchase agreements with sellers whose offers are accepted in the \nbackstop auction.”89  In the Reliability Backstop Auction, “[e]ach accepted seller will be \npaid its offer price, less any payments the seller is entitled to receive for commitment of \nthe same resource through the regular RPM auctions, and less any contributions to the fixed \ncost of its resource from the energy or ancillary service markets”90  That said, PJM is not \nsimply relying on the Reliability Backstop Auction mechanism, which was proposed over \n20 years ago but has never once been used.   \nThe proposed RBP, although similar to the Reliability Backstop Auction in its \nintent to maintain resource adequacy and reliability for the Region, is tailored to address \nthe specific circumstances surrounding the PJM Region’s present-day capacity shortfall \nstemming from large loads.  First, for example, the proposed RBP is intended to occur \nconcurrently, on a parallel path, with an ongoing bilateral matching process that credits \nnew capacity being brought by new large loads and therefore guards against double \nprocurement in the RBP.  Second, the RBP recognizes affordability concerns of retail \ncustomers and, as explained below, the proposed RBP includes design features to address \nthis.  Third, the RBP’s cost allocation mechanism has been intentionally developed to \naccount for the boundary between federal and state jurisdiction and to recognize that, while \nthe concern about potential cost shifts from large loads to residential and/or traditional \nindustrial customers is a key and significant issue, the PJM states play a vital role in \ndetermining how to best ensure that costs are appropriately allocated to their respective \n \n89 PJM Interconnection, L.L.C., 115 FERC ¶ 61,079, at 61,245 (2006), order on reh’g, 119 FERC ¶ 61,318 \n(2007), aff’d sub nom. Pub. Serv. Elec. & Gas Co. v. FERC, 324 F.App’x 1 (D.C. Cir. 2009).   \n90 Id. at P 55."},{"page":37,"startToken":10990,"endToken":11277,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 30 \n \n \n \nretail, large load customers.  Fourth, the RBP was developed in the context of other \napproaches for addressing the issues posed by the rapid growth of large loads, including \nthe forthcoming “IRAS” construct, a connect and manage-like proposal which \ncontemplates operational rules for reducing large loads under certain emergency \nconditions.   \n2. \nAn ongoing bilateral matching process is a parallel path to \nsupporting efforts to bring new capacity to PJM in order to meet the \nPJM Region Reliability Requirement shortfall.   \nA primary role of the markets PJM operates is to provide a transparent price \nreference that informs and supports bilateral trading and Self-Supply activity.  Indeed, \nthroughout the underlying stakeholder process, PJM members have expressed a strong \npreference for bringing new capacity to the PJM system voluntarily through bilateral \ncontracting rather than through the RBP.   \nTo streamline and support the efforts of PJM members to enter into bilateral \narrangements for capacity, PJM, in partnership with PJM consultant Charles River \nAssociates, has facilitated bilateral arrangements through a bilateral matching process with \nthe aim of connecting supply of new capacity, i.e., new capacity resources, with new \ndemand for that capacity, i.e., new load.  To be clear, participation in the bilateral matching \nprocess is non-binding and the matchmaking process itself does not impact rates, terms, or \nconditions.  Rather, the bilateral matchmaking process simply helps to facilitate voluntarily \nagreements so no Tariff changes are necessary to allow for this facilitation.    \nThe bilateral matching process is voluntary and iterative.  On June 9, 2026, the \nbilateral matching process began with a Request for Proposals, and initial matches are \nexpected to be notified in or around August 2026.  PJM is not a party to these bilateral"},{"page":38,"startToken":11277,"endToken":11625,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 31 \n \n \n \narrangements, nor has PJM placed any restrictions or requirements on the terms of these \nagreements.  Furthermore, bilateral matching is just one avenue in which supply and \ndemand may voluntarily enter into arrangements to enable new load to bring their own new \ncapacity.   \nCapacity obtained through bilateral matching or other voluntary arrangements for \nnew capacity, if reported to PJM within the RBP procurement window and supported by \nsufficient evidence, may be determined by PJM to be Qualifying RBP Offset UCAP MW.  \nAs discussed further, below, PJM may, as appropriate, based on the relevant evidence, \nreduce the Final RBP Target by the Qualifying RBP Offset UCAP MW and by the UCAP \nobligation value of load that have successfully requested and obtained an opt-out pursuant \nto proposed Tariff, Attachment DD, section 18.1(d).   \nB. \nThe RTO-Wide RBP Target Is Equal to the Initial RBP Target Minus \nQualifying RBP Offset UCAP MW and Opt-Out UCAP MW (Proposed \nTariff, Attachment DD, section 18.1). \n1. \nInitial and Final RBP Targets \nThe RBP is designed to procure a target UCAP MW value of capacity on a \nregion-wide basis.  The Initial RBP Target is the region-wide 2028/2029 Delivery Year \nreliability shortfall observed in the July 2026 BRA for Delivery Year 2028/2029, i.e., \n6,831.3 MW UCAP.91  Fixed Resource Requirement Entities are excluded from the Initial \nand Final RBP Targets as well as the RBP.92  The final RTO-wide procurement target, as \n \n91 See 2028/2029 BRA Report at 3 (“The [FRR] committed 10,863.8 MW UCAP to meet the FRR \ncommitment.  The total procured capacity in the RTO, which includes RPM and FRR, is 149,181.6 MW \nUCAP or 6,831.3 MW UCAP below the RTO Reliability Requirement.”); proposed Tariff, Attachment DD, \nsection 18.1(a). \n92 Proposed Tariff, Attachment DD, section 18.1(c).  The FRR, by design, is an opt-out of RPM, and the RBP \nis curing a gap that FRR load and FRR capacity are already removed from.  FRR load has already paid for"},{"page":39,"startToken":11625,"endToken":11930,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 32 \n \n \n \nproposed, is determined by subtracting both verified Qualifying RBP Offset UCAP MW \nand the unforced capacity obligation value of load with opt-outs.93   \nQualifying RBP Offset UCAP MW may be reported to PJM during the bid \nsubmission window, which will close three weeks after the window opening.  They must \nbe accompanied by verified supporting evidence, and must meet the requirements set forth \nin proposed Tariff, Attachment DD, section 18.2, and discussed below, see infra Part \nIII.B.2.    \nThe amount of capacity by which Qualifying RBP Offset UCAP MW may reduce \nthe Initial RBP Target will be determined by PJM based on the applicable Effective Load \nCarrying Capability (“ELCC”) Class Ratings for the 2028/2029 Delivery Year BRA or, \nwhere the relevant resources do not have ELCC Class Ratings, the estimated unit-specific \nUCAP values for such resources.94  The amount of capacity by which Qualifying RBP \nOffset UCAP MW may reduce the Initial RBP Target will also be capped at the Load \nAdjustment for each Electric Distributor zone/area amount of summer 2028 demand as set \nforth in the load forecast.95 \nAdditionally, the region-wide Initial RBP Target will be further reduced by Opt-\nOut UCAP MW to the extent that an Electric Distributor, whose rates are not regulated by \nthe state (e.g., cooperatives or municipal utilities), that is unable to allocate costs associated \n \nresource adequacy through the FRR Plan.  Allocating RBP Charges to FRR load would, in essence, require \nthat they pay twice for capacity it has already procured. \n93 Proposed Tariff, Attachment DD, section 18.1(b). \n94 Proposed Tariff, Attachment DD, section 18.2(d); RAA, Schedule 9.2, section D(1)(b) (on Accredited \nUCAP for resources with unit-specific UCAP values). \n95 Proposed Tariff, Attachment DD, section 18.2(e)."},{"page":40,"startToken":11930,"endToken":12222,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 33 \n \n \n \nwith capacity bid submission in the RBP to large loads, submits a request to PJM to opt-\nout from the RBP within the bid submission window and provides relevant information \nand written support.  In addition, an Electric Distributor may also request to opt out of the \nRBP for an associated MW quantity of load that participates in a peak shaving adjustment \nprogram where such Electric Distributor’s zone/area addresses their capacity needs through \npeak shaving adjustment programs that are codified in state law and meet the requirements \nset forth in Tariff, Attachment DD-2. \n \nJust as the driver of the RBP is the resource adequacy shortfall at the PJM Region \nlevel, the Final RBP Target is based on a region-wide shortfall.  In other words, PJM is not \nproposing to match specific supply to specific demand or apply locational constraints in \nthe RBP.  As Ms. Danielle Croop, Senior Manager in the Market Design group for PJM, \ntestifies on behalf of PJM, while “PJM recognizes there are locational considerations at \nlarge for resource adequacy, and these constraints are modeled in the [RPM,]” it is also the \ncase that the “RPM is an annual three-year forward framework, which allows PJM to model \nthe necessary locational parameters—Capacity Emergency Transfer Objectives (“CETO”) \nand Capacity Emergency Transfer Limits (“CETL”)—to accurately capture the locational \nneeds in the capacity market.”96  \nBy contrast, Ms. Croop testifies, “PJM does not project and calculate these \nparameters 15-years out, which is the eligible term of the RBP, because PJM does not have \nthe information needed to determine such locational parameters for 15-year term capacity \n \n96 Affidavit of Ms. Danielle Croop on Behalf of PJM Interconnection, L.L.C. (Attachment C) ¶ 8 (“Croop \nAff.”)."},{"page":41,"startToken":12222,"endToken":12517,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 34 \n \n \n \ncommitments.”97  As a result, including locational parameters based on today’s conditions \nwould inevitably skew the results and lead to either over-procurement or under-\nprocurement in given zones based on nothing more than speculation as to the state of the \nsystem ten and fifteen years from now.  Moreover, inclusion of a speculative locational \nparameter at this point would ignore the fact that “PJM’s interconnection process ensures \nthe initial deliverability of new capacity to the RTO.  Going forward, the PJM Regional \nTransmission Expansion Plan (“RTEP”) process annually studies and addresses any \ntransmission upgrades needed to ensure the ongoing deliverability of capacity resources.  \nLoad deliverability is also assessed as part of the RTEP process, which will identify \ntransmission needs as load patterns change.”98  In short, inclusion of a speculative 15-year \nforward locational capacity requirement at this point in time would simply ignore the role \nof PJM’s interconnection and planning process as the means to ensure deliverability of \ncapacity resources to load throughout the PJM Region. \nIn short, the RBP aims to procure RBP Resources for up to a 15-year fixed term.  \nSince PJM does not calculate locational parameters 15 years out, procuring resources on a \nlocational basis would be impractical.  Therefore, the Final RBP Target is not so granular \nas to assign procurement targets for specific Zones or specific Electric Distributor \nzones/areas.99  However, as described below, see infra Part III.E, the Final RBP Target will \nserve as an initial input to the RBP cost allocation methodology.   \n \n97 Id. \n98 Id. ¶ 9. \n99 For purposes of cost allocation as discussed below, see infra Part III.E, PJM will allocate cost responsibility \nto Electric Distributor zones/areas, to be further suballocated by PJM and the states."},{"page":42,"startToken":12517,"endToken":12862,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 35 \n \n \n \n2. \nQualifying \nRBP \nOffset \nUCAP \nMW \n(proposed \nTariff, \nAttachment DD, section 18.2) \nQualifying RBP Offset UCAP MW is new capacity voluntarily brought on to the \nPJM system by new load that meets certain characteristics and parameters set forth in the \nproposed Tariff, as supported by evidence verified by PJM.100  Where Electric Distributors \nand/or other entities report Qualifying RBP Offset UCAP MW to PJM with the requisite \nsupporting evidence, PJM may reduce the region-wide Initial RBP Target by the quantity \nof Qualifying RBP Offset UCAP MW, where appropriate.101  In other words, the Initial \nRBP Target may be decremented by the quantity of Qualifying RBP Offset UCAP MW. \na. \nNew load and new demand \ni. \nLoad (demand) must be new (proposed Tariff, \nAttachment DD, section 18.2(c)) \nImportantly, Qualifying RBP Offset UCAP MW can offset the RBP procurement \nif it serves new load.  “New” load, for purposes of the RBP, will be load that has an \nexecuted electric service agreement or transmission service agreement, indicating that the \nload will be coming online in the 2027/2028 through the 2028/2029 Delivery Year. \nii. \nCapacity must be new (proposed Tariff, Attachment \nDD, section 18.2(a)) \nJust as Qualifying RBP Offset UCAP MW must be supported by a showing that the \nload being served is new, supply must likewise demonstrate that it is “new” capacity.  To \n \n100 “Qualifying RBP Offset UCAP MW” is also a proposed, new defined term in the Tariff.  Proposed Tariff, \nDefinitions – Qualifying RBP Offset UCAP MW (defining “Qualifying RBP Offset UCAP MW” as the \n“unforced capacity that:  (i) pursuant to Tariff, Attachment DD, section 18.2, has not received an RPM \ncommitment or been committed in an FRR Plan as of the commencement of the Reliability Backstop \nProcurement, (ii) is supplied by eligible Capacity Resources in accordance with Tariff, Attachment DD, \nsection 18.2(b), and (iii) is supported by evidence, in accordance with Tariff, Attachment DD, section \n18.2(c)”). \n101 Proposed Tariff, Attachment DD, section 18.2(c)."},{"page":43,"startToken":12862,"endToken":13146,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 36 \n \n \n \nbe deemed new, the capacity must have neither previously received a commitment in the \nRPM nor been previously committed in an FRR plan, as of the beginning of the RBP in \nSeptember, 2026.102   \nEligible supply may be:  (i) a new build generation resource including new \nresources that obtain Capacity Interconnection Rights (“CIR”) transferred from deactivated \nresources or resources that have announced deactivation as of April 10, 2026; (ii) the \nincremental capacity created by an uprate of existing Generation Capacity Resources, but \nonly to the extent such incremental capacity is created through an increase in such \nGeneration Capacity Resource’s installed capacity and increase in CIRs associated with \nthat Generation Capacity Resource; (iii) the incremental capacity created by the utilization \nof Surplus Interconnection Service; (iv) repowering of a deactivated generation resource \nthat deactivated prior to April 10, 2026; (v) incremental capacity, whether due to greater \nUnforced Capacity or a higher level of CIRs, created by an existing Generation Capacity \nResource’s changing fuel type to a more efficient fuel type; or (vi) Planned Demand \nResource or Planned Distributed Energy Resources (“DER”) Capacity Aggregation \nResources, as described in the RAA, Schedule 6 and Schedule 6.2.103  \nQualifying RBP Offset UCAP MW provided by new capacity through bilateral \ncontracts or Self-Supply generation  must be, as described in the following section of this \ntransmittal letter, matched with new load.104  Alternatively, new load that provides its own \nQualifying RBP Offset UCAP MW by participating as an Annual Demand Resource or \n \n102 Proposed Tariff, Attachment DD, section 18.2(a). \n103 Proposed Tariff, Attachment DD, section 18.2(b). \n104 Proposed Tariff, Attachment DD, sections 18.2(c)(i)-(ii)."},{"page":44,"startToken":13146,"endToken":13405,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 37 \n \n \n \nDER Capacity Aggregation Resource must do so “starting in the 2028/2029 Delivery Year \nSecond Incremental Auction and continuing through the 2032/2033 Delivery Year.”105  \nHowever, new load participating as an Annual Demand Resource or DER Capacity \nAggregation Resource is permitted to subsequently replace UCAP MW provided through \nparticipation as an Annual Demand Resource or DER Capacity Aggregation Resource by \npurchasing “Qualifying RBP Offset UCAP MW that are eligible generation or storage \nresources.”106  \niii. \nMatching new load with new capacity supports \nreliability \nand \navoids \nover-procurement, \nunder-procurement, and double-counting (proposed \nTariff, Attachment DD, section 18.2(b)) \nDecreasing the Initial RBP Target by only the capacity that meets the requirements \nof Qualifying RBP Offset UCAP MW prevents double procurement of the capacity \nshortfall and avoids situations where load could effectively pay twice for capacity.  The \nrestrictions on Qualifying RBP Offset UCAP MW also help protect against \nunder-procurement by preventing a decrement to the Initial RBP Target from interfering \nwith PJM’s ability to maintain reliable operation of the system.   \nMore specifically, requiring Qualifying RBP Offset UCAP MW to be paired with \nnew load recognizes that the Initial RBP Target, based on the PJM Region Reliability \nRequirement shortfall of 6,831.3 MW, is derived from the forecasted demand for the period \nfrom 2027 up through the start of the 2028/2029 Delivery Year (or, for purposes of Demand \nResources and DER Aggregation Resources, through the second Incremental Auction).   \n \n105 Proposed Tariff, Attachment DD, section 18.2(c)(iii). \n106 Id."},{"page":45,"startToken":13405,"endToken":13702,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 38 \n \n \n \nThus, the Initial RBP Target should be decremented only by a quantity of capacity \n(supply) that was not already counted as supply for the 2027/2028 and 2028/2029 Delivery \nYears (i.e., capacity not already committed in PJM RPM).  The Initial RBP Target should \nalso only be decremented by new capacity that serves load (demand) that was counted in \nthe forecast.  A simplified example demonstrates how the new load and new capacity \nrequirements avoid under- and over-counting the RBP Target:   \nIncluded in the Load Adjustment Forecast:   \nElectric Distributor (ED) A (15 MW of Demand), Including Demand from \nLoad B \n------------------ \nInitial RBP Target = 10 MW Shortfall (i.e., the MW short of the PJM \nRegion Reliability Requirement from the 2028/2029 BRA)   \nThen, \nLoad B (Within ED zone/area A) Brings Resource C (2 MW \nof Supply, commercial operation date 2030)  \nResource C has not previously been a PJM capacity resource \nor committed in FRR   \nIf Resource C is otherwise eligible to serve as Qualifying \nRBP Offset UCAP MW, Initial RBP Target Decremented by \n2 MW → Revised RBP Target = 8 MW \nWhen new load that contributed to the capacity shortfall in PJM has brought new \ncapacity—i.e., capacity not previously counted as part of the calculation of PJM’s capacity \nshortfall—the impacts of the new load and the new capacity effectively cancel each other \nout.  Decrementing the Initial RBP Target by the quantity of Qualifying RBP Offset UCAP \nMW allows PJM to “right-size”107 the RBP Target while addressing the systems resource \nadequacy.  \n \n107 See Building for the Future Through Electric Regional Transmission Planning and Cost Allocation, Order \nNo. 1920, 187 FERC ¶ 61,068 at PP 10, 34, order on reh’g & clarification, Order No. 1920-A, 189 FERC"},{"page":46,"startToken":13702,"endToken":14004,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 39 \n \n \n \nb. \nSigned bilateral contracts or Self-Supply generation \nresources \n(proposed \nTariff, \nAttachment \nDD, \nsections 18.2(c)(i) and 18.2(c)(ii)) \nQualifying RBP Offset UCAP MW may be supported by signed bilateral contracts \nfor at least five Delivery Years108 or by Self-Supply generation that is in a RERRA-\napproved or accepted integrated resource plan with either associated generation in the PJM \ninterconnection queue or signed bilateral contracts for at least five Delivery Years.109   \nTo serve as Qualifying RBP Offset UCAP MW, both signed bilateral contracts and \nSelf-Supply must be supported by documentation of an expected online date of no later \nthan June 1, 2032.  Furthermore, the evidence must demonstrate that the new capacity is \nmatched with load that has an executed electric service agreement or transmission service \nagreement indicating that the load will be online in the 2027/2028 or 2028/2029 Delivery \nYears.   \nBoth signed bilateral contracts for Qualifying RBP Offset UCAP MW and signed \nbilateral contracts for new resources by Self-Supply Entities in a RERRA-approved or \naccepted integrated resource plan, must have a minimum term of at least five Delivery \nYears.  A five-year minimum term is balanced.  Capacity with a bilateral contract of at \nleast five years is capacity that will address the reliability shortfall and is not transitory.  \nFurthermore, a five-year term is not so lengthy as to undermine the flexibility needed for \ncommercial contracting or to pose a significant barrier to eligibility for Qualifying RBP \n \n¶ 61,126 (2024), order on reh’g & clarification, Order No. 1920-B, 191 FERC ¶ 61,026 (2025), appeals \npending sub nom. Appalachian Voices v. FERC, Nos. 24-1650, et al. (4th Cir. July 16, 2024). \n108 Proposed Tariff, Attachment DD, section 18.2(c)(i). \n109 Proposed Tariff, Attachment DD, section 18.2(c)(ii)."},{"page":47,"startToken":14004,"endToken":14275,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 40 \n \n \n \nOffset UCAP MW, in recognition of the fact that bilateral agreements may not need to be \nlonger than five years to develop new capacity.     \nDecrementing the Initial RBP Target by new resources reflected in bilateral \ncontracts or being developed by Self-Supply Entities that are already in approved \nintegrated resource plans is appropriate, as these new resources have already been \nprocured. \nc. \nLoads participating as Annual Demand Resources or DER \nAggregation Resources (proposed Tariff, Attachment DD, \nsection 18.2(c)(iii)) \nIn the alternative, Qualifying RBP Offset UCAP MW may be supported by a signed \ncommitment between a Curtailment Service Provider or DER Aggregator and new load.  \nIn this case, the new load must be supported by an executed electric service agreement or \ntransmission service agreement that shows that the new load will either support its full MW \nquantity by:  (a) participating as Annual Demand Resources or DER Aggregation \nResources at new locations starting in the 2028/2029 Delivery Year Second Incremental \nAuction and a must-offer requirement in RPM through 2032/2033 Delivery Year or (b) \npurchasing eligible replacement Qualifying RBP Offset UCAP MW. \nd. \nCapacity eligible to provide Qualifying RBP Offset UCAP \nMW (proposed Tariff, Attachment DD, section 18.2(b)) \nThe universe of capacity that is eligible to serve as Qualifying RBP Offset UCAP \nMW that may decrement the Initial RBP Target is relatively large.  Qualifying RBP Offset \nUCAP MW may be provided by new generation, Energy Storage Resources, Planned \nDemand Resources, or Planned DER Capacity Aggregation Resources.110  Furthermore, to \n \n110 Proposed Tariff, Attachment DD, sections 18.2(b), (c)."},{"page":48,"startToken":14275,"endToken":14548,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 41 \n \n \n \nbe clear, eligible capacity is not limited to capacity obtained through the recent, concurrent \nbilateral matching process, which is explained in Part III.A.2 above.  In addition, \nQualifying RBP Offset UCAP MW are not limited to capacity supplied by newly \nconstructed resources.  For example, eligible resources may include incremental capacity \ncreated by an uprate of existing Generation Capacity Resources, incremental capacity from \nSurplus Interconnection Service, and repowering of deactivated generation resources that \nretired as of April 10, 2026, which is the day that this particular eligibility requirement was \nfirst posted.111   \nThe categories of capacity that may provide Qualifying RBP Offset UCAP MW are \nrelatively expansive, as decrementing Qualifying RBP Offset UCAP MW avoids \ndouble-counting for load that is included in the Initial RBP Target and planning to bring \nits own capacity to the system.  That said, the categories of capacity eligible to serve as \nQualifying RBP Offset UCAP MW are not so expansive as to cause PJM to decrement the \nInitial RBP Target by UCAP MW that are not “new” or not sufficiently certain to be \navailable when called upon and reduce the resource adequacy shortfall outside the RBP.  \nQualifying RBP Offset UCAP MW must therefore be accompanied by supporting \nevidence, which PJM assesses before determining whether new capacity should be deemed \nQualifying RBP Offset UCAP MW and permitted to decrement the initial procurement \ntarget.   \n \n111 An April 10, 2026, cutoff date guards against resource owners potentially gaming retirements by, for \nexample, entering a deactivation notice after this date only to claim that it is being repowered in advance of \nthe RBP."},{"page":49,"startToken":14548,"endToken":14870,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 42 \n \n \n \nIt is also worth noting that Qualifying RBP Offset UCAP MW has been deliberately \ndesigned to be more inclusive than the resources that qualify to sell RBP UCAP MW, \nwhich PJM is proposing to call RBP Resources.112  As discussed below, see infra Part \nIII.C.3, while resources that bring Qualifying RBP Offset UCAP MW reduce the Final \nRBP Target, those resources do not hold any commitment or receive settlement through \nPJM in the RBP.  In contrast, RBP Resources procured through the RBP will be paid based \non a pay-as-bid basis for a fixed, 15-year term, and have obligations such as a must-offer \nrequirement for capacity for the term of the commitment.  RBP Resource requirements are \nmore stringent, thus narrowing the universe of resources that may voluntarily sell RBP \nUCAP MW to those that have successfully demonstrated a high likelihood of providing \nstable, long-term capacity.  In exchange, RBP Resources receive price certainty and \nstability through the RBP.113  The distinction between Qualifying RBP Offset UCAP MW \nand RBP UCAP MW provided by RBP Resources is discussed in greater detail below. \ne. \nElectric Distributors and other entities provide evidentiary \nsupport for Qualifying RBP Offset UCAP MW (proposed \nTariff, Attachment DD, section 18.2(c)) \nPJM is proposing to require that Electric Distributors provide reports and evidence \nof Qualifying RBP Offset UCAP MW in each of their respective zones/areas under the new \nproposed Tariff provisions.  As the Commission has previously held, Electric Distributors \nserve as “the party with the distribution and metering facilities defining a zone/area and \n \n112 Proposed Tariff, Definitions – RBP Resources (defining “RBP Resources” as “generation resources, \nEnergy Storage Resources, Demand Resources, or DER Aggregation Resources, as set forth in Tariff, \nAttachment DD, section 18.5, offered to provide RBP UCAP MW from the Reliability Backstop \nProcurement, in accordance with Tariff, Attachment DD, section 18”). \n113 See Croop Aff. ¶¶ 14-16."},{"page":50,"startToken":14870,"endToken":15188,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 43 \n \n \n \nresponsible for reporting load information to PJM.”114  However, so as to not inadvertently \nlimit sources of relevant and reliable information, PJM will also accept reports and \nevidence of Qualifying RBP Offset UCAP MW provided during the RBP bid submission \nwindow by other jurisdictional, as well as non-jurisdictional entities, including, but not \nlimited to, Transmission Owners, LSEs, interconnecting customers, large loads, and state \nregulatory agencies.  Commission precedent has previously supported PJM’s decision to \nnot limit the reporting of Load Adjustments to Electric Distributors.115   \nPJM acts within its authority to collect, review, and consider information from both \njurisdictional and non-jurisdictional entities to the extent that the information is relevant to \nCommission-jurisdictional services and rates.  First, such information is “in connection \nwith” and “directly affecting” wholesale capacity market rates.116  In this case, the \ninformation that PJM seeks to collect will impact the Final RBP Target.  Indeed, an \nanalogous practice can be found in longstanding requirements applicable to demand \nresources, as set forth in Order No. 719-A.117  In that order, the Commission prohibited \nPJM and other RTOs/ISOs from accepting bids from Curtailment Service Providers that \naggregated demand response of customers of utilities distributing below a MW per hour \nthreshold unless otherwise permitted by an appropriate retail authority.118  To comply with \nOrder No. 719-A, the Commission required that PJM and other RTOs/ISOs review \n \n114 PJM Interconnection, L.L.C., 188 FERC ¶ 61,200, at P 40 (2024). \n115 Id. at PP 22, 44. \n116 EPSA, 577 U.S. at 278-79; FPA section 201(b), 16 U.S.C. § 824(b). \n117 Wholesale Competition in Regions with Organized Electric Markets, Order No. 719-A, 128 FERC \n¶ 61,059, order on clarification, Order No. 719-B, 129 FERC ¶ 61,252 (2009). \n118 Order No. 719-A at P 60; PJM Interconnection, L.L.C., 135 FERC ¶ 61,211, at P 3 (2011)."},{"page":51,"startToken":15188,"endToken":15476,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 44 \n \n \n \nevidence and information concerning end-use customer participation in load response \nprograms.  In PJM’s case, “when an LSE or Electric Distribution Company does not \npresent evidence that the Retail Authority permits or conditionally permits demand \nresponse activity, the registration will not be processed until evidence of Retail Authority \nauthorization for the resource’s participation in PJM’s load response programs is provided \nto PJM within the established deadlines.”119  \nSecond, in the Commission’s June 2026 Order to Show Cause, the Commission \nexpressly required PJM and the PJM Transmission Owners to post and regularly update \ndata and details concerning large load additions, including “detailed information regarding \nthe extent to which requests for transmission service by Eligible Customers on behalf of \nlarge loads necessitate Network Upgrades to accommodate the transmission service to \nEligible Customers on behalf of large loads.”120  Likewise, under the RBP, PJM is \nproposing to collect, review, verify, and evaluate information to determine if the Final RBP \nTarget should be adjusted downward to reflect arrangements entered into voluntarily by \nnew loads to obtain new capacity.    \n3. \nOpt-out (proposed Tariff, Attachment DD, section 18.1(d)) \nThe Final RBP Target will also be decremented where an Electric Distributor \nzone/area elects to opt-out of procuring through the RBP for a particular zone/area in one \nof two specific and narrow circumstances.  First, an opt-out may be requested where the \nElectric Distributor’s zone/area has rates that are not regulated by the states and is unable \nto address cost allocation associated with capacity procured in the backstop.  This opt-out \n \n119 PJM Interconnection, 135 FERC ¶ 61,211 at P 3. \n120 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 74."},{"page":52,"startToken":15476,"endToken":15784,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 45 \n \n \n \nrequest must specify the associated MW quantity of load in the zone/area that will be opted-\nout of the Initial RBP Target and be accompanied by supporting documentation \ndemonstrating an inability to address cost allocation associated with capacity procured in \nthe backstop, along with written support for such opt-out from the relevant state governor, \nRERRA, and interconnection customer(s).  This narrow opt-out is designed to address a \nlimited regulatory gap faced by cooperatives and municipal utilities whose rates are not \nregulated by the states.  During the stakeholder process, cooperatives raised the concern \nthat Electric Distributors in a retail choice state not regulated by the state and not otherwise \nserving as the LSE for generation to the load, would be forced to have its customers absorb \nthe costs of an “overbuy” if a particular large load included in the forecast were to fail to \nmaterialize.  Unlike a state-regulated, investor-owned utility, cooperatives and municipal \nutilities are not governed by a state regulatory authority that would be responsible for \naddressing the potential reallocation of RBP costs to either other large loads or other zones \nwithin the state.  \nSecond, PJM is also proposing another narrow opt-out to permit Electric \nDistributors to decrement the Initial RBP Target by up to the associated MW quantity of \nload that participates in a peak shaving adjustment program codified in state law (e.g., NJ \nA796),121 where an Electric Distributor’s zone/area addresses its capacity needs through \nsuch a program.  To support an opt-out, the peak shaving adjustments must meet all \napplicable requirements established in Tariff, Attachment DD-2. \n \n121 See N.J. P.L.2026, C.32 (July 7, 2026) (to be codified at N.J. Rev. Stat. Title 48); NJ A796, Bill Track 50, \nhttps://www.billtrack50.com/billdetail/1954539 (last updated July 7, 2026)."},{"page":53,"startToken":15784,"endToken":16074,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 46 \n \n \n \nReducing the Final RBP Target by the quantity of this opt-out is similar to reducing \nthe target by the quantity of new load contracting for new capacity that would qualify as a \nQualifying RBP Offset UCAP MW.  While there is no accreditation value for peak shaving \nadjustment, the opt-out effectively recognizes bilateral agreements between load and peak \nshaving adjustment programs. \nTo reflect the UCAP MW of the opt-out, the Initial RBP Target will be decremented \nby the amount specified by the Electric Distributor.  Importantly, however, even if the \nElectric Distributor zone/area qualifies for and receives an opt-out from the RBP, the load \nin that zone/area may be subject to load reduction under the forthcoming proposal to \nimplement an IRAS. \nC. \nThe Procurement Process:  RBP Resources, Offers, RPM Must Offer, \nClearing, Settlement, and Cost Responsibility (Proposed Tariff, \nAttachment DD, sections 18.4, 18.5, and 18.6) \n1. \nThe scope of the RBP (proposed Tariff, Attachment DD, \nsection 18.4) \n \nPJM is proposing new Tariff provisions to describe the procurement process under \nthe RBP and to broadly address:  (1) who may participate in the RBP; (2) what the RBP \naims to procure; (3) the length of the procurement term; (4) when the RBP will take place; \nand (5) whether and when RBP Resources participating in the RBP may, in the alternative, \nenter into arrangements for Qualifying RBP Offset UCAP MW. \nFirst, participants in the RBP are (1) sellers with RBP Sell Offers122 submitted on \nbehalf of RBP Resources; and (2) PJM Settlement, Inc. (“PJMSettlement”), acting as a \n \n122 Proposed Tariff, Definitions – RBP Sell Offer (defining “RBP Seller Offer” as “an offer to sell RBP \nResources in the Reliability Backstop Procurement”)."},{"page":54,"startToken":16074,"endToken":16460,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 47 \n \n \n \ncounterparty on behalf of buyers, i.e., load.  PJMSettlement, a non-profit subsidiary of \nPJM, handles credit, billing and settlement functions for PJM and acts as a counterparty to \nPJM members’ pool transactions in the PJM markets on behalf of the ultimate buyer of the \nproduct.123  There is broad consensus among stakeholders that PJM should serve as the \ncounterparty that directly procures capacity on behalf of buyers.124  Furthermore, relying \non PJMSettlement as the counterparty mirrors the existing structure of the Reliability \nBackstop Auction set forth in Tariff, Attachment DD, section 16.4(a).125 \nSecond, PJM will seek to procure RBP Resources up to the UCAP MW value of \nthe Final RBP Target.126  RBP Resources are limited to generation, Energy Storage \nResources, Demand Resources, or DER Aggregation Resources that meet the \ncharacteristics described in the proposed Tariff.127  Additional details concerning the \nrequirements that resources must meet to be RBP Resources are set forth in proposed \nTariff, Attachment DD, sections 18.5(b) through 18.5(e).   \n \n123 \nPJM \nInterconnection \nSubsidiaries, \nPJM \nInterconnection, \nL.L.C. \n(Sep. \n5, \n2025), \nhttps://pjm.my.site.com/publicknowledge/s/article/PJM-Interconnection-Subsidiaries?language=en_US \n[https://perma.cc/B2QA-S7RS].  \n124 Indeed, as set forth in the PJM RBP Matrix, of the 13 RBP proposals put forth during the CIFP, seven of \nthe proposals identified PJMSettlement as the counterparty.  In addition, two of the proposals took no position \non the matter.  See PJM Interconnection, L.L.C., MC Voting Results for RBP Proposals Agenda Items 3L \nthrough \n3X \n(June \n30, \n2026), \nhttps://www.pjm.com/committees-and-groups/committees/mc \n[https://perma.cc/5CSQ-DP4K] (scroll to “Meeting Materials” and search for 2026, click on link for \n“6.30.2026 Special Meeting,” scroll to MC Voting Results – Agenda Items 3L to 3X and click on each to \nview the PDF) (last visited July 29, 2026). \n125 Tariff, Attachment DD, section 16.4(a) (“PJMSettlement shall be the Counterparty to the capacity \ntransaction resulting from committed Capacity Resources clearing the Reliability Backstop Auction.”). \n126 Proposed Tariff, Attachment DD, section 18.4. \n127 Proposed Tariff, Definitions – RBP UCAP MW (defining “RBP UCAP MW” as “unforced capacity that \nis eligible to be offered in the Reliability Backstop Procurement, in accordance with Tariff, Attachment DD, \nsection 18”)."},{"page":55,"startToken":16460,"endToken":16771,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 48 \n \n \n \nThird, RBP Sell Offers submitted in the RBP are offers of RBP UCAP MW for a \nfixed 15-Delivery Year term128 if the project is expected to commence commercial \noperation beginning with the 2028/2029 Delivery Year.129  RBP Resources with a \ncommercial operation date later than the 2028/2029 Delivery Year will be committed for a \nshorter term, representing the remainder of the 15-Delivery Year term of the RBP \ncommitment period through the end of the 2042/2043 Delivery Year.130  The 15-Delivery \nYear term is informed by the NEDC/PJM Governors’ Principles, which seeks “[r]evenue \n[c]ertainty to [n]ew [g]eneration” through “15-year price certainty for new capacity \nresources.”131 \nFourth, the RBP submission window is planned to open upon Commission \nacceptance of this submittal (with a targeted date of September 30, 2026) and close three \nweeks after, and the subsequent clearing and selection process will take place thereafter \nand conclude six weeks following the closing of the offer submission window.  PJM will \nnotify RBP Sellers that have been committed as soon as practicable upon the conclusion \nof the RBP.132  Assuming the Commission accepts this FPA section 205 filing within 60 \ndays, i.e., by September 29, 2026, and no new major concerns or hurdles arise, PJM intends \nto commence the RBP on September 30, 2026.133  The timing of the commencement of the \n \n128 Proposed Tariff, Attachment DD, section 18.4. \n129 Id. \n130 Id. \n131 NEDC/PJM Governors’ Principles at 1; see also Tariff, Attachment DD, section 16.4(a) (“The Reliability \nBackstop Auction shall obtain commitments of additional Generation Capacity Resources (or, as applicable, \nadditional Base Load Generation Resources) for a term of up to fifteen (15) Delivery Years.”). \n132 Proposed Tariff, Attachment DD, section 18.4. \n133 Proposed Tariff, Attachment DD, section 18.4."},{"page":56,"startToken":16771,"endToken":17063,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 49 \n \n \n \nRBP is informed by: (1) the NEDC/PJM Governors’ Principles, which urged that the \nprocurement should occur “no later than September 2026[,]”134 and by (2) the desire for \nPJM to finalize selection and commitments of RBP Resources prior to the opening of the \n2029/2030 Delivery Year BRA, scheduled for December 2026. \nFifth, RBP Sell Offers are considered binding.135  In other words, RBP Resources \nthat are the subject of an RBP Sell Offer are not permitted to exit the RBP to enter bilateral \narrangements, either through bilateral matching or otherwise, inclusive of arrangements \nthat would be considered Qualifying RBP Offset UCAP MW.136  However, to the extent \nthat the results of the RBP indicate that an RBP Resource was not committed in the RBP, \nsuch resource may subsequently enter into bilateral arrangements for Qualifying RBP \nOffset UCAP MW or otherwise.137  In summary, the RBP Sell Offer is a binding offer once \nany PJM-identified deficiencies are cured and until the conclusion of the RBP.  RBP Sellers \ncannot enter into bilateral agreements for the same project unless, following the conclusion \nof the procurement process, the project is not committed in the RBP.   \n2. \nOverview of seller and buyer obligations  \nTable 1, below, provides an overview of seller and buyer responsibilities.  Sellers \neligible to participate in the RBP, i.e., RBP Resources or Market Participants selling RBP \nUCAP MW of RBP Resources must:  (1) meet collateral requirements prior to participating \nin the RBP; (2) support eligibility to provide capacity; (3) provide capacity; (4) cover \n \n134 NEDC/PJM Governors’ Principles at 1. \n135 See proposed Tariff, Attachment DD, section 18.4. \n136 See id. \n137 See proposed Tariff, Attachment DD, section 18.2(c)."},{"page":57,"startToken":17063,"endToken":17336,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 50 \n \n \n \npenalties for any capacity shortfalls; and (5) bear responsibility for defaults.  Likewise, \nbuyers, i.e., LSEs, must:  (1) meet collateral requirements prior to each relevant Delivery \nYear; (2) cover the cost of RBP UCAP MW in accordance with the allocation of RBP \nCharges; and (3) bear responsibility for defaults.    \nTable 1. RBP Sellers and Buyers: Payments and Non-payments (Tariff Provisions) \n \nSeller (Supply)  \nBuyer (Demand)  \nCredit/Collateral \nRequirements \nCredit Requirements Prior to \nParticipation in RBP \n(Tariff, Attachment DD  \n§ 18.8(a)) \nCredit Requirements Prior to \nDelivery Year (Tariff, \nAttachment DD § 18.8(b)) \nProvision of RBP \nUCAP MW/ \nRBP Charges \nEligibility and Obligations to \nProvide Capacity (Tariff, \nAttachment DD §§ 18.5, 18.6) \nUCAP MW Eligible to Settle \nas CfD (Tariff, Attachment \nDD \n§ 18.5(g)(i)) \nSettlement of RBP Credits \n(Tariff, Attachment DD  \n§ 18.5(g)(ii)) \nResponsibility to Pay (RAA, \n7.2B) \nSettlement of RBP Charges \n (Tariff, Attachment DD  \n§ 18.5(g)(iii)) \nCost Allocation (Tariff, \nAttachment DD  \n§ 18.3) \nRBP UCAP MW \nshortfalls, RBP \nshortfall charges, \nand Associated \nCredits to Buyers \nNon-payment for RBP UCAP \nMW that Seller Is Short \n(Tariff, Attachment DD  \n§ 18.6(c)  \nRBP shortfall charges for \nFailure to Reach Commercial \nOperation in Delivery Year \nfor which RBP Resource \nCommitted (Tariff, \nAttachment DD § 18.6(d)) \nAllocation of RBP shortfall \ncredits to LSEs based on pro-rata \nshare of Final RBP Target \n(Tariff, Attachment DD  \n§ 18.3(b)(iv); RAA, Section \n7.2B) \nDefault \n(nonpayment) \nDecrease in RBP Credits \nWhere Nonpayment of RBP \nshortfall charges (Tariff, \nAttachment DD § 18.9) \nCover Nonpayment of RBP \nCharges (Tariff, Attachment DD \n§ 18.9)"},{"page":58,"startToken":17336,"endToken":17697,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 51 \n \n \n \n3. \nResources eligible to participate in the RBP must bring new \ncapacity to PJM (proposed Tariff, Attachment DD, sections 18.5(a) \nthrough 18.5(d))  \nThe RBP is focused on procuring new capacity.  Thus, to be eligible to be offered \ninto the RBP, a resource must:  (1) never have been committed to provide capacity;138 \n(2) not have been the subject of a notice of intent to participate in an RPM Auction prior \nto and including the 2028/2029 Delivery Year, but if so, must have offered and not cleared \nany RPM Auction;139 (3) have a commercial operation date, or other reasonable \nexpectation of being in service or otherwise be able to provide capacity, by no later than \nJune 1, 2032;140 and (4) not be supplying Qualifying RBP Offset UCAP MW.141  As further \nexplained below, neither an RBP commitment nor participation in the RBP will impact the \nrequirement that a resource that is already the subject of a notice of intent be offered in the \n2029/2030 BRA.  The capacity is needed and should be offered. \nRBP is designed to attract new supplies of capacity (i.e., new ICAP), not merely \nincremental resource efficiencies, to address the current capacity shortfall and provide a \nstable, long-term source of capacity.  Resources procured through the RBP must \ndemonstrate a high degree of certainty of achieving commercial operation within the next \nfew years and be available to provide capacity until the end of a fixed, 15-year term.  And, \n \n138 See, e.g., proposed Tariff, Attachment DD, section 18.5(a)(ii) (The resource “[h]as not received a capacity \ncommitment or been committed in an FRR Plan as of the commencement of the Reliability Backstop \nProcurement.”). \n139 See proposed Tariff, Attachment DD, section 18.5(a)(iv) (The resource “[t]o the extent the subject of a \nnotice of intent for the 2028/2029 Base Residual Auction, must have offered and not cleared in the 2028/2029 \nBase Residual Auction.”). \n140 See Proposed Tariff, Attachment DD, section 18.5(a)(i). \n141 See Proposed Tariff, Attachment DD, section 18.5(a)(iii)."},{"page":59,"startToken":17697,"endToken":17995,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 52 \n \n \n \nimportantly, resources procured through the RBP will be paid under the RBP framework, \nnot through bilateral or similar arrangements.  \nThe Final RBP Target, on the other hand, is an input in the RBP, setting the desired \namount of UCAP MW to be procured.  Thus, as discussed above, see supra Part III.B.2.d, \nreducing the RBP Target by Qualifying RBP Offset UCAP MW guards against \ndouble-counting or procuring twice for the same capacity.  As such, the primary purpose \nof the RBP Target is to determine how much UCAP MW is needed to meet the reliability \nrequirement shortfall without over-procuring. \nRecognizing that RBP Resources will have longer-term commitments and price \ncertainty—as compared to resources that provide Qualifying RBP Offset UCAP MW, PJM \nis proposing comparatively more restrictive criteria for participating resources to help \nensure that resources participating in the RBP are limited to those that have demonstrated \na high likelihood of success in reaching commercial operation in the near term and \nremaining available throughout the commitment period.  The RBP provides revenue \ncertainty to encourage the development of new capacity in PJM, provided by new projects.  \nSuch revenue certainty demands a similar degree of certainty from the recipients of that \nrevenue.  Accordingly, the generation, storage, demand, and DERs allowed to participate \nin RBP are a subset of those eligible to provide Qualifying RBP Offset UCAP MW.  \nTo put a finer point on the differences between Qualifying RBP Offset UCAP MW \nthat may decrement the RBP Target and RBP UCAP MW that may be offered into the \nRBP, Ms. Croop describes several categories of resources that are eligible to serve as \nQualifying RBP Offset UCAP MW, but are excluded from the categories of resources \neligible to participate in the RBP."},{"page":60,"startToken":17995,"endToken":18298,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 53 \n \n \n \nFirst, as Ms. Croop testifies, a resource that increases UCAP by switching fuels and \nthus changes ELCC class, which can increase the resource’s accreditation value, is not \neligible to be offered in the RBP.  According to Ms. Croop, “[f]uel switching does not bring \nnew ICAP or new [maximum facility output] on to the system.”142  Further, anticipated \nUCAP increase resulting in the resource changing ELCC class is not driven by bringing \nnew physical capacity to the system.  “[T]he potential new UCAP captured from this \nresource would require some estimate of the incremental UCAP value, which may require \nsensitivity analyses, to determine the delivered incremental UCAP and RBP payment, that \ncannot be based on any direct increase in ICAP for the resource.  This creates uncertainty \nin what capacity will be available to the system in the 15-year term and should be settled \nunder the RBP.”143 \nSecond, as Ms. Croop testifies, CIR uprates that bring additional UCAP MW to the \nPJM system will not qualify to participate in the RBP, because CIR uprates bring neither \nnew ICAP nor new energy to the system.144  Rather, to qualify, any incremental capacity \ncreated by new CIRs must also be associated with an increase in ICAP.145 \nThird, resources relying on Surplus Interconnection Service to bring new UCAP \nMW on the PJM system do not qualify as RBP Resources, because these resources do not \nhave any independent rights to the PJM system.  As Ms. Croop testifies:  \nBy design, a surplus resource can only operate while the \nexisting resource is in service, or no more than one year after \nthe deactivation of the existing resource, and when the \n \n142 Croop Aff. ¶ 19. \n143 Id. \n144 Id. ¶ 15. \n145 Id.; proposed Tariff, Attachment DD, section 18.2(b)."},{"page":61,"startToken":18298,"endToken":18618,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 54 \n \n \n \nexisting resource is not operating and using the \ninterconnection service.  Given the 15-year term, resources \nneed to be able to operate independently to provide certainty \nof deliverability for a 15-year term.  Further, these projects, \nwhile increasing UCAP in a hybrid configuration, do not \nhave clear contributions of UCAP between the existing \nresource and surplus resource creating uncertainty and the \nneed for sensitivities or estimates in both the increase system \ncapacity and the RBP settlements.146 \nFourth, Demand Resources and DER Aggregators without identified sites and a \n15-year agreement in place will not be permitted to participate in the RBP.  These \nrestrictions are necessary, according to Ms. Croop, “to provide assurance that the supply \nwill be available for the 15-year term and manage the risk of the supply being available for \nthe full term that PJM is procuring on behalf of load in the RBP.”147  By contrast, the \ncommitment terms (length, price, etc.) of Qualifying RBP Offset UCAP MW are managed \nby the commercial contract between the buyer and seller. \n4. \nRBP Sell Offers (proposed Tariff, Attachment DD, section 18.5(e))  \nSellers participating in the RBP must submit RBP Sell Offers for RBP UCAP MW \nin $/MW-day UCAP for each Delivery Year, beginning with the first full Delivery Year in \nwhich the RBP UCAP MW is expected to achieve commercial operation and provide \ncapacity, and through the end of the fixed 15-year term.  Each RBP Sell Offer must include:  \ni) \nthe quantity (MW (UCAP)) to be provided by the RBP Resource for \neach Delivery Year where the maximum UCAP included in an RBP \nSell Offer shall be limited to no greater than 120% of the resource \ntype’s most recent maximum Preliminary ELCC Class Ratings for \n2028/2029 through the last posted Delivery Year or based on the \nresource’s maximum estimated unit-specific ELCC ratings across \n \n146 Croop Aff. ¶ 20. \n147 Id."},{"page":62,"startToken":18618,"endToken":18940,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 55 \n \n \n \nsuch period for resources with no ELCC Class Rating, multiplied by \nthe resource’s ICAP; \nii) \nthe price in $/MW-day UCAP for each Delivery Year beginning \nwith the first full Delivery Year in which the RBP UCAP MW is \nexpected to provide capacity through the end of the fixed 15-year \nterm;         \niii) \nthe first full Delivery Year for which such resource will be available; \nand \niv) \nall relevant documentation necessary for the Office of the \nInterconnection to evaluate whether the project satisfies the gating \ncriteria, as set forth in Tariff, Attachment DD, section 18.5(f)(i). \nPJM also proposes to cap the maximum amount of MW (UCAP) offered for any \ngiven resource at “120% of the resource type’s most recent maximum Preliminary ELCC \nClass Ratings for 2028/2029 through the last posted Delivery Year.”148  This cap reflects \nthe fact that a resource’s Accredited UCAP value may change from year to year, based on \nthe ELCC accreditation approach.  Allowing sellers to offer amounts greater than the \nUCAP determined through current ELCC modeling allows sellers to offer their expected \nUCAP levels in future years while limiting the risk of overestimated expected UCAP \nvalues.  In other words, if a seller believes that their resource’s current ELCC rating is \nunderstated relative to what the seller projects for future Delivery Years, the seller would \nbe free to offer at a level greater than would be estimated today, while simultaneously \nincurring the risk that the resource’s final UCAP value for the Delivery Year comes in \nbelow the RBP offered value for such Delivery Year.  PJM’s proposed 120% cap level \nrepresents a reasonable balance between providing the seller with flexibility and managing \nUCAP risk for load.  Indeed, the 120% cap is comparable to Southwest Power Pool, Inc.’s \nrecently proposed cap to High Impact Large Load Generation Assessment (“HILLGA”) \n \n148 Proposed Tariff, Attachment DD, section 18.5(e)(i)."},{"page":63,"startToken":18940,"endToken":19288,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 56 \n \n \n \nCustomer’s generating facility’s projected capacity accreditation value (i.e., the higher of \n125% or 110% plus the highest approved Planning Reserve Margin) which the \nCommission found just and reasonable.149   \n5. \nRBP Sellers Responsible for Actual Network Upgrade Costs \n(proposed Tariff, Attachment DD, section 18.5(e))  \nSellers of RBP Sell Offers will be responsible for all actual network upgrade costs \nas determined through the interconnection process, without any subsequent adjustments to \nRBP Sell Offers.  Sellers will have the opportunity to reflect on the anticipated cost of any \nnetwork upgrades, estimated or final, associated with the RBP Resource’s provision of \ncapacity in the RBP Sell Offer. \n6. \nMust-offer obligation in the RPM for RBP committed resources \n(proposed Tariff, Attachment DD, sections 18.6(a) and 18.6(b)) \nA committed RBP Resource must offer its available capacity, up to the total \nquantity of committed RBP UCAP MW, into the RPM Auctions as a price taker, i.e., \n$0/MW-day UCAP, beginning with the first RPM Auction following the RBP \ncommitment, for the applicable offered Delivery Year in which the term of the committed \nRBP UCAP MW begins and continuing each subsequent Delivery Year through the end of \nthe fixed, 15-year term.150  The only exception to this general rule is that if an RBP \nResource has a commitment beginning with the 2029/2030 Delivery Year and is not the \nsubject of a notice of intent to be offered into the BRA for the 2029/2030 Delivery Year, \n \n149 Sw. Power Pool, Inc., 194 FERC ¶ 61,031 at P 66 (finding that Southwest Power Pool, Inc.’s “proposed \ncap on the projected capacity accreditation value helps to ensure that only the generation capacity necessary \nto serve the [High Impact Large Load (”HILL”)] is studied through the HILLGA process, while recognizing \nthat the relevant load responsible entity must secure sufficient resources to cover the Planning Reserve \nMargin that it will be required to carry when the HILL receives long-term, firm transmission service”). \n150 Proposed Tariff, Attachment DD, section 18.6(a)."},{"page":64,"startToken":19288,"endToken":19625,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 57 \n \n \n \nsuch RBP Resource would be required to be offered into the Second Incremental Auction \nfor the 2029/2030 Delivery Year.151  This limited exception is necessary because, as further \nexplained in the section detailing changes to the notice of intent requirement, a Planned \nGeneration Capacity Resource that is not the subject of a notice of intent to offer would \nnot have been included in the planning parameters for the 2029/2030 BRA.  \nRequiring the portion of an RBP Resource that has committed RBP UCAP MW to \nbe offered into the RPM Auctions as a price taker is appropriate given that such MW with \nan RBP commitment are already being paid for by the responsible LSEs so placing a \nmust-offer requirement on RBP Resources and requiring such offers to be submitted as \nprice takers during the term of such commitment ensures that load does not double pay for \ncapacity.  That is, if the portion of the committed RBP UCAP MW is not obligated to offer \ninto the RPM Auction as a price taker, there is a risk that such resource may not clear the \nRPM Auction and another resource would need to be committed as capacity in such \nauction.  Such an outcome would effectively result in over-procuring capacity since a \ncommitted RBP Resource is already retained for resource adequacy purposes while the \nRPM Auction procures additional capacity targeted at meeting the reliability requirement. \nBeyond the requirement for the committed RBP UCAP MW portion of an RBP \nResource to be offered into the RPM Auction as a price taker, the rules related to exceptions \nof the RPM must-offer obligation must also be narrowed for RBP Resources.  Specifically, \nunder the existing rules, an Existing Generation Capacity Resource may be eligible for an \n \n151 See id.  The First Incremental Auction for the 2029/2030 Delivery Year was canceled due to the \ncompressed auction schedule so the Second Incremental Auction is the next auction following the BRA for \nthe 2029/2030 Delivery Year."},{"page":65,"startToken":19625,"endToken":19927,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 58 \n \n \n \nexception to the RPM must-offer obligation if it “(i) is reasonably expected to be physically \nunable to participate in the relevant Delivery Year; [or] (ii) has a financially and physically \nfirm commitment to an external sale of its capacity . . . .”152  It remains appropriate to allow \nany Existing Generation Capacity Resource, including a committed RBP Resource, to not \nbe offered into the RPM Auction if it is physically unable to participate in the relevant \nDelivery Year (e.g., deactivation, long-term physical operational restrictions to the ICAP \nof the resource or under other major repair, regulatory proceedings specific to the resource \nthat will result in the retirement of the resource, or unable to achieve full commercial \noperation prior to the relevant Delivery Year)153 because such a resource could not \nreasonably be relied upon for capacity during the Delivery Year so it should not be counted \nas capacity supply in the RPM Auction.  However, even if an RBP Resource is granted an \nexception to the RPM must-offer obligation, the RBP Resource will nevertheless still be \nsubject to RBP shortfall charges, as described below.154   \nIn addition, the owner of a committed RBP Resource should not be allowed to \ncircumvent the must-offer obligation simply by obtaining a financially and physically firm \ncommitment to an external sale of capacity.  That is, a committed RBP Resource is \nprocured to provide capacity for a 15-year term, and the resource is paid by the relevant \nLSEs within PJM.  Such committed RBP Resource should therefore be counted as capacity \nin the RPM Auctions and not be allowed to sell capacity outside of PJM and be exempt \nfrom the capacity market must-offer obligations. \n \n152 Tariff, Attachment DD, section 6.6(g). \n153 Id. \n154 Proposed Tariff, Attachment DD, section 18.6(b)."},{"page":66,"startToken":19927,"endToken":20223,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 59 \n \n \n \n \nTo prevent a committed RBP Resource from obtaining an exception to the \nmust-offer obligation by selling the committed RBP UCAP MW of such resource outside \nof PJM, PJM proposes to add language to the Tariff that makes clear that the portion of \nany committed RBP UCAP MW of a Capacity Resource “shall not be eligible for an \nexception to the RPM must-offer requirement, under Tariff, Attachment DD, section 6.6A, \nbased on having a financially and physically firm commitment to an external sale of its \ncapacity.”155  Likewise, a committed RBP Resource should not be allowed to request \nremoval of Capacity Resource status for the portion of the committed RBP UCAP MW \nduring the commitment term as such a request could also effectively circumvent the \ncapacity must-offer obligation.  To that end, PJM proposes to add a requirement to the \nTariff that states that the Capacity Resource status of any committed RBP UCAP MW \ncannot be removed during the term of such commitment.156  However, if a resource has \nexcess UCAP MW in addition to the committed RBP UCAP MW quantity, the excess \nUCAP MW may be eligible for a capacity must-offer exception.  Since the excess UCAP \nMW are not committed under the RBP, the RBP Resource may request that Capacity \nResource status be removed for the excess UCAP MW under the existing rules, just like \nany other Existing Generation Capacity Resource.  \nAll RBP Resources that offer and clear in the RPM are paid RPM Auction Credits \nin accordance with longstanding RPM rules, and then will be settled based on the contract \nfor difference (“CfD”) design for the RBP UCAP MWs.  All load that is allocated RBP \n \n155 Proposed Tariff, Attachment DD, section 6.6(g). \n156 Id."},{"page":67,"startToken":20223,"endToken":20513,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 60 \n \n \n \nCharges and participates in the RPM will likewise be charged RPM Charges and be \ncharged or receive RBP Charges, based on the CfD settlement. \n7. \nRBP UCAP MW shortfalls or failure to materialize (proposed Tariff, \nAttachment DD, sections 18.6(c) through 18.6(e)) \nPJM is proposing two mechanisms to manage the risk of RBP Resources not \nperforming:  (1) an RBP UCAP MW shortfall charge, and (2) settlement on delivery.  An \nRBP UCAP MW shortfall occurs when a committed RBP Resources has not reached \ncommercial operation for the relevant Delivery Year for up to three consecutive years \nduring the term of the commitment.  Once an RBP Resource has achieved commercial \noperation, the RBP UCAP MW shortfall charge will no longer be assessed.  However, RBP \nResources are not compensated for the amount of RBP UCAP MW that the resources are \nshort of their RBP commitment. \nThere is one exception.  Namely, as proposed, “[a]n RBP Resource that is a \ngeneration or Energy Storage Resource and is unable to meet [its] expected commercial \noperation date solely due to Network Upgrades shall be excepted from RBP shortfall \ncharges if the RBP Resource successfully demonstrates readiness through test energy and \nseeks interim deliverability.”157   \nRBP shortfall charges will be equal to the committed RBP UCAP MW times a \ncharge rate equal to 20% of the RBP commitment price of such resource (i.e., RBP shortfall \ncharge = committed RBP UCAP MW * 20% of RBP commitment price) in the applicable \nDelivery Year.  RBP shortfall charges are assessed against an RBP Resource that fails to \nreach commercial operation and provide capacity for up to three consecutive Delivery \n \n157 Proposed Tariff, Attachment DD, section 18.6(d)(i)."},{"page":68,"startToken":20513,"endToken":20813,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 61 \n \n \n \nYears.  If the RBP Resource fails to provide any RBP UCAP MW after three consecutive \nDelivery Years, the RBP commitment will be rescinded for the remainder of the RBP \nResource’s fixed, 15-year term.  Once a commitment is rescinded, the RBP Resource will \nneither be eligible to receive compensation for the rescinded RBP UCAP MW nor be \nsubject to an RBP shortfall charge for the remainder of the 15-year term.   \nPJM is proposing to allow RBP Resources to retain RBP UCAP MW commitments \nfor up to three years in recognition of the fact that a resource’s commercial operation date \nmay be delayed, at times, even where a project is viable.  Shortfall charges assessed against \nRBP Resources will be allocated to load.  Should a project not reach commercial operation \nafter the first three Delivery Years in which it was expected to be online, the resource \nwould not be subject to additional RBP shortfall charges.  The limitation on RBP shortfall \ncharges helps reduce the barrier to entry, as RBP shortfall charges over the entire 15-year \ncommitment term, and the associated credit requirements for such an extended exposure to \nthe RBP shortfall, could be significant. \n8. \nClearing \nstructure \n(proposed \nTariff, \nAttachment \nDD, \nsection 18.5(f))  \na. \nThe MW-weighted average of the levelized procurement \ncost of all selected RBP Sell Offers shall not exceed \n$555/MW-day UCAP. \nPJM is proposing that the levelized procurement cost of all selected RBP Sell Offers \nnot exceed a maximum willingness to pay of $555/MW-day UCAP, on a MW-weighted \naverage basis over all Delivery Years of the RBP.158  Earlier this year, as part of the \nCommission’s order finding that PJM’s Periodic Review of certain inputs into the RPM \n \n158 Proposed Tariff, Attachment DD, section 18.5(f)(ii)."},{"page":69,"startToken":20813,"endToken":21120,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 62 \n \n \n \nwere just and reasonable, the Commission accepted an estimated, uncollared price cap of \n$555/MW-day (UCAP), which is Point 1 on the Variable Resource Requirement (“VRR”) \ncurve for 2028/2029 Delivery Year BRA.159  In other words, but for the collared price cap, \n$555/MW-day (UCAP) would have been the cap for the 2028/2029 Delivery Year BRA.  \nGiven the RBP is starting with an Initial RBP Target of the 2028/2029 Delivery Year \nshortfall, $555/MW-day is being proposed as the maximum willingness to pay, i.e., a cap \nto what load will pay for RBP capacity.  This ‘budget approach’ selection design allows \nthe procurement to manage cost to load over the fixed, 15-year term of the RBP, while not \nrestricting Sell Offers to a hard price cap, and also allowing for potentially fluctuating \noffers throughout the Delivery Years of the term. \nb. \nThe proposed maximum willingness is just and reasonable. \nA maximum willingness to pay set at the MW-weighted average of the levelized \nprocurement cost not exceeding Point 1 on the VRR curve for the 2028/2029 Delivery Year \nBRA, i.e., $555/MW-day UCAP, is just and reasonable.  First, the proposed maximum \nwillingness to pay weighs the need to procure capacity and maintain system reliability, \nrecognizing that prices above the uncollared price cap based on Point 1 of the VRR curve \nfor the 2028/2029 Delivery Year BRA may nevertheless be appropriate under scarcity \nconditions, while also weighing consumer protection considerations by requiring that, \nultimately, the average procurement price not exceed the uncollared price cap of \n$555/MW-day UCAP across the term of the RBP commitment.160   \n \n159 PJM Interconnection, L.L.C., 194 FERC ¶ 61,049 at PP 44-45, order addressing arguments raised on \nreh’g, 196 FERC ¶ 61,007 (2026).  \n160 Croop Aff. ¶¶ 26-29."},{"page":70,"startToken":21120,"endToken":21373,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 63 \n \n \n \nSecond, relying on a MW-weighted average of the levelized procurement cost \nprovides sellers with flexibility not afforded by a hard cap on RBP Sell Offers.  The simple, \nillustrative example, below, demonstrates how price flexibility is permitted under this \napproach, without wholly setting aside the price discipline of a cap.  \nExample: Final RBP Target = 1,000 MW \nOffers \nMW \nLevelized Offer \nUnit 1 \n250 \n$475 \nUnit 2 \n250 \n$500 \nUnit 3 \n250 \n$525 \nUnit 4 \n250 \n$600 \n \n• The MW-weighted average of the levelized procurement cost in this simplified \nexample would be $525MW-day, i.e., less than the proposed MW-weighted \naverage of the levelized procurement cost of all selected RBP Sell Offers not \nexceeding $555 MW-day.  All offers would be committed.   \n• If instead, Offer 4’s levelized offer was priced at $800, Offer 4 would not be \ncommitted.  That is, if Offer 4’s offer was priced at $800, the levelized \nprocurement cost would be $575 MW-day, which is greater than $555 MW-day. \nThe proposal to limit the maximum willingness to pay is necessary.  The RBP is \nnot disciplined by direct buy bids that explicitly express willingness to pay.  \nSimultaneously, as Ms. Croop attests, “it is not reasonable to assume that load should be \nobligated to pay an unlimited amount for supply.  As with other PJM procurement \nmechanisms, an upper bound helps.”161  In comparison to the BRA 1-year commitment, \nthe proposed RBP will be committing supply for an up to 15-year term.  This outcome \n \n161 Id. ¶ 26."},{"page":71,"startToken":21373,"endToken":21613,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 64 \n \n \n \ncreates revenue certainty for the supply resources and generally can reduce financial and \ndevelopment risk and may improve financing opportunities through lower capital costs or \nmore favorable financing terms.  Given these potential benefits, it is reasonable to conclude \nthat PJM’s willingness to pay for a 15-year commitment should not exceed the amount that \nload would be willing to pay for a single-year commitment under the RPM framework for \nthe targeted Delivery Year. \nThe Commission has previously found that it is just and reasonable to pair a \npay-as-bid approach to backstop procurement with a maximum willingness to pay.  In \ntransitioning from administrative pricing to competitive, pay-as-bid pricing, California \nIndependent System Operator Corporation (“CAISO”) paired the transition with a soft \noffer cap.  The Commission accepted CAISO’s proposed soft offer cap, reasoning that \n“because the soft offer cap represents the high end of the range of current resource \nadequacy prices, it should not create incentives for load-serving entities to forego bilateral \nresource adequacy contracts and, instead, rely on Capacity Procurement Mechanism \n(“CPM”) backstop procurement.”162  In the case of the RBP, the proposed maximum \nwillingness to pay is based on the Commission-approved price cap set administratively \nthrough PJM’s periodic review, equal to Point 1 on the Commission-approved VRR curve, \nrepresenting the high end of the range of uncollared clearing prices.  \n \n162 Cal. Indep. Sys. Operator Corp., 153 FERC ¶ 61,001, at P 29 (2015)."},{"page":72,"startToken":21613,"endToken":21875,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 65 \n \n \n \nc. \nThe pay-as-bid approach is just and reasonable for purposes \nof the RBP  \nPJM proposes to commit resources in the RBP using a pay-as-bid approach,163 \nwhich is more appropriate for a one-time backstop procurement than the single-clear-price \napproach used in the RPM.  As Ms. Croop attests, the “RBP differs significantly from \nPJM’s standard market constructs and warrants a different settlement approach” and, while \n“PJM generally supports a single-clearing-price market design and continues to view \nuniform clearing prices as the most efficient market outcome,”164 given the unique \ncircumstances of this procurement, the pay-as-bid structure is more appropriate. \nFirst, the RBP is a backstop procurement that has become necessary due to the \nunprecedented capacity shortfall in the PJM Region.  As a one-time procurement, Ms. \nCroop testifies, a uniform clearing price procurement, which “promotes transparent price \ndiscovery, facilitates forward pricing, and supports competitive market outcomes,”165 \nwould be ill-suited to the RBP.  As Ms. Croop states, the RBP “is not designed to be a \ndurable or repeatable procurement,” and therefore “its pricing outcomes are less likely to \nserve as incentive market signals.”166   \nSecond, the RBP will not be procuring a uniform commodity.  As Ms. Croop \ntestifies: \nAlthough the RBP will seek a fixed, 15-year period of time \nfor procurement and cost allocation of RBP Resources, those \nresources may differ based on contract duration (dependent \non the projected in-service date of selected resources), \n \n163 Proposed Tariff, Attachment DD, section 18.5(f). \n164 Croop Aff. ¶¶ 21, 22. \n165 Croop Aff. ¶ 21. \n166 Id. ¶ 23."},{"page":73,"startToken":21875,"endToken":22121,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 66 \n \n \n \ncommercial operation dates, and other factors such as \ndifferences in ELCC accreditation and varying UCAP across \nthe full term of the commitment.  These differences create \ndistinct products rather than a single homogeneous \noffering.167 \nResource-specific network upgrade costs and commercial operation date risks differ from \nresource to resource.   \nThird, without a “marginal unit” in any meaningful sense of the term, a single \nclearing price would transfer inframarginal rents to every seller priced below the most \nexpensive accepted offer.  A uniform clearing price would, according to Ms. Croop, \n“require PJM to normalize offers through potentially complex and subjective assumptions.  \nA pay-as-bid structure avoids those challenges while providing a straightforward and \ntransparent procurement framework.”168  \nd. \nNo direct market power screens or mitigation  \nNo direct market power screens or mitigation are being proposed for the RBP.  The \nRBP design does, however, minimize the potential for exercise of market power.  In the \ncontext of a pay-as-bid structure with a maximum willingness to pay set at $555/MW-day \nUCAP, the effectiveness of direct market screens or mitigation is limited.   \nFirst, a pay-as-bid structure, unlike a single-clearing price structure, relies on \nindividual clearing prices rather than a single clearing price.  Thus, as Ms. Croop explains, \nthere is an “inability for one resource to impact the clearing price of any other resource in \na pay-as-bid structure.  This is in contrast to a uniform clearing price market where the \n \n167 Id. ¶ 25. \n168 Id."},{"page":74,"startToken":22121,"endToken":22368,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 67 \n \n \n \nmarginal resource will set the clearing price and all resources will receive that price.”169  \nMs. Croop’s affidavit provides the following concrete example: \nSeller has a fleet of three resources:  A, B, and C and offers accordingly: \nResource A @$10/MW-day  \nResource B @$10/MW-day \nResource C @$50/MW-day170 \nAssuming that Resource C sets the market-clearing price at $50/MW-day in a \nsingle-clearing price structure, Resource A and Resource B would likewise receive the \nmarket-clearing price of $50/MW-day, and thus potentially collect inframarginal rents, i.e., \neconomic gains realized where a resource’s costs fall below the market-clearing price.  In \na single-clearing price auction, this is one of the key concerns that market mitigation \nmeasures are in place to address. \nIn a pay-as-bid structure, however, Resource C’s offer price would not affect the \nprices of Resource A or Resource B.  Each resource committed would receive the price \noffered.  Resource C would only receive the $50/MW-day, and this offer would not \ninfluence the revenues for Resource A and B. \nSecond, as discussed, above, PJM is proposing to pair the pay-as-bid structure with \na maximum willingness to pay not to exceed $555/MW-day UCAP.  The existence of a \nreasonable maximum willingness to pay further discipline costs, where a resource raises \nits offer risks, that resource not clearing due to more economical offers and/or the costs \nexceeding the set maximum willingness to pay.   \n \n169 Croop Aff. ¶ 34. \n170 Id."},{"page":75,"startToken":22368,"endToken":22646,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 68 \n \n \n \nThird, in a pay-as-bid procurement in which suppliers voluntarily participate, as \nMs. Croop explains, “the traditional incentive and ability to exercise market power are \nsubstantially reduced” where “each selected resource is compensated based on its \nindividual offer rather than a market-clearing price established by the marginal \nresource.”171  Indeed, the risk of economic withholding is limited here, because “the \nprocurement is voluntary, meaning suppliers can simply choose to participate or not, and \nthen further PJM is proposing a maximum willingness-to-pay cap, which provides a direct \nlimit on procurement costs even in the absence of offer mitigation.”172  PJM’s maximum \nprocurement target under the RBP is limited to the 2028/2029 BRA shortfall of \n6,831.3 MW UCAP.  The RFI, administered by CRA, identified over 100 GW of \nprospective supply interested in participating in some form through this process.173  This \nlevel of interest indicates there is available supply that will compete to secure an RBP \ncommitment.  PJM expanded the pool of eligible supply by permitting participation from \nresources capable of achieving commercial operation beyond the timeframe required for \nthe 2028/2029 BRA.  As a result, there is sufficient prospective supply to satisfy the \nidentified 2028/2029 reliability need.  This expanded supply eligibility mitigates scarcity \nconditions that would otherwise exist for the 2028/2029 Delivery Year and indicating the \nability to create meaningful competition among suppliers seeking RBP contracts.  In \nscarcity conditions, suppliers may have incentives to submit offers at or near the applicable \nmaximum willingness to pay.  However, due to the abundance of eligible supply competing \n \n171Id. ¶ 32. \n172 Id. ¶ 34. \n173 Charles River Associates Presentation at 5."},{"page":76,"startToken":22646,"endToken":22904,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 69 \n \n \n \nfor the limited RBP contracts, competitive dynamics are expected to encourage suppliers \nto submit competitive offers that more closely reflect their willingness to provide service. \nUnder a pay-as-bid structure, such competition should exert downward pressure on \nprocurement costs and improve the efficiency of the RBP procurement process.174 \nFourth, the Commission, under somewhat similar circumstances, has previously \nfound the pay-as-bid approach to be just and reasonable.  The Commission also previously \nfound that, with respect to the CAISO’s CPM, CAISO’s proposal to transition from an \nadministratively set, single-clearing price to a pay-as-bid approach, was just and \nreasonable.175  The CPM, like the RBP in PJM, is a “voluntary backstop mechanism that \nauthorizes CAISO to procure capacity to address a deficiency or supplement resource \nadequacy procurement by load-serving entities, as needed, to maintain grid reliability.”176  \nIn 2015, the Commission accepted CAISO’s proposal “to implement a competitive \nsolicitation process and pay designated resources their bid price, rather than paying an \nadministratively set price, subject to a soft offer cap.”177  In doing so, the Commission held \nthat, as to the CPM, the “the pay-as-bid approach is appropriate because it is a backstop \nprocurement mechanism” that is intended “to respond to unexpected reliability needs.”178  \nFurthermore, as CAISO explained, “a pay-as-bid approach, rather than a single clearing \n \n174 Croop Aff. ¶¶ 35 (citing Charles River Associates Presentation), 36. \n175 Cal. Indep. Sys. Operator Corp., 153 FERC ¶ 61,001. \n176 Id. at P 2. \n177 Id. at P 8. \n178 Id. at P 28."},{"page":77,"startToken":22904,"endToken":23368,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 70 \n \n \n \nprice, reflects the unique nature of the CPM, which is designed as a rarely used backstop \nprocurement mechanism to address short-term transitory events.”179 \nFifth, unlike CAISO’s CPM,180 the RBP is intended to incentivize and procure new \ncapacity resources rather than existing resources with established costs.  In this respect, the \nproposed cap for the RBP is similar to the existing market mitigation rules for Planned \nGeneration Capacity Resources.  As set forth in the Tariff provisions on mitigation for \nPlanned Generation Capacity Resources,  \nSell Offers based on Planned Generation Capacity Resources . . . \nshall be presumed to be competitive and shall not be subject to \nmarket power mitigation in any Base Residual Auction or \nIncremental Auction for which such resource qualifies as a Planned \nGeneration Capacity Resource, but any such Sell Offer shall be \nrejected if it meets the criteria set forth in subsection (C) \nbelow . . . .181 \n \nIn subsection (C) of the Tariff provision, Sell Offers of Planned Generation capacity \nResources may be rejected if it exceeds 140% of an average, relevant price.182  In other \n \n179 Id. at P 15; see also Cal. Indep. Sys. Operator Corp., Tariff Amendment and Offer of Settlement Regarding \nCapacity Procurement Mechanism Revisions and Request for Waiver of Notice Requirement of California \nIndependent System Operator Corporation, Docket No. ER15-1783-000, Transmittal at 15 (May 26, 2015) \n(stating “compensation on a pay-as-bid approach, rather than a single clearing price, reflects the unique nature \nof the CPM and the CPM competitive solicitation process.  CPM serves as a rarely used backstop \nprocurement mechanism to address short-term transitory events.  The CAISO typically relies on CPM to \nprocure an individual resource to respond to unexpected, unplanned-for system conditions or meet unique \nreliability needs that might occur at a given point in time.  CPM is not a capacity clearing market like those \nin place in the eastern ISOs and RTOs, and it is not a process for clearing load and supply in the marketplace.  \nBackstop capacity generally is non-homogenous (limited interchangeability) because the CAISO typically \ndesignates CPM capacity based on specific characteristics such as location or resource capabilities” (footnote \nomitted)). \n180 See Cal. Indep. Sys. Operator Corp., CAISO Tariff Amendment and Offer of Settlement Regarding \nCapacity Procurement Mechanism Revisions and Request for Waiver of Notice Requirement, Docket No. \nER15-1783-000, Transmittal at 15 (May 26, 2015) (“[T]he CPM backstop is not intended to incentivize new \ngeneration.”). \n181 Tariff, Attachment DD, section 6.5(a)(ii)(A). \n182 Tariff, Attachment DD, section 6.5(a)(ii)(C) (Sell Offers of Planned Generation Capacity Resources may \nbe rejected if it exceeds 140% of an average price established around the VRR Curve if “the average of \nlocation-adjusted Sell Offers for Planned Generation Capacity Resources from the same asset class,” “if there"},{"page":78,"startToken":23368,"endToken":23693,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 71 \n \n \n \nwords, the existing offer cap for Planned Generation Capacity Resources is based on an \naverage of offers from all Planned Generation Capacity Resources.  Similarly, for new \ncapacity resources in the RBP, the proposed cap, based on a MW-weighted average of the \nlevelized procurement cost of all selected RBP Sell Offers not exceeding $555/MW-day \nUCAP, provides a zone of reasonable prices, much like the volume-weighted average \napplied to Planned Generation Capacity Resources as a mitigation measure.183 \nNotwithstanding the above, the implementation of market mitigation measures in a \npay-as-bid construct can be difficult to verify and ineffective.  As Ms. Croop explains, “[i]n \na pay-as-bid approach, unlike a uniform clearing price construct where sellers are expected \nto offer a marginal cost, sellers are more likely to offer the expected clearing price.  Given \noffers will likely have less variation and information underlying offers it can be difficult \nand ineffective to determine offers exhorting market power.”184 \ne. \nStage 1:  gating criteria—ensuring the viability of the \nresource to be developed (proposed Tariff, Attachment DD, \nsection 18.5(f)(i)) \nTo ensure that resources selected through the RBP are those most likely to go into \nservice and provide needed capacity and to deter offers of speculative resources, PJM is \nproposing “gating” criteria under which the seller will provide certain evidence designed \nto demonstrate that the proposed resource will be successfully completed and able to \nprovide capacity.  As detailed below, the required information should demonstrate that the \n \nis no Asset-Class New Plant Offers for such Delivery Year, the average Asset-Class New Plant Offers for all \nprior Delivery Years” or “if there are no Asset-Class New Plant Offers for any prior Delivery Year, the net \n[Cost of New Entry] applicable for such Delivery Year in the [locational deliverability area] for which such \nSell Offer was submitted.”) \n183 See Tariff, Attachment DD, section 6.5(a)(ii). \n184 Croop Aff. ¶ 33."},{"page":79,"startToken":23693,"endToken":24021,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 72 \n \n \n \nresource is likely to be fully developed and the seller has taken all necessary steps (at this \nstage) to succeed. \nRBP Sell Offers must include the applicable information in order to be considered \nvalid and advance to the price evaluation stage.185  PJM is proposing different evidence \ndemonstrating likelihood of successful development for generation/storage resource \ndevelopers than from demand resource developers, with each set of requirements tailored \nto the specific characteristics of the resource types.  However, given the importance of such \ninformation, before failing to advance an offer to the price evaluation stage, PJM will \nprovide sellers the opportunity to cure any PJM-identified deficiencies.  Sellers will have \nfive calendar days, or up to the close of the bid submission window, to cure.186   \nFor RBP Sell Offers of generation and storage resources, the seller must provide \nvarious types of evidence demonstrating that the project is at a substantially advanced stage \nof development and therefore showing that it is not speculative and is likely to provide \ncapacity corresponding to its commitment.  Specifically, the seller must provide the \nfollowing evidence:   \n• Critical path construction schedule (with seller attestation) supporting the \nfeasibility of commercial operation date of June 1, 2032, or earlier;187  \n• Applicable interconnection study information and development timeline \nappropriate to its interconnection queue study process;188  \n \n185 See proposed Tariff, Attachment DD, section 18.5(f)(i). \n186 See id. \n187 See proposed Tariff, Attachment DD, section 18.5(f)(i)(1) (“A critical path construction schedule and \nexpected commercial operation date, with attestation, for the Office of the Interconnection to validate that \nRBP Sell Offers are for RBP UCAP MW with a feasible commercial operation date of June 1, 2032 or \nearlier.”). \n188 See proposed Tariff, Attachment DD, section 18.5(f)(i)(1)(A) (“With respect to a project in Transition \nCycle #2 under Tariff, Part VII and earlier, such project must provide study information and timeline from"},{"page":80,"startToken":24021,"endToken":24481,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 73 \n \n \n \n• Evidence of 100% site control;189 \n• Financing plan, showing that the resource has sufficient financial backing \nto be successfully completed;190 \n• Permitting plan, showing that the developer is on track to obtain all \nnecessary and applicable permits to complete the project;191 and \n• Signed memorandum or other documentary evidence that the developer has \nor will procure the major equipment necessary to develop the resource.192 \nIn addition, the seller must demonstrate that it is able to actually develop the underlying \nresource by providing “[e]vidence of experience having constructed a previous project of \nsimilar size and technology or have contracted with an engineering, procurement, and \nconstruction partner with such experience.”193  A seller offering RBP UCAP MW based on \na natural gas-fired resource must provide evidence that there will be a pipeline delivering \n \nits most current PJM study.”); see proposed Tariff, Attachment DD, section 18.5(f)(i)(1)(B) (“With respect \nto a project in Cycle 1 under Tariff Part VIII, the Expedited Interconnection Track under Tariff, Part X, or \nnot under study, the project must provide study information and timeline from an independent consultant \nreport.”). \n189 See proposed Tariff, Attachment DD, section 18.5(f)(i)(2) (“Evidence of 100% Site Control for each of \nthe Generating Facility (including the location of the main step-up transformer), the Interconnection \nFacilities, and the Interconnection Switchyard (as defined in the PJM Manuals) for a term of at least three \nyears from the date of submission of the Application.  In addition, a certification, executed by an officer or \nauthorized representative of the Generation Project Developer, verifying that the Site Control requirements \nhave been met. Further, at Transmission Provider’s request, Generation Project Developer shall provide \ncopies of landowner attestations or county recordings.  The Site Control requirements include an acreage \nrequirement for the Project, as set forth in the PJM Manuals.  Evidence of site control consistent with Tariff, \nPart VIII, Subpart A, section 402.”). \n190 See proposed Tariff, Attachment DD, section 18.5(f)(i)(3) (“Financing plan, i.e., identified financing \nsources and details (e.g., project financing, balance sheets, tax equity, sponsor equity), current status of any \nfinancing commitments or term sheets, and a general description of the capital structure and expected timeline \nto financial close.”). \n191 See proposed Tariff, Attachment DD, section 18.5(f)(i)(4) (“Permitting plan, e.g., a list of all applicable \npermits, current status, and timeline to obtain each.”). \n192 See proposed Tariff, Attachment DD, section 18.5(f)(i)(5) (“Signed memorandum for the acquisition of \nmajor equipment, invoices or agreements to acquire major equipment, or other documentary evidence that \nmajor equipment has been procured.”). \n193 Proposed Tariff, Attachment DD, section 18.5(f)(i)(6)."},{"page":81,"startToken":24481,"endToken":24795,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 74 \n \n \n \nthe natural gas to the resource.194  And, finally, to the extent the resource is located outside \nthe PJM Region, the seller must demonstrate that the resource has sufficiently progressed \nthrough its host region’s interconnection study process to have obtained “a completed \nfacilities study or [the] equivalent” and, consistent with PJM’s pseudo-tie requirements for \nexternal Capacity Resources in Tariff, Attachment DD, section 5.5A(b), a “long-term firm \npoint-to-point transmission service, or a confirmed transmission service request with a \ncompleted system impact study, sufficient to deliver capacity to the border of the PJM \nRegion.”195 \nFor RBP Sell Offers of Annual Demand Resources and DER Capacity Aggregation \nResources, the seller must provide certain evidence demonstrating that the resource will be \ncapable of providing the offered load reduction over the term of the agreement.  To this \nend, PJM is proposing that such RBP Sell Offers must be accompanied by the following \nevidence supporting the offered load reduction:  \n• The locations within PJM of the load reduction;196 and \n• Executed customer agreements or binding commitments with identified \nlocations and customer names sufficient to cover the offered MW \nquantity.197  \n \n194 See proposed Tariff, Attachment DD, section 18.5(f)(i)(7) (“For natural gas-fueled generation resources, \nevidence of delivery infrastructure arrangements in the form of a notice of intent or attestation of pipeline \ncapacity expansion to support the new project.”). \n195 Proposed Tariff, Attachment DD, section 18.5(f)(i)(8). \n196 See proposed Tariff, Attachment DD, section 18.5(f)(i)(9) (“Locations within the PJM Region by \nZone/Sub-zonal [locational deliverability area] and aggregate capacity for RBP Sell Offers.”). \n197 See proposed Tariff, Attachment DD, section 18.5(f)(i)(10) (“Executed customer agreements or binding \ncommitments covering the proposed RBP UCAP MW commitment, with identified locations, customer \nnames, and expected curtailment/injection capability per site.”)."},{"page":82,"startToken":24795,"endToken":25122,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 75 \n \n \n \nThe seller must also show that it will be able to effectuate the offered load reduction \nthrough evidence of an “[e]quipment procurement plan or evidence of deployed enabling \ninfrastructure such as metering, telemetry, load control, [Supervisory Control and Data \nAcquisition]/dispatch systems, or DER major equipment as applicable.”198 Finally, the \nseller must demonstrate that it has coordinated with the Electric Distributor to ensure the \nresource will meet applicable requirements.199 \nf. \nStage 2:  selection assessment \nAfter PJM has evaluated an RBP Sell Offer’s “gating” criteria evidence \ndemonstrating that the underlying resource has a high likelihood of successfully delivering \nthe offered capacity over the 15-year timeframe, PJM will then evaluate the RBP Sell \nOffers “based on the first Delivery Year offered in the RBP Sell Offer, levelized cost, and \nRBP UCAP MW quantity.200  The selection process will first order all Sell Offers based \non the resource’s identified offered Delivery Year, and then by price, by ordering the RBP \nSell Offers “in least-cost order based on the levelized cost ($/MW-day) of UCAP MW over \nthe fixed 15-year term.”201  From this stack of offers, PJM will select RBP Sell Offers “until \nthe Final RBP Target is satisfied.”202   \n \n198 See proposed Tariff, Attachment DD, section 18.5(f)(i)(11) (“Equipment procurement plan or evidence of \ndeployed enabling infrastructure such as metering, telemetry, load control, [Supervisory Control and Data \nAcquisition]/dispatch systems, or DER major equipment as applicable.”). \n199 See proposed Tariff, Attachment DD, section 18.5(f)(i)(12) (For DER Capacity Aggregation Resources, \n“[a]pplicable Electric Distributor interconnection/distribution impact study requirements and a plan to initiate \non a timeline consistent with the proposed delivery date.”); see proposed Tariff, Attachment DD, section \n18.5(f)(i)(13) (For Demand Resources, “Electric Distributor coordination requirements for metering, \ntelemetry, and baseline measurement infrastructure.”). \n200 Proposed Tariff, Attachment DD, section 18.5(f)(ii). \n201 Id. \n202 Id."},{"page":83,"startToken":25122,"endToken":25389,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 76 \n \n \n \nThe affidavit of Ms. Croop includes three examples, appended as Exhibit 1 to her \naffidavit, which provide step-by-step explanations of how RBP Sell Offers are assessed \nand selected by Delivery Year and price of each RBP Resource, as identified in terms of \nlevelized procurement cost and levelized MW value across the fixed, 15-year term.203  The \nfirst example describes how one resource’s offer price and MW quantity are levelized \nacross the term.204  The second and third examples demonstrate how a set of offers are \nevaluated based on ranked Delivery Year and levelized cost, and provide descriptions of \neach step in the selection process.205 \nAs explained above, see supra Part I.A, all RBP commitments terminate with the \n2042/2043 Delivery Year, regardless of which Delivery Year the RBP Resource first \noffered.  Therefore, the levelized cost determination is needed for a comparative evaluation \nfor each resource for the period between commercial operation and the 2042/2043 Delivery \nYear.   \nThus, it is necessary to calculate a levelized procurement cost for each RBP Sell \nOffer.  As Ms. Croop explains, “levelized cost of capacity is an industry standard \nevaluation metric used in competitive resource procurements across the country.  The \nlevelized cost calculation for evaluation addresses the fundamental issue of a simple MW-\nweighted average cost by accounting for the time value of money, which is critical when \nevaluating contracts spanning 15-year terms, as PJM is proposing in the RBP.  Levelizing \n \n203 Croop Aff., Exhibit (“Exh.”) 1 (Examples Demonstrating RBP Resource Procurement Process).  \n204 Id. at 1-2. \n205 Id. at 2-7."},{"page":84,"startToken":25389,"endToken":25699,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 77 \n \n \n \nproperly discounts future cost streams to a common basis, giving us a true economic \ncomparison across bids.”206 \nThis period will be considered in the determination of the levelized cost of each \nRBP Sell Offer shall be calculated as: “Levelized Cost ($/MW-day) = Net Present Value \n(RBP Sell Offer price * UCAP offered)/Net Present Value (UCAP offered), with a discount \nrate equal to 9.5% after-tax average weighted average cost of capital (‘ATWACC’).”207  \nThe 9.5% ATWACC is appropriate here, as Ms. Croop attests, as the proposed discount rate \nwas The Brattle Group-estimated calculated value used in the 2025 Periodic Review of \nVariable Resource Requirement Curve Shape and Key Parameters.208 \nPJM has designed the RBP clearing mechanism to recognize the 15-year timeframe \nand that there may be issues with all offered resources having a reasonably expected \ncommercial operation date by June 1, 2028.  First, the Final RBP Target is fixed and is the \ntarget value for each year of the 15-year period.  Second, in selecting resources from the \noffer stack, PJM will first try to satisfy the Final RBP Target with RBP Resources expected \nto reach commercial operation in the 2028/2029 Delivery Year.  If the set of resources \noffered with expected commercial operation dates in the 2028/2029 Delivery Year is \ninsufficient to meet the Final RBP Target, then PJM will apply the selection criteria to \nconsider all resources offered with an expected commercial operation date in the 2029/2030 \nDelivery Year.  PJM will continue to apply the selection criteria iteratively, up to and \n \n206 Croop Aff. ¶ 30. \n207 Id. ¶ 31. \n208 Id. (citing 2025 Periodic Review of Variable Resource Requirement Curve Shape and Key Parameters, \nPJM \nInterconnection, \nL.L.C. \n(Nov. \n7, \n2025), \nhttps://www.pjm.com/pjmfiles/directory/etariff/FercDockets/9248/20251107-er25-455-000.pdf \n[https://perma.cc/87GP-AYL5])."},{"page":85,"startToken":25699,"endToken":26042,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 78 \n \n \n \nincluding the 2032/2033 Delivery Year, until the set of offers selected meets the Final RBP \nTarget.   \nWithin this selection process PJM will continue to maintain the maximum \nwillingness to pay and will not procure a resource that results in the MW-weighted average \nof the levelized procurement cost exceeding $555/MW-day.  As a result of this constraint, \nin the selection process, PJM may skip over a resource with an earlier Delivery Year if \nprocuring that resource would violate the maximum willingness to pay for the procurement.   \nAdditionally, the selection is prioritizing earlier Delivery Years to address the \nshortfall target as soon as possible.  As a result, if a resource is skipped in the selection \nprocess because it violates the maximum willingness to pay cap, but a lower-cost resource \nis procured that then creates “room in the budget” to select that higher-offer-earlier \nDelivery Year resource, the selection process will go back to procure that resource before \ncontinuing down the rank-order of additional offers in later Delivery Years.   \nPJM’s proposed procurement process also provides for flexibility to select a more \neconomically efficient solution.  In procuring the least-cost set of resources, PJM may clear \nan RBP Sell Offer with an offered quantity that exceeds the remaining Final RBP Target if \nthe solution results in a lower overall cost than the alternative.209  For example, in the course \nof clearing, assume the Final RBP Target were 6,000 MW.  In this example, an RBP \nResource would put the final RBP procurement at 6,001 MW (i.e., above the Final RBP \nTarget) but remain within the maximum willingness to pay of $555/MW-day.  However, \n \n209 Proposed Tariff, Attachment DD, section 18.5(f)(ii) (“In selecting the least-cost solution that satisfies the \nFinal RBP Target and the cost of procurement constraint, [PJM] may commit an RBP Sell Offer with an \noffered quantity that exceeds the remaining Final RBP Target to the extent such solution provides greater \neconomic efficiency than an alternative solution that satisfies the requirements and constraints.”)."},{"page":86,"startToken":26042,"endToken":26338,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 79 \n \n \n \nhigher priced offers for MW quantities within the 6,000 MW target exceed the $555/MW-\nday maximum willingness to pay.  In this case, PJM may exercise the option to clear 6,001 \nMW in the RBP, i.e., 1 MW above the procurement target, to maintain a total weighted \naverage price at or below $555/MW-day.  Even though, in this example, PJM procured \nabove the target, the overall cost was lower.  In this way, PJM chooses among alternative \nsolutions and selects the more economically efficient outcome. \nBecause the RBP is procuring new capacity and not simply fungible UCAP MW, \nPJM is proposing that “RBP Resources shall not be partially cleared.”210  Thus, there exists \nthe possibility that PJM may clear a set of resources with a cumulative RBP UCAP MW \ntotal that does not exactly match the Final RBP Target.  PJM proposes that “[i]n the event \nthat the Reliability Backstop Procurement cannot meet the Final RBP Target, the \nReliability Backstop Procurement shall clear short of the Final RBP Target.”211   \nFollowing the conclusion of the RBP and to the extent consistent with the existing \nmember confidentiality rules, PJM will post a report that, inter alia, provides a transparent \noverview of the aggregate MWs that were procured through the RBP and a weighted \naverage of the RBP Charges as soon as practicable after the RBP is completed. \n9. \nContract for difference settlement structure (proposed Tariff, \nAttachment DD, section 18.5(g)) \n \nEach committed RBP Resource will individually settle as a CfD.  The CfD \nsettlement structure turns on a committed RBP Resource’s “strike price”—i.e., the RBP \nSell Offer price at which the RBP Resource’s RBP UCAP MW is committed, expressed as \n \n210 Id. \n211 Id."},{"page":87,"startToken":26338,"endToken":26597,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 80 \n \n \n \n$/MW-day UCAP.  Because the RBP is pay-as-bid, each committed RBP Resource has an \nindividualized “strike price.”     \nA committed RBP Resource must offer all committed RBP UCAP MW as a price \ntaker in the RPM, unless the resource qualifies for an exception under the rules governing \na committed RBP Resource participating in the RPM.  The “market price” is the RBP \nResource’s unit-specific weighted average resource clearing price (“WARCP”) of all RPM \nAuctions in which the RBP Resource participated for the relevant Delivery Year, expressed \nas $/MW-day UCAP.212   \nIf the strike price of the total MW eligible to settle as a CfD is higher than the \nmarket price, the buyer (load) must pay the difference between the strike price and market \nprice.  Alternatively, if the strike price of the total MW eligible to settle as a CfD is lower \nthan the market price the seller (RBP Resource) must pay back the difference between the \nstrike price and market price.   \nThe proposed CfD settlement structure is just and reasonable.  First, the CfD \nstructure protects load from paying RBP Resources a windfall, while also protecting RBP \nResources from settling below market prices.  Thus, the CfD structure provides stability \nduring the lengthy term of an RBP Resource commitment and limits the potential risk of \nlong-term exposure.   \nSecond, the CfD structure operates on the principle that payments for providing \nRBP UCAP MW should net out the market revenues from the RPM.  In other words, CfD \n \n212 Proposed Tariff, Attachment DD, section 18.5(g)(ii)."},{"page":88,"startToken":26597,"endToken":26849,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 81 \n \n \n \nlimits payment for RBP UCAP MW to the “missing money” and avoids double payment \nfor the same capacity—once through the RPM and again through the RBP.  \nThird, recognizing that the RBP locks in a fixed price for a fixed, 15-year term, the \nCfD structure is intentionally “self-correcting.”  Loads will fund the actual revenue \nshortfall, measured ex post, as opposed to an administrative guess about what that revenue \nshortfall might be.   \nFourth, the proposed CfD is not purely financial.  The total MW eligible to settle \nas a CfD will be:  (a) the lesser of the RBP Resource’s daily committed RBP UCAP MW, \ndaily owned UCAP MW; and (b) daily cleared RPM UCAP MW.213  A physical availability \nrequirement supports reliability, resource adequacy, market participation, and stable \ncapacity revenue streams for RBP Resources.214  Under the proposed CfD settlement \nstructure, RBP Credits and Charges will only be assessed to the extent that RBP UCAP \nMW are committed in the RPM and physically available for dispatch in the relevant \nDelivery Year.  To the extent that an RBP Resource fails to deliver the full RBP UCAP \nMW committed in the RBP, the RBP Settlement Credits, settled as a CfD, will only credit \nthe lower of the daily committed RBP UCAP MW, daily owned UCAP MW, and daily \ncleared RPM UCAP MW.215   \n \n213 Proposed Tariff, Attachment DD, section 18.5(g)(i). \n214 Croop Aff. ¶ 39. \n215 Proposed Tariff, Attachment DD, section 18.5(g)(i)."},{"page":89,"startToken":26849,"endToken":27185,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 82 \n \n \n \na. \nRBP Settlement Credits and RBP Charges \nRBP Resources that clear in the RBP are assessed RBP Settlement Credits, a daily \nvalue measured in $/day UCAP,216 which may be positive (indicating a payment to supply) \nor negative (indicating a reduction in payment to supply).   \nLoad allocated responsibility for RBP UCAP MW will be allocated RBP Charges, \na daily value measured in $/day UCAP, which may likewise be positive (a reduction in \ncost to load) or negative (a cost to load).217   \nFor example, in a settlement where an RBP Resource is assigned a positive \n$10,000/Day RBP Settlement Credit, load is assigned a corresponding negative $10,000 \nRBP Charge.   \nLikewise, in accordance with the rules in place today, all RBP UCAP MW that \noffer and clear in the RPM will be assessed RPM Auction Credits, while load will be \nassessed RPM Charges. \nb. \nExamples of RBP Resource Settlements  \nTables 2-4, below, are illustrative examples of how a hypothetical RBP Resource \nthat clears in both the RPM and the RBP is credited when the RBP price is higher, lower, \nor equal to the RPM price.  In Table 2, the same quantity of MW clear in the RPM and \nRBP.  In Table 3, more MW clear in the RPM than in the RBP, and in Table 4, fewer MW \nclear in the RPM than in the RBP.  The number of MW that clear in the RPM and RBP are \n \n216 Proposed Tariff, Definitions – RBP Settlement Credits (‘“RBP Settlement Credits’ shall mean, for each \nday in the Delivery Year in the term of the Reliability Backstop Procurement commitment period, the $/day \nvalue that a resource committed in the Reliability Backstop Procurement receives as a contract for differences \nsettlement in accordance with Tariff, Attachment DD, section 18.5(g).”). \n217 Proposed Tariff, Definitions – RBP Charges (‘“RBP Charges’ shall mean the $/day value of the total RBP \nSettlement Credits, positive or negative, of all RBP Resources across the PJM Region.”)."},{"page":90,"startToken":27185,"endToken":27516,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 83 \n \n \n \nrelevant because, as previously noted, the total MW eligible to settle as a CfD is limited to \nthe lesser of the RBP Resource’s committed RBP UCAP MW for a Delivery Year, daily \nowned UCAP MW, and daily committed RPM UCAP MW.  Thus, for example, even if \nthe resource committed more MW in the RPM than in the RBP, the CfD would still only \nbe for the lower quantity of MW that committed in the RBP. \nTable 2 shows the outcomes of a hypothetical RBP Resource where the quantities \nof UCAP MW cleared in the RPM and RBP are equal (50 MW (UCAP)).  Table 3 shows \nthe outcomes where a hypothetical RBP Resource clears more capacity in the RBP (50 \nMW (UCAP)) than in the RPM (20 MW (UCAP)).  Table 4 shows outcomes where a \nhypothetical RBP Resource clears less capacity (20 MW (UCAP)) in the RBP than in the \nRPM (50 MW (UCAP)).  In each table, the “Total Credits” column is the total amount paid \nto the RBP Resource.  Tables 2-4 represent Resource Settlement.  Load Settlement is an \ninverse of the RBP Credits, i.e., where Resource Credits are paid to a resource, RBP \nCharges are assessed to load to cover the RBP Credits.  Together, Tables 2-4 provide \nconcrete examples of how the CfD settlement structure supports long-term stability and \nprice-certainty, while also providing a two-sided hedge that blunts potential gains from \nspeculative offers in a pay-as-bid framework.   \nAs demonstrated in the first row of Table 2, where an RBP Resource clears 50 MW \n(UCAP) in both the RBP and RPM, and the RBP price is higher than the RPM price, at \nsettlement, only the incremental value of the RBP Credits will be counted toward the total \ncredits.  In other words, the 50 MW (UCAP) cleared in the RPM and RBP will not be paid \ntwice for the same capacity.  The 50 MW (UCAP) will be paid the value of the RPM"},{"page":91,"startToken":27516,"endToken":27856,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 84 \n \n \n \nAuction Credits plus the RBP Settlement Credits, which is based on the difference between \nthe RBP and RPM prices.   \nHowever, CfD also serves a limiting role.  For example, in the second row of \nTable 2, the RBP price falls below the RPM price.  The RBP Settlement Credits now \nrepresent an incremental decrease in value of the capacity.  Thus, the RBP Resource is \nultimately paid its expected RBP Credits. \nTable 2. Resource Settlement ($/day)  \nWhere UCAP MW Cleared in RBP and RPM Are Equal \n(RPM Cleared MW = 50 MW (UCAP), RBP Cleared MW = 50 MW (UCAP)) \n \n \n \n \n \n \nRBP and RPM Prices \nExpected \nRBP \nCredits \nRPM Auction \nCredits  \n \nRBP \nSettlement \nCredits  \nTotal \nCredits \nRBP \nCleared \nMW * RBP \nPrice \nRPM Cleared \nMW * RPM \nPrice+ \nRBP Cleared \nMW * (RBP \nPrice – RPM \nPrice+) \nRPM \nAuction \nCredits + \nRBP \nSettlement \nCredits \nRBP Price >  RPM Price+  \nRBP Price =$250   \nRPM Price+ = $200 \n50 MW * \n$250 = \n$12,500 \n50 MW * $200 \n= $10,000 \n50 MW * \n($250-$200) = \n$2,500 \n$12,500 \nRBP Price < RPM Price+  \nRBP Price =$200   \nRPM Price+ = $250 \n50 MW * \n$200 = \n$10,000 \n50 MW * $250 \n= $12,500 \n50 MW * \n($200-$250) =-\n$2,500 \n$10,000 \nRBP Price = RPM Price+ \nRBP Price =$250   \nRPM Price+ = $250 \n \n50 MW * \n$250 = \n$12,500 \n50 MW * $250 \n= $12,500 \n50 MW * \n($250-$250) = \n$0 \n$12,500 \n+Or, in the event resource clears in multiple RPM Auctions, RPM WARCP) \nIn Table 3, the resource clears fewer MW (UCAP) in the RBP compared to the \nRPM.  As the first row of Table 3 illustrates, where the RBP price is higher than the RPM \nprice, the resource receives the value of the RPM Auction Credits for all 50 MW in which \nthe resource clears in the RPM and the CfD for only the 20 MW that clears the RBP.  In \nrow two, where the clearing price of the RBP was lower than the RPM price, the CfD \nreduces the total amount credited to the RBP Resource based on the 20 MW that clears the"},{"page":92,"startToken":27856,"endToken":28223,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 85 \n \n \n \nRBP.  Finally, in row three of Table 3, where the clearing price for the RPM and RBP are \nthe same and the MW UCAP that clears the RBP is lower than the RPM, the CfD does not \nchange the total amount credited to the RBP Resource.         \nTable 3. Resource Settlement ($/day)  \nWhere RBP Cleared MW < RPM Cleared MW  \nRPM Cleared MW = 50 MW (UCAP), RBP Cleared MW = 20 MW (UCAP)  \n \n \n \n \n \n \nRBP and RPM Prices \nExpected \nRBP \nCredits \nRPM \nAuction \nCredits  \n \nRBP \nSettlement \nCredits  \nTotal \nCredits \nRBP \nCleared \nMW * RBP \nPrice \nRPM Cleared \nMW * RPM \nPrice+ \nLesser of \nCleared MW * \n(RBP Price – \nRPM Price+) \nRPM \nAuction \nCredits + \nRBP \nSettlement \nCredits \nRBP Price >  RPM Price+  \nRBP Price =$250   \nRPM Price+ = $200 \n20 MW * \n$250 = \n$5,000 \n50 MW * $200 \n= $10,000 \n20 MW * \n($250-$200) = \n$1,000 \n$11,000 \nRBP Price < RPM Price+  \nRBP Price =$200   \nRPM Price+ = $250 \n20 MW * \n$200 = \n$4,000 \n50 MW * $250 \n= $12,500 \n20 MW * \n($200-250) = \n-$1,000 \n$11,500 \nRBP Price = RPM Price+ \nRBP Price =$250   \nRPM Price+ = $250 \n \n20 MW * \n$250 = \n$5,000 \n50 MW * $250 \n= $12,500 \n20 MW * \n($250-$250) = \n$0 \n$12,500 \n+Or, in the event resource clears in multiple RPM Auctions, RPM WARCP) \n \nTable 4 demonstrates how resources settle when a resource clears more MW \n(UCAP) in the RBP compared to the RPM.  Again, the CfD at which the RBP settles will \nbe the lower of the resource’s cleared MW in the RPM and the RBP.  Thus, even though \nthe expected RBP Credits are based on 50 MW, the CfD at which the RBP settles is based \nonly on the 20 MW that clears both the RBP and the RPM.  In row 1 of Table 4, the RBP \nprice is higher than the RPM.  Only 20 MW clears in the RPM and, thus, the CfD settlement \nreflects only 20 MW.  While the expected RBP Credits was $12,500, the RBP Resource \nonly receives $1,000 in the CfD settlement, plus the RPM Auction Credits of $4,000.  In \nrow 2 of Table 4, the RBP price is lower than the RPM.  Thus, the CfD results in a reduction"},{"page":93,"startToken":28223,"endToken":28547,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 86 \n \n \n \nof the total amount credited to the RBP Resource.  Finally, in row 3 of Table 4, where the \nRBP and RPM prices are the same, the CfD does not add or subtract from the RPM Auction \nCredits.   \nTable 4. Resource Settlement ($/day)  \nWhere RBP Cleared MW > RPM Cleared MW  \nRPM Cleared MW = 20 MW (UCAP), RBP Cleared MW = 50 MW (UCAP) \n \n \n \n \n \n \nRBP and RPM Prices \nExpected \nRBP \nCredits \nRPM \nAuction \nCredits  \n \nRBP \nSettlement \nCredits  \nTotal \nCredits \nRBP \nCleared \nMW * RBP \nPrice \nRPM Cleared \nMW * RPM \nPrice+ \nLesser of \nCleared MW * \n(RBP Price – \nRPM Price+) \nRPM \nAuction \nCredits + \nRBP \nSettlement \nCredits \nRBP Price >  RPM Price+  \nRBP Price =$250   \nRPM Price+ = $200 \n50 * $250 = \n$12,500 \n20 MW * $200 \n= $4,000 \n20 MW * \n($250-$200) = \n$1,000 \n$5,000 \nRBP Price < RPM Price+  \nRBP Price =$200   \nRPM Price+ = $250 \n50 MW * \n$200 = \n$10,000 \n20 MW * $250 \n= $5,000  \n20 MW * \n($200-250) = \n-$1,000 \n$4,000 \nRBP Price = RPM Price+ \nRBP Price =$250   \nRPM Price+ = $250 \n \n50 MW * \n$250 = \n$12,500 \n20 MW * $250 \n= $5,000 \n20 MW * \n($250-$250) = \n$0 \n$5,000 \n+Or, in the event resource clears in multiple RPM Auctions, RPM WARCP) \nc. \nSettlement of RBP Resources with MW Shortfalls, RBP \nshortfall charges, RPM Commitment Deficiency MW, and \nRPM \nCommitment \nCharges \n(proposed \nTariff, \nAttachment DD, section 18.6(d)) \nAs noted above, see supra Part III.C.9, the total MW eligible to settle as a CfD will \nbe:  (a) the lesser of the RBP Resource’s committed RBP UCAP MW for a Delivery Year, \ndaily owned UCAP MW, and daily RPM cleared UCAP MW.  Where the RBP Resource \nexperiences a partial shortfall—meaning the quantity of MW (UCAP) that a resource clears \nis greater than the amount the resource actually owns, the CfD settlement will only count \nthe daily owned UCAP MW.  In other words, there is no payment for undelivered RBP \nUCAP MW."},{"page":94,"startToken":28547,"endToken":28855,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 87 \n \n \n \nIn addition, as described above, see supra Part III.C.7, RBP Resources that fail to \nreach commercial operation in a Delivery Year for which the resource has been committed \nin the RBP will be subject to RBP shortfall charges unless the RBP Resource qualifies for \none narrow exception.  RBP shortfall charges are equal to the product of the RBP \nResource’s committed RBP UCAP MW shortfall and 20% of the RBP price.218  The \nresulting shortfall charge will be allocated as a credit to LSEs based on each LSE’s pro-rata \nallocation of RBP Charges.  Like RBP Charges, the RBP shortfall charges are settled daily.   \nd. \nExample of RBP Resource Settlements of RBP MW \nShortfalls, RBP shortfall charges, RPM Commitment \nDeficiency MW, and RPM Commitment Charges (proposed \nTariff, Attachment DD, section 18.6(d)) \nTable 5, below, demonstrates how shortfalls of capacity procured and committed \nin the RBP and RPM can impact the total credits ultimately paid to an RBP Resource.  In \nTable 5, a hypothetical RBP Resource clears 50 MW in both the RBP and RPM but is \nultimately 5 MW short.  In other words, although the RBP Resource cleared in the RBP \nfor 50 MW, only 45 MW actually reach commercial operation.  Because a resource’s \nELCC may vary from year to year, PJM is proposing that RBP shortfall charges not be \nassessed to RBP Resources that have reached commercial operation, even if such resources \nhave only partially reached the full commitment of RBP UCAP MW.   \nNevertheless, if an RPM Resource experiences a shortfall of MW cleared in the \nRPM, the RPM Resource will be subject to the existing RPM shortfall penalties.  In \nTable 5, below, the hypothetical resource commits 45 MW in the RPM, which is equal to \n \n218 See Proposed Tariff, Attachment DD, section 18.6(d)."},{"page":95,"startToken":28855,"endToken":29190,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 88 \n \n \n \nthe resource’s daily owned MW and therefore does not have any deficiency MW in the \nRPM.   \nTable 5. Resource Settlement ($/day)  \nWhere RBP Cleared MW = RPM Cleared MW,  \nRBP Cleared MW > Daily Owned MW \n(RPM Cleared MW = 50 MW (UCAP), RBP Cleared MW = 50 MW (UCAP), Daily \nOwned MW = 45 MW (UCAP), RPM Committed MW = 45 MW (UCAP),  \nRBP Shortfall 5 MW (UCAP), RPM Commitment Deficiency MW = 0 MW (UCAP)) \n \n \n \n \n \n \nRBP and RPM Prices \nExpected \nRBP \nCredits \nRPM Auction \nCredits  \n \nRBP Settlement \nCredits  \nTotal Credits \nRBP \nCleared \nMW * RBP \nPrice \nRPM Cleared \nMW * RPM \nPrice+ \nLesser of \nCleared or \nOwned MW * \n(RBP Price – \nRPM Price+) \nRPM Auction Credits + \nRBP Settlement Credits \nRBP Price >  RPM \nPrice+  \nRBP Price =$250   \nRPM Price+ = $200 \n50 MW * \n$250 = \n$12,500 \n50 MW * $200 \n= $10,000 \n45 MW * ($250-\n$200) = $2,250 \n$12,250 \nRBP Price < RPM Price+  \nRBP Price =$200   \nRPM Price+ = $250 \n50 MW * \n$200 = \n$10,000 \n50 MW * $250 \n= $12,500 \n45 MW * ($200-\n$250) = \n-$2,250 \n$10,250 \nRBP Price = RPM Price+ \nRBP Price =$250   \nRPM Price+ = $250 \n \n50 MW * \n$250 = \n$12,500 \n50 MW * $250 \n= $12,500 \n45 MW * ($250-\n$250) = $0 \n$12,500 \n+Or, in the event resource clears in multiple RPM Auctions, RPM WARCP) \n \nIn Table 6, below, the hypothetical RBP Resource experiences a full RBP shortfall.  \nIn addition, the RPM has a lower UCAP available due to a decrease in ELCC.  The \nhypothetical RBP Resource clears 50 MW in the RBP but only clears and commits 49 MW \nin the RPM due to the ELCC decrease.     \nUltimately, the daily owned UCAP MW is 0 MW, because the resource has failed \nto reach commercial operation.  The hypothetical RBP Resource in this example has not, \nas yet, failed to reach commercial operation for three consecutive years, and therefore the \nRBP commitment has not been rescinded.  However, because the RBP Resource has not \nreached commercial operation, it is assessed an RBP shortfall charge.  In addition, because"},{"page":96,"startToken":29190,"endToken":29547,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 89 \n \n \n \nit has not reached commercial operation, the resource is also assessed an RPM \nCommitment Deficiency Charge for the 49 MW in the RPM.  Ultimately the result is a net \ncharge (i.e., negative RBP Credit) to the seller. \nTable 6. Resource Settlement ($/day)  \nWhere RBP Cleared MW > RPM Cleared and Committed MW > Daily Owned MW \n(RPM Cleared MW = 49 MW (UCAP), RPM Committed MW = 49 MW (UCAP),  \nRBP Cleared MW = 50 MW (UCAP), Daily Owned MW = 0 MW (UCAP), RBP \nShortfall Penalty MW = 50 MW (UCAP), RPM Commitment Deficiency MW = 49 MW) \n \n \n \n \n \n \nRBP and \nRPM Prices \nExpected \nRBP \nCredits \nRPM \nAuction \nCredits  \n \nRPM \nCommitment \nCharge \nRBP \nSettlement \nCredits  \nRBP \nShortfall \nCharges \nTotal Credits \nRBP \nCleared MW \n* RBP Price \nRPM \nCleared \nMW * \nRPM \nPrice+ \nRPM Commitment \nDeficiency MW * \n(120% RPM \nPrice+) \nLesser of \nCleared or \nOwned MW * \n(RBP Price – \nRPM Price+) \nRBP \nShortfall \nMW * (20%  \nRBP Price) \nRPM Auction \nCredits – RPM \nCommitment \nCharge \n+ RBP Settlement \nCredits -RBP \nShortfall Charges \nRBP Price >  \nRPM Price+  \nRBP Price \n=$250   \nRPM Price+ \n= $200 \n50 MW * \n$250 = \n$12,500 \n49 MW * \n$200 = \n$9,800 \n49 MW * (120% * \n$200) =$11,760 \n0 MW * \n($250-$200) = \n$0 \n50 MW * \n(20% * \n$250) = \n$2,500 \n-$4,460 \nRBP Price < \nRPM Price+  \nRBP Price \n=$200   \nRPM Price+ \n= $250 \n50 MW * \n$200 = \n$10,000 \n49 MW * \n$250 = \n$12,250 \n49 MW * (120% * \n$250) = $14,700 \n0 MW * \n($200-$250) = \n$0 \n50 MW * \n(20% * \n$200) = \n$2,000 \n-$4,450 \nRBP Price = \nRPM Price+ \nRBP Price \n=$250   \nRPM Price+ \n= $250 \n \n50 MW * \n$250 = \n$12,500 \n49 MW * \n$250 = \n$12,250 \n49 MW * (120% * \n$250) = $14,700 \n0 MW * \n($250-$250) = \n$0 \n50 MW * \n(20% * \n$250) = \n$2,500 \n-$4,950 \n+Or, in the event resource clears in multiple RPM Auctions, RPM WARCP) \n10. \nNon-payment of RBP Charges and RBP shortfall charges (proposed \nTariff, Attachment DD, section 18.9) \nTo the extent an LSE defaults and fails to pay an RBP Charge, PJM will allocate \nthe defaulted amount to all remaining LSEs that have been assigned responsibility for RBP \nCharges in the Electric Distributor zone/area based on each LSE’s pro-rata share of the"},{"page":97,"startToken":29547,"endToken":29828,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 90 \n \n \n \ntotal RBP Charges, as allocated based on either the Reliability Backstop Obligation or \nPJM’s back-up cost allocation methodology. \nWhere an RBP Resource that is subject to RBP shortfall charges ultimately defaults \nand fails to pay the RBP shortfall charges, LSEs will not be allocated or charged those \ncorresponding credits.  Thus, LSEs that would have otherwise paid for the RBP UCAP MW \nwill not be responsible for covering the cost of the UCAP MW that were not delivered. \nRBP Resource subject to RBP shortfall charges pursuant to proposed Tariff, \nAttachment DD, section 18.6(d) defaults on RBP shortfall charges, the corresponding \ncredits will not be allocated to the LSEs that would otherwise receive the RBP shortfall \ncredits.   \n11. \nChange in ownership of RBP Resource (proposed Tariff, \nAttachment DD, section 18.6(f)) \nCommitments of RBP UCAP MW follow the RBP Resource.  With change in \nownership of the RBP Resource, the commitment of RBP UCAP MW will be conveyed to \nthe new owner and continue through the end of the fixed 15-year term. \nD. \nTreatment of RBP Commitment in Event of Transmission Owner Exit \nDuring Term of the Commitment (Proposed Tariff, Attachment DD, \nsection 18.7) \nAs RBP commitments will remain in place through the 2042/2043 Delivery Year, \ni.e., for a fixed, 15-year term, PJM is also proposing rules that set forth the responsibilities \nof various parties in the event a Transmission Owner exits from PJM.  While it is true that \nno Transmission Owner has formally sought to exit PJM at this time, should such an event \noccur during the term of an RBP commitment in an exiting Transmission Owner’s territory,"},{"page":98,"startToken":29828,"endToken":30102,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 91 \n \n \n \nclear and enforceable rules will ensure that RBP commitments are honored through the \nterm of the agreement.   \nEstablishing those rules now, with the RBP proposal, will provide the requisite \nnotice of how RBP commitments will be honored and recognizes that a primary incentive \nfor developers to participate in the RBP is the cost certainty afforded developers in a \n15-year commitment, which will aid the financing RBP Resources that can be developed \nand placed in service quickly.  Without this 15-year guarantee, the financing terms and \nconditions associated with developing an RBP Resource would likely be significantly \ndifferent, alter the total cost to build the resource, and potentially result in fewer resources \nbeing offered into the RBP at higher prices.  Therefore, however remote the possibility of \na Transmission Owner exiting PJM during or prior to the 2042/2043 Delivery Year, it is \nimperative that rules are in place to ensure that, even in the event of a Transmission Owner \nexit, committed RBP Resources will be made whole for the entire term of the commitment. \nIf a Transmission Owner leaves PJM and the load taken with the Transmission \nOwner is commensurate with the RBP Resources that are located in that Transmission \nOwner’s territory, the Transmission Owner is expected to honor the remaining term of the \nRBP commitment since it would need such resources to serve the loads in its service \nterritory.  However, in the event a Transmission Owner exits PJM and committed RBP \nResources are physically in such Transmission Owner’s service territory, it would be \nunreasonable for PJM’s Members to continue paying for such excess RBP Resources if"},{"page":99,"startToken":30102,"endToken":30377,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 92 \n \n \n \nthey no longer can provide capacity to PJM (e.g., if the resource cannot be pseudo-tied into \nPJM as further explained below).219  \nSimilarly, in the event a Transmission Owner exits PJM with the net load that is \nremoved with the Transmission Owner’s departure, it would be unreasonable for PJM’s \nremaining load to pay for the excess committed RBP Resources that remain in the PJM \nRegion.  To address these potential scenarios, proposed Tariff, Attachment DD, sections \n18.7(a) and 18.7(b) put committed RBP Resources back in the same position they would \nhave been in had the associated Transmission Owner not exited PJM. \n1. \nCommitted RBP Resources in exiting Transmission Owner territory \n(proposed Tariff, Attachment DD, section 18.7(a)) \nWhere a Transmission Owner exits PJM and committed RBP Resources are \nphysically in that Transmission Owner’s service territory, the Transmission Owner may, \nprior to exiting PJM, enter into a separate agreement with the impacted RBP Resources \nthat would maintain appropriate rates, terms and conditions of the RBP commitments.220  \nThe Transmission Owner effectively steps into PJM’s role in the RBP context.  In this way, \nthe Transmission Owner that leaves PJM will be responsible for honoring the commitment \nto pay the impacted RBP Resources that may be located in such Transmission Owner’s \nservice territory for the remaining term of the commitment.  At the same time, the existence \nof such an agreement would relieve PJM of any applicable RBP Obligations (“RBO”) made \nto RBP Resources that are subject to such agreements. \n \n219 See Transmittal, Part III.D. \n220 Proposed Tariff, Attachment DD, section 18.7(a)."},{"page":100,"startToken":30377,"endToken":30673,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 93 \n \n \n \nIn the event the exiting Transmission Owner does not enter into such an agreement, \nPJM proposes to require the exiting Transmission Owner to cover all costs necessary for \nthose RBP Resources that exceed the Transmission Owner’s withdrawn load to be pseudo-\ntied back into PJM, thus allowing such resources to continue providing capacity to serve \nPJM’s load.221  Since the electric distance test may not necessarily be satisfied through \nnetwork upgrades or other financial arrangements depending on where an RBP Resource \nmay be located within an exiting Transmission Owner’s service territory, PJM proposes to \nexempt impacted RBP Resources from the electrical distance test to allow for such \nresources to be pseudo-tied back into PJM.222  Exempting the electric distance test for the \nlimited pool of RBP Resources that are impacted should a Transmission Owner leave PJM \nwill allow such resources to qualify as external capacity resources that can continue to \nserve PJM loads even if such resources are physically located beyond the usual electric \ndistance requirement.  All other pseudo-tie requirements to qualify as capacity set forth in \nTariff, Attachment DD, section 5.5A would continue to apply to any RBP Resource that \nPJM elects to retain and the Transmission Owner would be expected to pay for any \nnecessary costs to pseudo-tie such impacted RBP Resources prior to exiting PJM.  \nMechanically, PJM would collect such costs from the exiting Transmission Owner and \ntransfer the collected revenue to the impacted RBP Resources.  \nIn the event PJM does not elect to retain such RBP Resource or the resource is \nunable to be pseudo-tied back into PJM, the exiting Transmission Owner would be \nobligated to pay for the remaining term of the RBP Resource’s commitment on an \n \n221 Id. \n222 Id."},{"page":101,"startToken":30673,"endToken":30934,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 94 \n \n \n \naccelerated basis prior to exiting PJM.223  The exact amount that an exiting Transmission \nOwner would owe would be determined through a separate filing with the Commission.  \nThereafter, PJM would pay the collected revenues from the Transmission Owner to the \nimpacted RBP Resource(s) as payments are due under the normal course of the \ncommitment.   \n2. \nLoad allocated RBP Charges in exiting Transmission Owner \nterritory (proposed Tariff, Attachment DD, section 18.7(b)) \nIn the event that a Transmission Owner withdraws from PJM and net load leaves \nwith the Transmission Owner, resulting in stranded committed RBP Resources remaining \nwithin the PJM Region, PJM similarly proposes to allow such exiting Transmission Owner, \nprior to exiting PJM, to enter into agreements that would maintain appropriate rates, terms \nand conditions and preserve the RBP commitments with the owners of the RBP \nResource(s).  PJM and PJMSettlement would then be relieved of applicable RBP \nObligations to the RBP Resources.224  \nAlternatively, absent such an agreement, such Transmission Owner would be \nrequired to pay for all forward obligations associated with the net load that was allocated \nRBP Charges, the exact amount which would be determined through a separate filing under \nthe Federal Power Act with approval from the Commission.225  This will ensure that the \nremaining load within the PJM Region will not be stranded with increased costs necessary \nto pay for the remaining term of RBP Resources that are not located within the \n \n223 Id. \n224 Proposed Tariff, Attachment DD, section 18.7(b). \n225 Id."},{"page":102,"startToken":30934,"endToken":31205,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 95 \n \n \n \nTransmission Owner’s service territory.  Mechanically, the revenues collected from the \nTransmission Owner will be credited to the remaining loads in the PJM Region responsible \nfor paying RBP Charges.  The amount collected from the Transmission Owner and credited \nto remaining loads will help offset any cost increases to remaining loads that may be \nnecessary to continue honoring the commitments of RBP Resources remaining in the PJM \nRegion through the rest of the 15-year term.  \nWhile the exiting Transmission Owner would be initially responsible to pay for the \ncosts necessary to ensure no RBP Resource becomes a stranded asset, nothing in PJM’s \nproposal would preclude such a Transmission Owner from seeking to recover any such \ncosts from the relevant large loads. \n3. \nRules governing treatment of RBP Resources or load allocated RBP \nCharges in the event of Transmission Owner exit are appropriately \nsubmitted with this filing.  \nThe NEDC/PJM Governors’ Principles include “15-year price certainty for new \ncapacity resources.”226  Price certainty includes protections against supply or demand \nbecoming unavailable to serve the PJM Region as a result of a Transmission Owner’s \ndecision to exit PJM.  The proposed rule provides stakeholders with ample notice.  Sellers \nof RBP Resources can be assured that the underlying inputs to their financing terms (i.e., \nfirm price on a specified term) will not change in the event a Transmission Owner does exit \nfrom PJM during the term of the RBP commitment.  Furthermore, setting forth the rules in \nthe Tariff now, even before the RBP offer window has opened, avoids any potential \n \n226 NEDC/PJM Governors’ Principles at 1."},{"page":103,"startToken":31205,"endToken":31512,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 96 \n \n \n \narguments that changes to cost allocation associated with the RBP Resources after the \ncommitments have already made may be impermissibly retroactive.  \n4. \nThe proposed rules governing treatment of RBP Resources or load \nallocated RBP Charges in the event of Transmission Owner exit are \nappropriately set forth in Tariff, Attachment DD. \nIn the event of a Transmission Owner’s exit from PJM, the treatment of RBP \nResources and load that has been allocated RBP Charges is, at bottom, a matter of close-out \nor settlement consequences of the RBP and thus properly addressed in Tariff, \nAttachment DD.  The departing RBP Resource’s UCAP MW and/or the departing load’s \nproportional share of the remaining term CfD are both incident to the RBP framework.  In \nother words, although the process impacts Transmission Owners, they predominately affect \nRBP Resources and load commitments, particularly in relationship to how they interact \nwith other obligations and assurances provided by suppliers and buyers, and are thus \nproperly addressed in the Tariff, as part of the rules concerning the RBP framework.227  The \nproposed provisions address a substantive aspect of how RBP Resources should be treated \nthroughout the 15-year commitment.   \nE. \nAllocation of Costs Associated with Resources Procured Through the \nRBP (Proposed Tariff, Attachment DD, section 18.3) \n1. \nThe proposed cost allocation methodology \nPJM is proposing to allocate daily RBP Charges to relevant Electric Distributor \nzones/areas, pro rata, based on the zone/area’s assigned share of the total, region-wide Final \n \n227 See Duquesne Light Co., 189 FERC ¶ 61,181, at P 55 (2024) (finding it not just and reasonable to include \nsubstantive transmission planning procedures in the CTOA, as the provisions do not affect only (or \npredominately) the rights and responsibilities of PJM and transmission owners), order addressing arguments \nraised on reh’g, 192 FERC ¶ 61,051 (2025)."},{"page":104,"startToken":31512,"endToken":31806,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 97 \n \n \n \nRBP Target MW, floored at zero,228 and in accordance with RAA Schedule 8, as revised \nin 2024 to incorporate Load Adjustments in equations that “specify that load forecasts will \nbe adjusted by zone/area and specifically include a variable for Load Adjustments[.]”229   \nCost responsibility allocated to a zone/area may be further adjusted where PJM \nreceives sufficient evidence demonstrating that new capacity has been brought by load to \nthe relevant Electric Distributor’s zone/area in the form of Qualifying RBP Offset UCAP \nMW.230  A zone/area of an Electric Distributor that qualifies for one of the opt-outs set \nforth in proposed Tariff, Attachment DD, section 18.1(d), would also have RBP Charges \nreduced by the MW quantity of the opt-out.231     \nFor each zone/area to which cost responsibility for RBP Charges has been allocated, \nPJM’s methodology sets forth rules for the further allocation of RBP Charges to LSEs \nwithin the relevant Electric Distributor’s zone/area.232  Ms. Croop’s affidavit provides a \nstep-by-step explanation and example of how the proposed cost allocation methodology is \napplied to an Electric Distributor zone/area and then to the LSEs within the zone/area.233   \nPJM is proposing that cost allocation to LSEs within an Electric Distributor’s \nzone/area be based on “the state and/or RERRA-determined allocation of cleared RBP \nUCAP MW to LSEs within each Electric Distributor’s zone/area, as reported by each \n \n228 Proposed Tariff, Attachment DD, section 18.3(a). \n229 PJM Interconnection, 188 FERC ¶ 61,200 at P 43. \n230 Proposed Tariff, Attachment DD, section 18.2(c). \n231 Proposed Tariff, Attachment DD, section 18.1(d). \n232 Proposed Tariff, Attachment DD, section 18.3(a). \n233 Croop Aff. ¶¶ 42-52."},{"page":105,"startToken":31806,"endToken":32127,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 98 \n \n \n \nElectric Distributor to [PJM].”234  PJM has thus created a new defined term, the “RBP \nObligation” or “RBO”, to refer to this state and/or RERRA-determined allocation of RBP \nUCAP MW to LSEs within each zone/area.235  The RBO is flexible.  For example, it \npermits states and/or RERRAs to rely on their own, disparate definitions of data centers \nand large loads, and to determine which retail customers should be allocated RBP Charges, \ngenerally.  PJM’s authority over wholesale markets does not extend to dictating the \nallocation of costs to retail load, data centers and other large loads and, for purposes of cost \nallocation to such data centers and other large loads, each state and/or RERRA may have \nits own methodology, developed in accordance with its unique needs and considerations.        \nPJM’s proposal requires that Electric Distributors report, to PJM, the state and/or \nRERRA-determined allocations of RBP UCAP MW to LSEs in their zone(s)/area(s).  To \nthe extent that Electric Distributors report RBOs, the RBP Charge assessed daily to an LSE \nin the relevant zone/area will equal the LSE’s daily reported RBO MW in the zone/area \ndivided by the total daily RBO MW in the zone/area, and multiplied by the total, daily RBP \nCharges allocated to the zone/area.   \nIn the unexpected event that RBOs are ultimately not reported to PJM, PJM will \nstill need to proceed with settlement of the RBP Charges.  In this case, PJM will rely on a \nback-up cost allocation methodology to determine allocation to LSEs.  PJM’s back-up \nmethodology applies PJM’s status quo method for allocating capacity costs pursuant to \n \n234 Proposed Tariff, Attachment DD, section 18.3(b)(iii). \n235 Proposed Tariff, Definitions – RBP Obligation (‘“RBP Obligation’ or ‘RBO’ shall mean the state and/or \nRERRA-determined allocation of RBP UCAP MW to Load Serving Entities within each Electric \nDistributor’s zone/area.”)."},{"page":106,"startToken":32127,"endToken":32476,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 99 \n \n \n \nRAA, Schedule 8,236 which incorporates Load Adjustments for purposes of allocating \ncapacity costs to LSEs.  In other words, if no allocation is reported by the relevant Electric \nDistributors with allocated RBP UCAP MW, PJM will allocate RBP Charges based on the \nPeak Load Contribution submitted to PJM for the LSEs in the relevant zone/area. \nImportantly, PJM is not proposing a backup methodology for how RBP Charges \nshould be allocated to non-jurisdictional, retail customers served by each of the LSEs in \nany Electric Distributor’s zone/area.  Even if Electric Distributors do not report any state \nand/or RERRA-determined RBOs in their zone(s)/area(s), and even if PJM subsequently \napplies the status quo allocation methodology to PJM’s LSE customers, PJM would not, \nunder the proposed methodology, determine any further allocation to retail customers \nserved by those LSEs.   \nPJM and the PJM states and/or RERRAs must cooperate to ultimately allocate \nwholesale costs to end use, retail customers.  In the Commission’s 2007 order on rehearing \naffirming its finding that PJM’s RPM market design was just and reasonable, the \nCommission noted that the “question of jurisdiction over resource adequacy is a complex \nmatter that stands at ‘the confluence of state-federal jurisdiction.’”237  The proposed RBP \nmethodology recognizes and respects this division of responsibility.  While it is within \nPJM’s purview to allocate the costs of RBP Resources to LSEs, who are customers of PJM, \nthe Commission has also recognized that it is beyond the scope of PJM’s authority to \n \n236 Proposed Tariff, Attachment DD, section 18.3(b)(iii) (“If no RBO MW are reported to the Office of the \nInterconnection in an Electric Distributor zone/area, PJM will allocate the RBP Charges for that zone/area to \nall load in the zone/area using each LSE’s ratio share of the Daily Unforced Capacity Obligation for the \nzone/area as determined in RAA, Schedule 8.  PJMSettlement shall be the Counterparty to each LSE’s \nobligation to pay, and payments of, RBP Charges.”).    \n237 PJM Interconnection, 119 FERC ¶ 61,318 at P 40."},{"page":107,"startToken":32476,"endToken":32728,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 100 \n \n \n \n“address how LSEs [will subsequently] bill retail customers for such charges” as doing so \nwould affect the “ability [of the PJM states and/or RERRAs] to allocate such charges.”238  \nThus, PJM’s proposed methodology for allocating RBP Charges sets the table for states \nand/or RERRAs, by empowering them to make decisions about how to best further allocate \nRBP Charges to data centers and other retail customers.   \n2. \nThe proposed method of allocating costs to Electric Distributor \nzones/areas and LSEs within those zones/areas is just and \nreasonable \n \nPJM is proposing to allocate daily RBP Charges to buyers in a manner that reflects \ncareful consideration of cost causation and cooperative federalism principles, with an eye \ntowards legal durability.   \nFirst, the allocation of daily RBP Charges to relevant zones/areas, and the proposed \nback-up allocation methodology to LSEs served in those zones/areas in the absence of a \nstate-determined methodology, rely on cost allocation methodologies set forth in RAA, \nSchedule 8239  that the Commission has already found just and reasonable.  \nThe Commission, in 2024, accepted PJM’s proposed revisions to RAA, Schedule 8 \n“to better allocate, to zones/areas, localized load adjustments used to determine capacity \nobligations for [LSE].”240  These 2024 revisions to the RAA were, as PJM noted at the \n \n238 Commonwealth Edison Co., 133 FERC ¶ 61,118, at P 12 (2010). \n239 Proposed Tariff, Attachment DD, section 18.3(b)(iii). \n240 PJM Interconnection, 188 FERC ¶ 61,200 at P 1."},{"page":108,"startToken":32728,"endToken":33015,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 101 \n \n \n \ntime, “spurred by the recent proliferation of data centers that are contributing to large \nadditions of forecasted load concentrated within a specific wholesale metering area.”241   \nThe Commission’s 2024 order on those revisions found that PJM’s proposed Load \nAdjustments at the zone/area level were “just and reasonable because PJM propose[d] to \nassign increases or decreases in forecasted load to the zone/area in which the change \noccurs.”242  The proposed equations for allocating Load Adjustments “more accurately \nassign capacity obligations to LSEs.”243  The Commission furthermore found that it was \nappropriate for the relevant Electric Distributor to serve as “the party with the distribution \nand metering facilities defining a zone/area and responsible for reporting load information \nto PJM.”244     \nSecond, to the extent that PJM, under the proposed cost allocation methodology, \nfurther refines costs allocated to specific Electric Distributor zones/areas based on evidence \nthat a zone/area has Qualifying RBP Offset UCAP MW, PJM’s proposal recognizes the \nimportance of further adjusting allocations in zones/areas to reflect additional, new \ncapacity to the extent that such capacity was not previously captured by the forecast and \nLoad Adjustments.  Incorporating Qualifying RBP Offset UCAP MW into the allocation \nis intended to better align beneficiaries with costs and, in particular, to provide a \nmechanism to avoid allocating costs to LSEs that have already paid for new capacity to \n \n241 PJM Interconnection, L.L.C., Proposal to Better Account for Large Load Adjustments in Forecasted \nCapacity Obligations of PJM Interconnection, L.L.C., Docket No. ER24-2447-000, Transmittal at 1 (July 1, \n2024). \n242 PJM Interconnection, 188 FERC ¶ 61,200 at P 37. \n243 Id. \n244 Id. at P 40."},{"page":109,"startToken":33015,"endToken":33442,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 102 \n \n \n \nsupport their needs.  Thus, the proposed allocation relies on a Commission-accepted \nmethodology, with adjustments to recognize Qualify New UCAP MW that may reduce the \nallocation to a particular zone/area.  By reducing allocated load further based on Qualifying \nRBP Offset UCAP MW, the proposed methodology guards against assigning costs to those \nwho will not benefit from the addition of the new capacity procured through the RBP.   \nThird, the proposed methodology assigns costs roughly commensurate with \nbenefits to load.245  Cost causation requires that “all approved rates reflect to some degree \nthe costs actually caused by the customer who must pay them.”246  Indeed, as the courts \nhave held, “[n]othing requires the Commission to ensure full or perfect cost causation,”247 \nand the Commission “is not bound to reject any rate mechanism that tracks the cost \ncausation principle less than perfectly.”248  The load forecast, which reflect Load \nAdjustments in each zone/area, as further decremented by Qualifying RBP Offset UCAP \nMW, applies the information available to PJM, at the level of granularity that PJM has at \nits disposal, based on equations that “allow PJM to allocate a capacity obligation associated \nwith a load adjustment to the zone/area in which the adjustment occurs.”249  In other words, \nPJM relies on the best information available in the short time before the commencement of \n \n245 Ill. Com. Comm’n v. FERC, 576 F.3d 470, 477 (7th Cir. 2009) (requiring “an articulable and plausible \nreason to believe that the benefits are at least roughly commensurate with [the costs.]”); Transmission \nPlanning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, 136 \nFERC ¶ 61,051, at PP 622, 639 (2011) (requiring costs of regional transmission facilities to be allocated in a \nmanner that is at least roughly commensurate with estimated benefits), order on reh’g & clarification, Order \nNo. 1000-A, 139 FERC ¶ 61,132, order on reh’g & clarification, Order No. 1000-B, 141 FERC ¶ 61,044 \n(2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (“South Carolina PSA”).   \n246 K N Energy v. FERC, 968 F.2d 1295, 1300 (D.C. Cir. 1992) (emphasis added); see also Midwest ISO \nTransmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004). \n247 South Carolina PSA, 762 F.3d at 88.    \n248 Sithe/Indep. Power Partners, L.P. v. FERC, 285 F.3d 1, 5 (D.C. Cir. 2002) (citation omitted).  \n249 PJM Interconnection, 188 FERC ¶ 61,200 at P 37."},{"page":110,"startToken":33442,"endToken":33880,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 103 \n \n \n \nthe RBP on September 30, 2026.  PJM has tracked Load Adjustments in zones/areas to the \nlevel of granularity that is feasible.  As the United States Court of Appeals for the District \nof Columbia Circuit, in South Carolina PSA, held, “feasibility concerns play a role in \napproving rates, such that the Commission is not bound to reject any rate mechanism that \ntracks the cost-causation principle less than perfectly.”250  The Commission’s approach to \ncost allocation is flexible by design.251 \nThe proposed zonal cost allocation methodology roughly assigns RBP Charges to \nthe zones/areas with reported new load that is not matched with new capacity.  These \nzones/areas and LSEs can be said to have caused the resource adequacy shortfall reflected \nin the 2028/2029 Delivery Year BRA.  Applying the methodology set forth in RAA, \nSchedule 8, with adjustments for Qualifying RBP Offset UCAP MW, therefore, roughly \nassigns zones/areas that caused the shortfall with a share of the RBP Charges.  To be clear, \nstates retain the authority to then further allocate these costs to retail customers, including \ndata centers and other large loads, consistent with the Ratepayer Protection Pledge. PJM is \naddressing the allocation to specific zones but within those zones, the retail customer loads \n \n250 South Carolina PSA, 762 F.3d at 88 (internal quotation marks omitted) (quoting and citing Sithe/Indep. \nPower Partners, 285 F.3d at 5); Midwest ISO Transmission Owners, 373 F.3d at 1368-69; Pub. Serv. Comm’n \nof Wis. v. FERC, 545 F.3d 1058, 1066-67 (D.C. Cir. 2008); Carnegie Nat. Gas Co. v. FERC, 968 F.2d 1291, \n1293-94 (D.C. Cir. 1992) (noting that there is “no requirement in the Act itself that rates precisely match cost \ncausation and responsibility” and that instead “the Commission may rationally emphasize other, competing \npolicies and approve measures that do not best match cost responsibility and causation”).  \n251 See, e.g., Ill. Com. Comm’n, 576 F.3d at 477 (“We do not suggest that the Commission has to calculate \nbenefits to the last penny, or for that matter to the last million or ten million or perhaps hundred million \ndollars.” (citing Midwest ISO Transmission Owners, 373 F.3d at 1369 (“[W]e have never required a \nratemaking agency to allocate costs with exacting precision.”))); Sw. Power Pool, Inc., 178 FERC ¶ 61,087, \nat P 30 n.42 (2022) (“Courts have held that the cost causation principle does not require costs to be allocated \nwith exacting precision, but rather requires that costs be allocated in a manner ‘roughly commensurate’ with \nthe benefits received.”) (citations omitted)."},{"page":111,"startToken":33880,"endToken":34227,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 104 \n \n \n \nwhich have most contributed to the shortfall can be allocated the RBP costs consistent with \nstate law as applicable. \n3. \nThe proposed allocation methodology recognizes that allocation to \nretail customers, including data centers, is within the states’ and/or \nRERRAs’ purview  \nThe proposed cost allocation methodology assigns RBP costs in a manner that \nrespects the balance of authority between states, the Commission, and PJM.252  Even in its \ninfancy, the RPM required that the Commission “recognize the traditional role of state and \nlocal entities in regulating resource adequacy” while also remaining “aware of [its] \nresponsibilities under the FPA to ensure that adequate service is provided, and that \nwholesale rates are just and reasonable.”253  Thus, the Commission found that the \nappropriate course of action was to “defer to state and local entities’ decisions when \npossible on resource adequacy matters, but in doing so . . . not shirk our \ncongressionally-mandated responsibilities.”254   \nFirst, the proposed cost allocation methodology empowers states and/or RERRAs \nto submit RBP RBOs, which PJM would then apply to the allocation of RBP Charges to \nLSEs.  However, under the proposed allocation framework, PJM would retain a back-up \nmethodology for allocated RBP Charges to LSEs, which would apply if no RBOs are \n \n252 See U.S. Telecom Ass’n v. FCC, 359 F.3d 554, 567 (D.C. Cir. 2004) (“[A] federal agency entrusted with \nbroad discretion to permit or forbid certain activities may condition its grant of permission on the decision of \nanother entity, such as a state, local, or tribal government, so long as there is a reasonable connection between \nthe outside entity’s decision and the federal agency's determination.”); see also PJM Interconnection, 119 \nFERC ¶ 61,318 at P 40 (Commission noting that it will “defer to state and local entities’ decisions when \npossible on resource adequacy matters, but . . . will not shirk our congressionally-mandated \nresponsibilities.”). \n253 PJM Interconnection, 119 FERC ¶ 61,318 at P 40 (i.e., requiring PJM to “allocate costs to data centers” \nas urged in the NEDC/PJM Governors’ Principles at 1). \n254 Id."},{"page":112,"startToken":34227,"endToken":34559,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 105 \n \n \n \nreported for a particular zone/area.  PJM’s proposed Tariff language expressly provides \nstates and/or RERRAs with the opportunity, within PJM’s proposed cost allocation \nframework, to submit state-determined RBOs.  This back up cost allocation methodology \nis needed, because if no RBOs are reported for a particular zone/area, PJM would still need \nto allocate the RBP costs in a manner that is just and reasonable. \nPJM’s approach finds support in the Commission’s 2025 order accepting \nMidcontinent Independent System Operator, Inc.’s (“MISO”) Revised Expedited Resource \nAddition Study (“ERAS”) Proposal.255  In that matter, Commission found that RERRA \nparticipation in the ERAS process was permissible and not an improper delegation of \nfederal authority to the states, as the participation of RERRA:  \nwould be wholly pursuant to a Commission-jurisdictional \nprocess . . . proposed by MISO and approved by the Commission—\nnot by state authorities—and under which a [Generator \nInterconnection Procedure] is on file with the Commission and any \nfuture revisions would be subject to Commission approval.  Further, \nthe ERAS process would remain subject to the Commission’s \nauthority pursuant to FPA sections 205 and 206.  In contrast, in \nTalen, the Maryland Commission established a state program that \noperated outside a Commission-jurisdictional process and \n“interfered” with the Commission’s authority to establish interstate \nwholesale rates.256 \nSimilarly, if accepted, PJM’s proposed cost allocation methodology would be set \nforth expressly in its Tariff, approved by and on file with the Commission.  The Tariff \nwould expressly permit states and/or RERRAs to participate in the cost allocation of RBP \n \n255 Midcontinent Indep. Sys. Operator, Inc., Revisions to the Open Access Transmission, Energy and \nOperating Reserve Tariff Expedited Resource Addition Study Filing of Midcontinent Independent System \nOperator, Inc., Docket No. ER25-2454-000 (June 6, 2025). \n256 Midcontinent Indep. Sys. Operator, Inc., 192 FERC ¶ 61,064, at P 99 (2025) (distinguishing Hughes v. \nTalen Energy Mktg., LLC, 578 U.S. 150, 163 (2016)), order addressing arguments raised on reh’g, 194 \nFERC ¶ 61,050 (2026)."},{"page":113,"startToken":34559,"endToken":34840,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 106 \n \n \n \ncosts to LSEs by reporting RBOs, which would supplant PJM’s backup allocation \nmethodology of RBP Charges to LSEs.  Like MISO’s Revised ERAS Proposal, the \nproposed cost allocation methodology would nevertheless remain subject to the \nCommission’s authority pursuant to FPA sections 205 and 206.   \nSecond, PJM’s proposed cost allocation methodology hews closely to the \nCommission’s most recent articulation of where the boundary between state/RERRA and \nfederal jurisdiction exists with respect to large loads.  Namely, while noting concerns \n“about the impact that large load additions can have on retail ratepayers, particularly the \nconcern that other retail ratepayers may be forced to subsidize Network Upgrades needed \nto add large loads to the transmission system[,]” the Commission found that, in this realm, \nthe scope of its regulatory authority is limited.257  “Specifically,” it is the PJM states that \n“have authority over how the wholesale costs of providing electricity, including \ntransmission of such electricity, to those retail customers are recovered through retail \nrates.”258   \nPJM’s cost allocation framework recognizes the need to protect retail ratepayers \nfrom subsidizing new capacity procured to serve large loads while also recognizing PJM’s \nown jurisdictional limitations.  As the Commission has found, it is the PJM states and/or \nRERRAs that have authority over how wholesale costs of these new capacity resources are \nrecovered from retail customers through retail rates.  In fact, PJM does not have a line of \nsight into the retail load and end-use customers served by each relevant LSE.  PJM also \nrecognizes that states may each define “large loads” and “data centers” differently.  Thus, \n \n257 June 2026 Order to Show Cause, 195 FERC ¶ 61,211 at P 69. \n258Id."},{"page":114,"startToken":34840,"endToken":35143,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 107 \n \n \n \na cost allocation methodology that provides PJM states and/or RERRAs with the ability to \ndetermine the specific RBOs that should be assigned to LSEs, as well as to cost allocate to \nend-use customers in their respective states in accordance with their laws and policies, \nsupports the NEDC/PJM Governors’ Principles, which include the principle that the cost \nof new capacity should be allocated to data centers who have caused the need for additional \ncapacity in the PJM Region.   \nThird, PJM’s proposed framework is pragmatic.  In the short time remaining before \nthe September 30, 2026 RBP, it would simply be infeasible for PJM to obtain detailed \ninformation about the large loads and the various LSEs serving such large loads from every \nstate and RERRA in the PJM Region.  States and RERRAs are simply in a better position \nto identify and cost allocate RBP Charges to large loads, including data centers, and the \nLSEs that serve them.  States and RERRAs have granular information about large loads \nwithin their borders.  Accordingly, PJM’s proposed cost allocation methodology \ndeliberately leaves states and RERRAs with the flexibility to protect their own customers \nby allocating the costs of the procurement accordingly.  Furthermore, PJM’s proposal \nrecognizes that state laws on the allocation of capacity costs to large loads, including data \ncenters, are evolving.  The proposal recognizes and relies on the pledges of the 13 \ngovernors of the PJM states to “[u]se all available authorities to ensure that their state \npublic utility commissions design rate class structures to ensure that their states’ LSEs \nallocate their share of the cost to procure new capacity through the . . . [a]uctions to new \ndata center loads that have not otherwise procured capacity or agreed to be curtailable.”259  \n \n259 NEDC/PJM Governors’ Principles at 2."},{"page":115,"startToken":35143,"endToken":35466,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 108 \n \n \n \nHowever, to the extent that states and/or RERRAs do not provide such information, PJM \nwill rely on Commission-approved cost allocation methodologies in place today to properly \nallocate costs to Electric Distributor zones/areas and LSEs.   \nThe proposed methodology addresses the consumer protection goals that have been \nraised by the National Energy Dominance Council, PJM’s 13 state governors, and other \nstate and federal entities, while heeding the Commission’s recent articulation of the \nboundary between state and federal jurisdiction.    \nF. \nCredit Requirements of RBP Resources and LSEs Commensurate with \nRisks (Proposed Tariff, Attachment DD, Section 18.8) and Management \nof RBP Defaults (Proposed Tariff, Attachment DD, Section 18.9) \nPJM is proposing to require both individual sellers (i.e., RBP Sellers) and buyers \n(i.e., LSEs) of RBP UCAP MW to provide RBP Collateral.260  While RBP Sellers must \nsatisfy credit requirements prior to or simultaneously with submitting an RBP Sell Offer, \nLSEs will not be required to post credit until the first Delivery Year in which RBP \nResources are expected to be in service (i.e., 2028/2029), once the allocation of cost \nresponsibility for RBP UCAP MW has been determined for such Delivery Year.  The \nproposed RBP credit requirements apply in addition to and separate from existing \ncollateral requirements, including collateral requirements associated with participating in \nRPM Auctions and engaging in RPM bilateral transactions.  Thus, PJM proposes to house \nthe RBP credit rules in new section 18.8 of proposed Tariff, Attachment DD, and not \n \n260 PJM is proposing to add the definition of “RBP Collateral” to make clear the forms of collateral acceptable.  \nSpecifically, RBP Collateral “shall mean:  either (1) a cash deposit, including any interest thereon, or (2) a \nletter of credit issued for the benefit of PJM or PJMSettlement, in an amount and form determined by and \nacceptable to PJM or PJMSettlement as credit support.”  Proposed Tariff, Definitions – RBP Collateral."},{"page":116,"startToken":35466,"endToken":35724,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 109 \n \n \n \nalongside PJM’s more long-lasting credit rules in PJM’s Credit Risk Management Policy \nin Tariff, Attachment Q. \nThe proposed RBP credit requirements recognize the inherent risks associated with \nprocuring new capacity to serve new, incoming load through long-term commitments.  \nWhile long-term, 15-year commitments should incentivize the addition of capacity by \nproviding new capacity resources with revenue certainty, the fact that the commitments are \nall for new resources—that require additional capital investment and development and face \na number of other issues, including supply chain and permitting risks—means the risks of \nnon-performance (i.e., not reaching commercial operation) or delayed delivery is more \nmeaningful to the PJM Region and likelihood is greater than for resources competing in \nRPM Auctions.  Accordingly, there is a need for a discrete RBP credit requirement to \nsupport an RBP Sell Offer. \nLikewise, the principle, supported by the Ratepayer Protection Pledge,261 that large \nloads will cover the costs of the new capacity procured through the RBP—and that the \ncosts will not become stranded costs, which would ultimately be socialized—requires \ncollateral to be provided by those LSEs allocated cost responsibility for RBP Resources to \nsufficiently guard against default risk.  PJM recognizes that evolving markets, supply chain \nissues, the unprecedented and unexpected nature of a capacity shortfall stemming from the \ninflux of large loads, and the pace of change in technology are indicators of risk.  Thus, \nlike the credit requirements imposed on inherently riskier Financial Transmission Rights, \n \n261 Ratepayer Protection Pledge; Ratepayer Protection Pledge Announcement."},{"page":117,"startToken":35724,"endToken":36016,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 110 \n \n \n \nsellers and buyers of RBP UCAP MW are limited to providing RBP Collateral in the form \nof either cash deposit or Letter of Credit.262 \nNevertheless, PJM has also tailored the proposed RBP Seller credit requirements \nto not be so onerous that they unnecessarily discourage RBP participation.  The proposed \ncollateral requirement applied to RBP Sellers and buyers balances covering risks of \nnon-delivery (whether the RBP Resource fails to materialize or is delayed, or the LSE fails \nto pay RBP Charges) and incentivizing the addition of new capacity to the PJM Region.  \nThis is particularly true now as recent RPM Auctions alone have not procured sufficient \ncapacity to meet the PJM Region’s reliability requirement.   \nAs discussed below, the RBP credit requirement will only apply as needed.  The \nRBP credit requirement will not attach to RBP Sellers or buyers until the RBP Sellers’ or \nbuyers’ actions give rise to credit exposure.  Thus, RBP Collateral will be required of RBP \nSellers as a condition of submitting RBP Sell Offers263 and must be posted either prior to \nsubmitting or along with RBP Sell Offers.  When an RBP Resource no longer gives rise to \ncredit exposure, the RBP Collateral will be returned upon request.  Specifically, RBP \nUCAP MW that are offered but do not get committed through the RBP, RBP Resource \ncommitments that are rescinded for failure to materialize after three Delivery Years, or \nRBP Resource that reach commercial operation and are no longer subject to the RBP \nshortfall charge may have their RBP credit requirement reduced accordingly.    \n \n262 See Proposed Tariff, Definitions – RBP Collateral. \n263 Proposed Tariff, Definitions – RBP Sell Offer (“‘RBP Sell Offer’ shall mean an offer to sell RBP \nResources in the Reliability Backstop Procurement.”)."},{"page":118,"startToken":36016,"endToken":36426,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 111 \n \n \n \nBuyers of RBP UCAP MW, i.e., LSEs that have been allocated cost responsibility \nfor RBP Charges pursuant to proposed Tariff, Attachment DD, section 18.3, will be \nrequired to post RBP Collateral to mitigate the risk of potential defaults from non-payment \nof RBP Charges, while those LSEs not allocated cost responsibility generally will not have \nany credit requirement.264  As explained in the affidavit of Ms. Gwen Kelly, Senior Director \nin Credit Risk and Collateral Management for PJM, on behalf of PJM, a buyer’s credit \nrequirement will start at an amount sufficient to mitigate the long-term risk of the RBP \ncommitment at the beginning of the commitment term and decrease over time as the term \nwinds down.265  \nSuch a buyer-side credit requirement is just and reasonable and received strong \nMember support in the stakeholder process.266  In any event, PJM has the obligation to \nappropriately mitigate risk of default through application of credit requirements and credit \ntools.  But, as noted above, the RBP’s unprecedented long-term commitment and \ncorresponding long-term payment requirement are not contemplated by PJM’s existing \n \n264 Proposed Tariff, Definitions – RBP Charges (“‘RBP Charges’ shall mean the $/day value of the total RBP \nSettlement Credits, positive or negative, of all committed RBP Resources across the PJM Region.”).   \n265 Affidavit of Gwen Kelly on Behalf of PJM Interconnection, L.L.C. (Attachment D) ¶ 29 (“Kelly Aff.”) \n(“PJM further considered how the payment exposure with the portfolio of committed RBP Resources changes \nover the 15-year commitment term.  PJM concluded that the remaining payment exposure naturally declines \nas remaining, forward RBP payment obligations are satisfied and as committed RBP Resources are removed \nfrom the portfolio through rescinded commitments or other changes affecting the remaining payment \nobligations.”). \n266  Indeed, as set forth in the PJM RBP Matrix, of the 13 RBP proposals put forth during the CIFP, seven of \nthe proposals adopted the buy-side credit requirement set forth herein.  In addition, two of the proposals took \nno position on the matter.  See PJM Interconnection, L.L.C., MC Voting Results for RBP Proposals Agenda \nItems 3L through 3X, (June 30, 2026), https://www.pjm.com/committees-and-groups/committees/mc \n[https://perma.cc/5CSQ-DP4K] (scroll to “Meeting Materials” and search for 2026, click on link for \n“6.30.2026 Special Meeting,” scroll to MC Voting Results – Agenda Items 3L to 3X and click on each to \nview the PDF) (last visited July 29, 2026)."},{"page":119,"startToken":36426,"endToken":36781,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 112 \n \n \n \ncredit tools.  PJM’s proposed RBP credit rules address that gap and allow PJM to mitigate \nthe new risks presented by RBP.267 \n1. \nSellers must provide collateral with RBP Sell Offers (proposed \nTariff, Attachment DD, section 18.8(a)) \n \nPJM proposes that sellers provide RBP Collateral in accordance with credit \nrequirements for each RBP Sell Offer before or concurrently with submitting an offer in \nthe RBP.268   \nFor each RBP Sell Offer, the credit requirement is the sum of 20% of the RBP Sell \nOffer Price * RBP UCAP MW for each of the first three Delivery Years offered.  This is \nexpressed formulaically in the proposed Tariff as: \n∑0.2 × (𝑅𝐵𝑃 𝑆𝑒𝑙𝑙 𝑂𝑓𝑓𝑒𝑟 𝑃𝑟𝑖𝑐𝑒 𝑖𝑛\n$\n𝑀𝑊𝐷𝑎𝑦) 𝑛× (𝑈𝐶𝐴𝑃 𝑖𝑛 𝑀𝑊)𝑛× 365\n3\n𝑛=1\n \nwhere n = Delivery Year269 \nAs such, the RBP credit requirement appropriately reflects (and matches) the seller’s ability \nto offer an RBP Resource at a different price and different UCAP commitment level for \neach Delivery Year for the first three years the RBP Resource is expected to be in service. \nThis credit requirement is specific to each offered RBP Resource and is designed \nto cover three years of RBP shortfall charges for that resource.270  RBP shortfall charges \n \n267 See Kelly Aff. ¶ 19 (“PJM found that its current credit tools do not contemplate the long-term nature of \nRBP and the risk of future non-payment that results.”); id. ¶ 24 (“In developing that rate, PJM sought to \nestablish an initial level of collateral that provides commensurate protection against non-payment while \navoiding full collateralization of the entire 15-year contractual commitment.”).  \n268 See proposed Tariff, Attachment DD, section 18.8(a). \n269 Proposed Tariff, Attachment DD, section 18.8(a)(iv); see also Kelly Aff. ¶ 13. \n270 See Kelly Aff. ¶ 14 (“[T]he RBP credit requirement reflects and matches (i) the seller’s ability to offer an \nRBP Resource at a different price and different UCAP commitment level for each Delivery Year for the first \nthree years; and (ii) the requirement that an RBP Resource must reach commercial operation within three \nDelivery Years of its target in-service date.”)."},{"page":120,"startToken":36781,"endToken":37091,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 113 \n \n \n \nare also based on 20% of the RBP Sell Offer Price and are applicable in the event the RBP \nResource does not achieve commercial operation.  Credit requirement at this level covers \nthe payment of any RBP shortfall charges, while not being so high as to deter entry of \nnon-speculative RBP Resources.  As such, the credit requirement applicable to RBP Sell \nOffers will support the success of RBP in attracting the development of new capacity in \nthe PJM Region. \n2. \nReturn of RBP Collateral (proposed Tariff, Attachment DD, \nsection 18.8(a)(ii)) \nConsistent with the risk mitigation logic driving the need for RBP Sellers to post \nRBP Collateral, such collateral shall be returned commensurate with reduction in risk.271  \nFirst, PJM will return any RBP Collateral associated with “any RBP Resources that do not \nreceive a commitment through the Reliability Backstop Procurement.”272  Second, PJM \nmay return RBP Collateral associated with an RBP Resource that secured a commitment \nonly after the resource achieves commercial operation and then after a one-year look-back, \nto allow PJM to confirm that steady commercial operation occurred.273   \n3. \nCollateral requirements for RBP Resources traded to a different \nentity than the RBP Seller (proposed Tariff, Attachment DD, \nsection 18.8(a)(v)) \nGiven the risk of an RBP Resource not achieving commercial obligation and to \nincent continued development of committed RBP Resources in the event of a change in \nownership, PJM proposes to retain the original RBP Seller’s RBP Collateral and financial \n \n271 See id. ¶ 15 (“Consistent with PJM’s objective of aligning collateral with the underlying financial \nexposure, PJM concluded that collateral should remain in place only while the associated performance risk \ncontinues to exist.”). \n272 Proposed Tariff, Attachment DD, section 18.8(a)(iii)(A). \n273 Proposed Tariff, Attachment DD, section 18.8(a)(iii)(B)."},{"page":121,"startToken":37091,"endToken":37371,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 114 \n \n \n \nresponsibility for a committed RBP Resource that is traded until the receiving party (i) \nindependently posts sufficient credit with PJM and (ii) provides written confirmation to \nPJM of its agreement to “fully assume the credit responsibility associated with the \ncommitted RBP Resource.”274  This requirement ensures the credit associated with any \ncommitted RBP Resource that has not yet achieved commercial operation is maintained \nand an RBP Seller must consider the ability of the other entity to either (i) post sufficient \ncredit or (ii) bring the RBP Resource to commercial operation.  Both considerations are for \nthe benefit of the PJM Region and are just and reasonable.  This credit requirement for \ntrading RBP Resources is consistent with the credit requirement for trading Capacity \nResources committed through RPM.275 \n4. \nBuyers (LSEs) allocated cost responsibility for RBP Charges must \nprovide \ncollateral \n(proposed \nTariff, \nAttachment \nDD, \nsection 18.8(b)) \nPJM is proposing to require that those LSEs allocated RBP cost responsibility for \na given Delivery Year must post credit associated with such obligation.276  Such a credit \nobligation is just and reasonable, as it is designed to protect those LSEs not allocated cost \nresponsibility for RBP Resources from having to pay for such resources.  To be clear, LSEs \nnot allocated cost responsibility for RBP Resources will not have an RBP credit \nrequirement.  This is consistent with the Ratepayer Protection Pledge and cost causation \nprinciples, as explained above.  \n \n274 Proposed Tariff, Attachment DD, section 18.8(a)(v). \n275 See Tariff, Attachment Q, section VI.B.7 (Credit Responsibility for Traded Planned RPM Capacity \nResources). \n276 See proposed Tariff, Attachment DD, section 18.8(b)."},{"page":122,"startToken":37371,"endToken":37722,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 115 \n \n \n \nThe purpose of the buyer-side credit requirement is to mitigate the risk associated \nwith RBP commitments through the RBP commitment term.  The purpose of LSE credit is \nto mitigate potential defaults from non-payment of RBP credit obligations.277  PJM \nmitigates risk of default through credit requirements and credit tools.  This is particularly \ntrue where a procurement process locks in RBP payments for a fixed, 15-year term.  \nGiven this overall purpose, PJM will first determine the overall credit requirement \nneeded to address this risk at an aggregate level before then determining an individual \nLSE’s credit requirement.278  PJM will determine the cumulative RBP credit requirement \nequal to “the product of the RBP Credit Rate multiplied by RBP UCAP MW \ncommitted.”279  That is, one uniform $/MW rate will be applicable to all committed RBP \nUCAP MW.  Once determined, PJM will apply this rate to set the RBP credit requirement \nfor each LSE allocated cost responsibility for a given Delivery Year.  This approach \nappropriately achieves the purpose of mitigating potential defaults from non-payment of \nRBP Charges through the commitment term.   \na. \nDetermining the inputs to the RBP credit requirement \nAs can be seen, an LSE’s RBP credit requirement is a function of two inputs: the \nRBP Credit Rate and RBP UCAP MW committed.  Initially, the “committed RBP UCAP \n \n277 See Kelly Aff. ¶¶ 19-20 (“PJM evaluated the credit tools needed to mitigate potential defaults from \nnon-payment of RBP Charges. . . . Based upon that evaluation, PJM determined that only those LSEs \nallocated responsibility for RBP Charges should be required to provide RBP Collateral.”). \n278 Ms. Kelly testifies that “PJM considered that the relevant financial exposure is created by the portfolio of \ncommitted RBP resources rather than by any individual LSE in isolation,” and therefore “PJM developed a \nmethodology that first determines the aggregate collateral necessary to address the payment exposure \nassociated with the portfolio of committed RBP Resources and then allocates that collateral requirement \namong the LSEs responsible for payment of RBP Charges.”  Kelly Aff. ¶¶ 21-22. \n279 Proposed Tariff, Attachment DD, section 18.8(b)(i)(A)."},{"page":123,"startToken":37722,"endToken":38039,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 116 \n \n \n \nMW” input will equal the total amount of RBP UCAP MW committed through the \nReliability Backstop Procurement.  But, that MW level will change as committed resources \nfail to follow through on their commitment and do not achieve commercial operation.  \nThus, to the extent any “commitment of RBP UCAP MW that is rescinded pursuant to \nTariff, Attachment DD, section 18.6(e)” that value is subtracted from the input used to \ndetermine the uniform RBP credit requirement.280   \nThe other input to determining RBP credit requirement is the “RBP Credit Rate.”  \nPJM proposes to set this input initially at $1.5 million.  Over time this rate “may be reduced, \nfor reasons including a change in the total committed RBP UCAP MW, when total posted \nRBP Collateral is greater than the total remaining RBP Charges obligations, . . . to an \namount sufficient to cover the total existing RBP Charges obligations.”281   \nThe initial $1.5 million figure is designed to adequately balance mitigating the risk \nof defaults from non-payment of RBP Charges associated with the RBP commitments \nwithout unduly burdening those Load Serving Entities serving large loads.  The initial $1.5 \nmillion figure ensures that PJM holds sufficient collateral to cover approximately 50% of \nthe notional value of all RBP commitments, which achieves PJM’s objective of \nestablishing “an initial level of collateral that provides commensurate protection against \nnon-payment while avoiding full collateralization of the entire 15-year contractual \ncommitment.”282  This can be seen through the application of a simple formula based on \n \n280 Id. (“[T]he RBP UCAP MW committed amount shall equal the amount of RBP UCAP MW that receives \na commitment through the Reliability Backstop Procurement minus each commitment of RBP UCAP MW \nthat is rescinded pursuant to Tariff, Attachment DD, section 18.6(e).”). \n281 Proposed Tariff, Attachment DD, section 18.8(b)(i)(A). \n282 Kelly Aff. ¶ 24."},{"page":124,"startToken":38039,"endToken":38416,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 117 \n \n \n \nthe RBP Charge obligation over 15 years, i.e., the commitment term, and a conservative \nassumption that all RBP commitments are—on average—at the maximum willingness to \npay, i.e.,15 years * 365 days * $555/MW-Day = $3,038,625.  Roughly half of $3,038,625 \nis $1.5 million, confirming that collateral at this level will cover approximately half the \nnotional value of the contracted commitment from Day 1.  Ms. Kelly also performed a \n“check” on the reasonableness of the $1.5 million value through a discount cash flow \nmodel, which took each year’s RBP Charge Obligation, i.e., 1 year * 365 days * $555/MW-\nDay = $202,575, discounted to September 2026, when the auction is conducted, using the \ndiscount rate of 9.5%.283  The discount rate is the capacity market Weighted Average Cost \nof Capital developed by the Brattle Group as part of PJM’s 2025 periodic review of the \nCost of New Entry of Capacity Resources into the PJM Region.284   \nBecause the risks the RBP Collateral is designed to address will lessen over time, \nthe $1.5 million per MW figure is an initial value.  PJM proposes to reduce this RPM Credit \nRate value to correspond with decreasing risk over time.285  As Ms. Kelly testifies, “PJM \ndeveloped a provision permitting reductions to the RBP credit rate when changes in the \nunderlying RBP commitment portfolio demonstrate that previously required collateral \nexceeds the remaining expected payment exposure.”286  The risk could lessen for a number \n \n283 See id. ¶ 27. \n284 See id. ¶ 29 (citing The Brattle Group, Brattle 2025 CONE Report for PJM, PJM Interconnection, L.L.C., \n26-34 \n(Apr. \n9, \n2025), \nhttps://www.pjm.com/-/media/DotCom/committees-\ngroups/committees/mic/2025/20250411-special/item-1-02-revised-cone-report-final.pdf \n[https://perma.cc/B3VN-EY34]). \n285 Proposed Tariff, Attachment DD, section 18.8(b)(i)(A) (“[T]he RBP Credit Rate shall equal $1.5 million, \nas may be reduced, for reasons including a change in the total committed RBP UCAP MW, when total posted \nRBP Collateral is greater than the total remaining RBP Charges obligations, over time by the Office of the \nInterconnection to an amount sufficient to cover the total existing RBP Charges obligations.”). \n286 Kelly Aff. ¶ 30."},{"page":125,"startToken":38416,"endToken":38717,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 118 \n \n \n \nof reasons, including a reduction in the total committed RBP UCAP MW—which would \nreduce the forward RBP Charge obligations, and as the total posted RBP Collateral \nbecomes greater than the total remaining forward RBP Charges obligations.  This \n“approach aligns required collateral with the remaining financial exposure through the \ncommitment term.”287   \nb. \nDetermining an LSE’s RBP credit requirement \nPJM proposes that the RBP credit requirement will follow cost allocation for RBP \nResources.  In other words, only those LSEs allocated cost responsibility will be assigned \nan RBP credit requirement and be required to post RBP Collateral, and the RPM credit \nrequirement will be based on the level of RBP UCAP MW for which an LSE is allocated \ncost responsibility.  In this manner, the RBP credit requirement will be aligned with cost \nallocation.288 \nAt a high level, an LSE’s RBP credit requirement will equal the product of (1) the \nuniform $/MW credit requirement rate and (2) the LSE’s RBP UCAP MW amount.  Thus, \nfor LSEs serving load in an Electric Distributor zone/area in which no RBOs have been \nreported,289 an LSE’s “allocated RBP UCAP MW shall equal the Load Serving Entity’s \npro-rata share of the Daily Unforced Capacity Obligation for the zone/area as determined \nin RAA, Schedule 8.”290 \n \n287 Id. \n288 See id. ¶ 20 (“PJM determined that only those LSEs allocated responsibility for RBP Charges should be \nrequired to provide RBP Collateral.  Conversely, LSEs not allocated responsibility for RBP Charges do not \npresent the payment exposure the proposed credit provisions are intended to address and therefore are not \nsubject to the RBP credit requirement.”). \n289 See supra Part III.E.1 for a discussion of RBOs. \n290 Proposed Tariff, Attachment DD, section 18.8(b)(i)(B)(1)."},{"page":126,"startToken":38717,"endToken":39033,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 119 \n \n \n \nFor LSEs serving load in an Electric Distributor zone/area in which RBOs have \nbeen reported, the LSE will be required to post RBP Collateral for its RBO MW (i.e., its \nallocated RBP UCAP MW amount).  Consistent with the proposed cost allocation rules,291 \nPJM proposes that “the RBP Obligation MW [will] equal[] the RBP Obligation MW \nsubmitted for the Load Serving Entity by the Electric Distributor and scaled, as necessary, \nin the event that the RBP Obligation MW values uploaded by the Electric Distributor do \nnot sum to the fixed, Final RBP Target MW for the zone/area.”292 \nWhile the forgoing should require the provision of adequate credit to mitigate the \nrisk of paying for the RBP commitments over their term, that approach does not have the \nflexibility to address unreasonable credit risk that may arise in the RBP context.  Thus, \nbecause PJM is proposing to address RBP credit through rules outside of its Credit Risk \nManagement Policy, PJM is proposing to include language allowing PJM to “evaluate \nwhether such Load Serving Entity for unreasonable credit risk under the Unreasonable \nCredit Risk provisions of Tariff, Attachment Q, Section II, and require additional RBP \nCollateral as appropriate.”293  Such a provision is necessary and reasonable, because it \nensures that PJM has unambiguous authority to manage unreasonable credit risk in the RBP \ncontext.  Indeed, while PJM also proposes that “[n]othing in this Tariff, Attachment DD, \nsection 18 supersedes the provisions of Tariff, Attachment Q,”294 that provision does not \nprovide clear authority.  The Commission has recognized the importance of managing \n \n291 See proposed Tariff, Attachment DD, sections 18.3(b)(i)-(ii). \n292 Proposed Tariff, Attachment DD, section 18.8(b)(i)(B)(1). \n293 Proposed Tariff, Attachment DD, sections 18.8(b)(i)(B)(1)-(2). \n294 Proposed Tariff, Attachment DD, section 18.8."},{"page":127,"startToken":39033,"endToken":39333,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 120 \n \n \n \nunreasonable credit risk to “protect the integrity of the PJM-administered markets, as well \nas protect market participants from financial losses that result from unreasonable credit \nrisks and defaults.”295  And, here, PJM is providing sufficient “clarity and transparency” \nby grounding PJM’s evaluation in “the Unreasonable Credit Risk provisions of Tariff, \nAttachment Q, Section II.”296 \nc. \nPosting and maintenance of RBP Collateral \nPJM is proposing that, “prior to forty-five (45) days before the start of the Delivery \nYear,” all LSEs with an RBP credit requirement “must post, or maintain an existing, RBP \nCollateral” equal to their RBP credit requirement.297  This allows time for Electric \nDistributors to work with their RERRAs in specifying the RBO MW for the relevant \nzone/areas, with  “the initial allocation reported no later than 60 days prior to the 2028/2029 \nDelivery Year.”298  As a general matter, an LSE’s RBP credit requirement is not likely \nchange based on the applicable Delivery Year.  Stated another way, a change in Delivery \nYear does not necessarily mean a change in RBP credit requirement.  Rather, changes in \nRBP credit requirement will only occur to the extent (1) the LSE’s allocated RBP UCAP \nMW level changes and/or (2) PJM changes the RBP Credit Rate, as discussed above.  \nAccordingly, an LSE with an RBP credit requirement should have a good degree of \ncertainty that its requirement will remain relatively constant, and generally only go down \nover time, if its allocated RBP UCAP MW does not change.  For this reason, PJM is making \n \n295 PJM Interconnection, L.L.C., 171 FERC ¶ 61,173, at P 36 (2020). \n296 Id. \n297 Proposed Tariff, Attachment DD, sections 18.8(b)(i)(B)(1). \n298 Proposed Tariff, Attachment DD, section 18.3(b)(iii)."},{"page":128,"startToken":39333,"endToken":39618,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 121 \n \n \n \nexplicit that the posted RBP Collateral can be maintained from one Delivery Year to the \nnext; there is no need to recall and repost any RBP Collateral if the RBP credit requirement \nis not changing.   \nHowever, to the extent an LSE’s allocated RBP UCAP MW level does change for \na future Delivery Year, it must post the appropriate RBP Collateral at least 45 days in \nadvance.  This timeframe affords PJM’s credit department to work with the LSE to ensure \nthe LSE meets all applicable requirements.   \nd. \nChanges to the RBP credit requirement associated with intra-\nDelivery Year transfers of load and RBP UCAP MW cost \nresponsibility \nOnce determined, a credit requirement may be reduced during a Delivery Year to \nthe extent the RBP UCAP MW allocated to the LSE are also reduced.299  Such a reduction \nin allocated RBP UCAP MW cost responsibility could occur where an LSE transfers its \nload serving obligations for a certain load to another LSE.  In such an event, the transferee \nLSE must satisfy the credit requirements associated with taking on such load serving \nobligation, including any cost allocation for the RBP UCAP MW associated with such \ntransferred load.  Ms. Kelly explains that “PJM concluded that the underlying payment \nexposure associated with transferred RBP payment obligations remains until the receiving \nLSE independently satisfies the applicable collateral requirements and assumes \nresponsibility for the transferred obligations.”300  Thus, PJM proposes that the “[t]ransferee \nshall independently post sufficient RBP Collateral directly with the Office of \nInterconnection to satisfy the incremental RBP UCAP MW associated with the acquired \n \n299 See proposed Tariff, Attachment DD, section 18.8(b)(i)(A). \n300 Kelly Aff. ¶ 32."},{"page":129,"startToken":39618,"endToken":39930,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 122 \n \n \n \nload.”301  The transferring LSE would then “be released from its financial obligations for \namount of RBP Collateral associated with the RBP UCAP MW associated with the \nacquired load” and the LSE’s posted RBP Collateral associated with such load shall be \nreturned once (i) the new LSE has posted the RBP Collateral; and (ii) “any unpaid invoice \namounts associated with such transfer have been paid by the transferor.”302 \n5. \nManagement of defaults of obligations to pay RBP Charges and \nRBP shortfall charges (proposed Tariff, Attachment DD, \nsection 18.9) \nConsistent with the Ratepayer Protection Pledge and cost causation principles, PJM \nproposes to circumscribe the consequences of defaults in the RBP context.  There are two \npayment obligations on which entities may default:  RBP Charges by LSEs, and RBP \nshortfall charges by the RBP Seller.  First, PJM proposes that, upon any LSE’s default of \nRBP Charges, the defaulted amounts shall be reallocated to among the other LSEs allocated \nRBP Charges based on their proportional share of the total RBP Charges assessed across \nthe PJM Region.303  However, the amounts (re)allocated to these other LSEs may be offset \nby the RBP Collateral posted by the defaulting LSE.304  Such a rule is just and reasonable \nand protects against broad socialization of cost responsibility among not only LSEs not \nserving large loads but also the rest of PJM’s Members, as PJM’s Operating Agreement \nprovides that, in the event a Member defaults on its payment obligations, the other PJM \nMembers may be required to pay a share of defaulted amounts.305   \n \n301 Proposed Tariff, Attachment DD, section 18.8(b)(i)(C)(1). \n302 Proposed Tariff, Attachment DD, section 18.8(b)(i)(C)(2). \n303 See proposed Tariff, Attachment DD, section 18.9(a). \n304 See id. \n305 See Operating Agreement, section 15.2.2."},{"page":130,"startToken":39930,"endToken":40233,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 123 \n \n \n \nSecond, PJM proposes that, in the event an RBP Resource must pay RBP shortfall \ncharges and it defaults on payment of such charges, then the LSEs that would have received \ncorresponding credits will not receive such credits.306  This is reasonable, as there would \nbe no monies to fund such credits to the LSEs.  However, to the extent the RBP Seller’s \nposted RBP Collateral has not been returned (e.g., because the resource achieved \ncommercial operation), then PJM may be able to provide some level of credits to the \nappropriate LSEs from such collateral. \nG. \nMiscellaneous and Conforming Changes  \n1. \nReliability Backstop Auction (Tariff, Attachment DD, section 16.2) \nThe RBP bears similarities to the Reliability Backstop Auction, which was \nestablished approximately 20 years prior to cover potential capacity shortfalls, as described \nin Tariff, Attachment DD, section 16.2.  As noted above, the RBP is a procurement \nframework that is specifically tailored to the circumstances of the present-day capacity \nshortfall and therefore provides benefits that a generic Reliability Backstop Auction would \nnot.   \nUnder the current Tariff provisions, a Reliability Backstop Auction is triggered if, \nfor three consecutive Delivery Years, the BRA “equates to an installed reserve margin that \nis more than one percentage point lower than the approved PJM Region Installed Reserve \nMargin.”307  The BRAs for the 2027/2028 and 2028/2029 Delivery Years resulted in an \n \n306 See proposed Tariff, Attachment DD, section 18.9(b) (“In the event that an RBP Resource subject to RBP \nshortfall charges pursuant to Tariff, Attachment DD, section 18.6(d) defaults on payment of RBP shortfall \ncharges, the corresponding credits will not be allocated to the Load Serving Entities that would otherwise \nreceive the RBP shortfall charge credits.”). \n307 Tariff, Attachment DD, section 16.2."},{"page":131,"startToken":40233,"endToken":40617,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 124 \n \n \n \ninstalled reserve margin that was more than one percentage point lower than the approved \nPJM Region Installed Reserve Margin.  In both the BRA for the 2028/2029 Delivery Year \nand the BRA for the 2027/2028 Delivery Year, the RPM cleared 5.6% below the PJM \nRegion Installed Reserve Margin of 20%.308  Even with the intervention of the RBP, the \n2029/2030 Delivery Year BRA may clear short, as new capacity that qualifies for \nprocurement in the RBP are required to provide evidence of feasibility of commercial \noperation by no later than June 1, 2032.  Unless the starting point for the three consecutive \nDelivery Years is reset, a Reliability Backstop Auction may be triggered and interfere with \nthe RBP.  Thus, PJM is proposing to reset the Reliability Backstop Auction trigger by \nrevising the Tariff to state that “[n]o Reliability Backstop Auction will be conducted to \naddress such a shortfall unless it occurs in the Base Residual Auctions for three consecutive \nDelivery Years” beginning with the 2032/2033 Delivery Year and thereafter.309  Similarly, \nPJM proposes to specify that the existing requirement for PJM to investigate the cause for \nclearing short of the reliability requirement and to recommend corrective action be reset to \nthe 2032/2033 Delivery Year.  Doing so avoids posting substantively repetitive reports \nshould the BRAs continue to clear short in the intervening Delivery Years.310  The revision \nto the 2032/2033 Delivery Year will align the trigger of the Reliability Backstop Auction \n \n308 2027/2028 BRA Report at 1 (“PJM Interconnection cleared the 2027/2028 Base Residual Auction with a \nreserve margin that is more than one percentage point below the Installed Reserve Margin target, and with \ntotal Unforced Capacity of all Base Load Generation Resources less than the forecasted minimum hourly \nload. This confirmed shortfall constitutes a triggering event as defined in the PJM Tariff, mandating an \ninvestigation to determine the root causes of the region’s failure to secure sufficient resource adequacy.”); \n2028/2029 BRA Report at 3. \n309 Proposed Tariff, Attachment DD, section 16.2. \n310 PJM issued its first report in accordance with this requirement after the BRA for the 2027/2028 Delivery \nYear cleared short the reserve target on February 9, 2026.  See 2027/2028 BRA Report."},{"page":132,"startToken":40617,"endToken":40893,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 125 \n \n \n \nto begin  after the RBP Resources come online, allow time to observe the impact of \ncommercial bilateral contracting whether through PJM’s Bilateral Matching efforts or \notherwise, and the efforts underway that are outlined in PJM’s Powering Reliability \nThrough Markets White Paper.  Revising the Reliability Backstop Auction trigger to the \nbeginning of 2032/2033 avoids the possibility of an intervention through a Reliability \nBackstop Auction, until after all RBP Resources should have reached their respective \ncommercial operation dates.  In addition, revising the Reliability Backstop Auction trigger \nprovides time for the effects of PJM’s Bilateral Matching and other commercial bilateral \ncontracting to be felt.  Furthermore, it provides time for the effects of PJM’s Powering \nReliability Through Market’s efforts to be felt before potentially triggering a Reliability \nBackstop Auction.   \nResources procured in the RBP must demonstrate that commercial operation by the \nbeginning of the 2032/2033 Delivery Year is feasible.  Thus, resetting the trigger for the \nReliability Backstop Auction to the 2032/2033 Delivery Year recognizes that, even if the \nRBP successfully procures sufficient capacity to cover the shortfall, RBP Resources will \nneed time to become operational.  Resetting the Reliability Backstop Auction thus ensures \nthat the safeguard will remain in place without interfering with the RBP, which is being \nproposed to address a similar resource adequacy concern. \n2. \nPlanned Generation Capacity Resource (Tariff, Attachment DD, \nsection 5.5A) \nThe existing rules limit the resources that are eligible to participate into the RPM \nAuctions.  In particular, a new generation resource would not be allowed to be offered into \nthe RPM Auctions unless it meets the definition of a Planned Generation Capacity"},{"page":133,"startToken":40893,"endToken":41208,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 126 \n \n \n \nResource.  As currently defined, a Planned Generation Capacity Resource must have met \nall of the requirements for an approved Decision Point I (for a resource that is 20 MW or \nless) or Decision Point II (for a resource that is greater than 20 MW).  This limitation exists \nto provide a gating criteria so that speculative projects or projects that are unlikely to be in \nservice by the relevant Delivery Year would not be allowed to be offered into the RPM \nAuctions.   \nFor the RBP, there is already a separate and rigorous gating criteria that is detailed \nabove, see supra Part III.C.8.e, to provide reasonable confidence that a resource committed \nthrough the RBP would be deliverable by the relevant Delivery Year.  Additionally, to \navoid double procurement of capacity, the committed RBP UCAP MW must be offered \ninto the corresponding RPM Auctions as price takers.  However, because not all projects \nthat receive an RBP commitment may have reached Decision Point I or Decision Point II \nat the time of the relevant RPM Auctions, they may not currently be eligible to be offered \ninto the RPM Auctions based on the existing definition of Planned Generation Capacity \nResource.  As a result, PJM proposes to amend the existing definition of Planned \nGeneration Capacity Resource so that any generation resource that is committed in the RBP \nwould qualify as a Planned Generation Capacity Resource and be allowed to be offered \ninto the relevant RPM Auctions.311 \n \n311 See proposed RAA, Article 1, Definitions – Planned Generation Capacity Resource.  The clean version of \nthe definition for Planned Generation Capacity Resource on which PJM is proposing revisions is the version \nthe Commission accepted in Docket No. ER24-2398-000.  Since that version was accepted there have been \noverlapping versions of RAA, Article 1, Definitions that did not carry forward changes accepted in that \ndocket."},{"page":134,"startToken":41208,"endToken":41515,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 127 \n \n \n \n3. \nNotice of intent (Tariff, Attachment DD, section 5.5) \nUnder the current rules, any Planned Generation Capacity Resource is eligible to \nbe offered into the RPM Auctions only if it is the subject of a notice of intent to be offered \ninto the relevant auction.  The reason for this requirement is to provide certainty that a \nPlanned Generation Capacity Resource, which does not have a capacity must-offer \nobligation, will be offered into the RPM Auction before it is included in the planning \nmodel.  Otherwise, inclusion of Planned Generation Capacity Resources in the planning \nmodels could result in an inaccurate CETL and CETO that is calculated for each locational \ndeliverability area.  Because a committed RBP Resource, including any Planned \nGeneration Capacity Resource, would be required to be offered into the RPM Auctions, \nimposing the requirement for unit owners to submit the same notice of intent to offer into \nthe RPM Auctions would be superfluous and present a barrier for the resource to be offered \ninto the RPM Auction if the unit owner missed the deadline to submit the notice of intent \nto offer.  Therefore, PJM proposes to specify that a notice of intent to offer is not required \nfor any committed RBP Resource since those resources will be required to be offered into \nthe RPM Auctions that correspond with the Delivery Year that such resource has an RBP \ncommitment.312   \nThe only exception to this general rule is that for a Planned Generation Capacity \nResource that is committed as an RBP Resource and that was not the subject of a notice of \nintent to offer for the BRA associated with the 2029/2030 Delivery Year, such Planned \nGeneration Capacity Resource must be offered into the Second Incremental Auction for \n \n312 Proposed Tariff, Attachment DD, section 5.5(b)."},{"page":135,"startToken":41515,"endToken":41849,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 128 \n \n \n \nthe 2029/2030 Delivery Year.313  The reason for this limited exception is because PJM \nwould not have included such a Planned Generation Capacity Resource in the planning \nparameters for the 2029/2030 BRA so the CETO/CETL may be inaccurately represented \nif such resource were to be offered into the 2029/2030 BRA.  Thus, a committed RBP \nResource that is a Planned Generation Capacity Resource and happened to have already \nsubmitted a notice of intent to offer into the 2029/2030 BRA would still be required to be \noffered into the 2029/2030 BRA since PJM would have included such resource in the \nplanning parameters.  For all other future RPM Auctions, including the 2029/2030 Second \nIncremental Auction, PJM will automatically include any committed RBP Resource in the \nplanning models so a notice of intent to offer would not be necessary.  \nIn the event a committed RBP Resource is not expected to be in-service or \ndeliverable by the relevant Delivery Year, the unit owner of such resource is required to \nnotify PJM, and provide supporting documentation, that the resource is not expected to be \ndeliverable no later than December 1 proceeding a BRA or 90 days prior to the \ncommencement of an Incremental Auction.  Providing such notification by these deadlines, \nwhich are the same as the deadlines for Planned Generation Capacity Resources that are \nnot committed through RBP to provide notices of intent to offer into the RPM Auctions, is \nappropriate because it would provide sufficient time for PJM to exclude from the planning \nmodels any committed RBP Resource that would no longer be expected to be deliverable \nby the first Delivery Year.  This is necessary so that PJM does not include a resource in the \n \n313 Id.  The First Incremental Auction for the 2029/2030 Delivery Year was canceled due to the compressed \nauction schedule, so the Second Incremental Auction is the next auction following the BRA for the 2029/2030 \nDelivery Year."},{"page":136,"startToken":41849,"endToken":42161,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 129 \n \n \n \nplanning parameters that will not be in service and available to provide capacity by the \nrelevant Delivery Year.  Of course, a committed RBP Resource would still be subject to \nthe RBP shortfall charge as discussed above, see supra Part III.C.9, should it submit a \nnotice to PJM that it would not be expected to be in service by the relevant Delivery Year.  \nIn this way, the RBP shortfall charge acts as a financial disincentive against falsely \nnotifying PJM that a resource may not be deliverable to avoid the must-offer obligation \ninto the RPM Auctions.  \n4. \nMinimum Offer Price Rule (proposed Tariff, Attachment DD, \nsection 5.14(h-2)) \nGiven that any committed RBP Resource is required to be offered into the RPM \nAuctions as a price taker for the term of the RBP commitment, such resource must be \noffered into the RPM Auction at $0/MW-day.  To ensure that this requirement is not \nfrustrated by the existing Minimum Offer Price Rule, PJM is proposing to exempt, only for \ncommitted RBP Resources, the requirement that a Capacity Market Seller provide a \ncertification that the underlying resource is not receiving or expected to receive \nConditioned State Support and that the Capacity Market Seller does not intend to submit a \nSell Offer to exercise buyer-side market power.314  Additionally, the proposed Tariff also \nclarifies that for committed RBP Resources, the lack of such a certification would not \nsubject the underlying resource to the Minimum Offer Floor Price.315  These updates will \nensure that a committed RBP Resource will be allowed to be offered into the RPM Auction \nas a price taker without violating the Minimum Offer Price Rule.  Finally, there is no \n \n314 Proposed Tariff, Attachment DD, section 5.14(h-2)(1)(A). \n315 Proposed Tariff, Attachment DD, section 5.14(h-2)(1)(B)(i)."},{"page":137,"startToken":42161,"endToken":42404,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 130 \n \n \n \nconcern of a potential exercise of buyer-side market power for committed RBP Resources \nbecause such resources are being procured by PJM through the RBP for resource adequacy \npurposes and are required to be offered as price takers to avoid double procurement of \ncapacity. \nIV. \nCORRESPONDENCE \nThe following individuals are designated for inclusion on the official service list in this \nproceeding and for receipt of any communications regarding this filing: \nCraig Glazer \nVice President–Federal Government Policy \nPJM Interconnection, L.L.C. \n1200 G Street, N.W., Suite 600 \nWashington, D.C. 20005 \n(202) 423-4743  \ncraig.glazer@pjm.com \n \nRyan J. Collins \nVivian W. Chum \nWright & Talisman, P.C. \n1200 G Street, N.W., Suite 600 \nWashington, D.C. 20005 \n(202) 393-1200  \ncollins@wrightlaw.com \nchum@wrightlaw.com \nChenchao Lu \nAssociate General Counsel \nPJM Interconnection, L.L.C. \n2750 Monroe Blvd. \nAudubon, PA  19403 \n(610) 666-2255  \nchenchao.lu@pjm.com \n \n \nV. \nREQUESTED EFFECTIVE DATE AND CONSENT TO MODIFICATION \nOR SEVERANCE OF ISSUES \nPJM requests that the Commission issue an order on this filing and make this \nproposal effective by no later than September 29, 2026, which is 60 days after the date of \nthis filing.  Commission action and an effective date of no later than September 29, 2026, \nwill allow PJM to commence the RBP immediately thereafter.  Upon Commission \nacceptance of this filing without modification, PJM intends to commence the RBP on \nSeptember 30, 2026."},{"page":138,"startToken":42404,"endToken":42893,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 131 \n \n \n \nAs noted above, however, to facilitate Commission approval and prompt opening \nof the RBP procurement window, PJM consents to the Commission’s exercise of authority \nto modify and/or sever the proposed Tariff and RAA language, as needed and permitted \nunder the FPA and NRG Power Marketing,316 where such modification is consistent with \nPJM’s overarching objectives in this filing.317  Should the Commission require \nmodifications to the proposed RBP as detailed in this filing, PJM may need to delay the \ncommencement of the RBP beyond September 30, 2026, to implement the RBP consistent \nwith such Commission directed changes.  In addition, PJM provides the following requests \nand observations:     \nFirst, should the Commission exercise its authority to modify the proposed Tariff \nlanguage herein pursuant to the FPA and NRG Power Marketing, PJM respectfully requests \nthat the Commission expressly prescribe the revised rate or rule in its order.  Prescriptive \nrevised language from the Commission would provide the “necessary predictability” to \nallow PJM to implement such changes to the RBP in a timely manner.318  PJM’s submittal \n \n316 NRG Power Mktg., 862 F.3d at 108.  As the Commission has repeatedly stated, “[t]he United States Court \nof Appeals for the District of Columbia Circuit has held that, in certain circumstances, the Commission has \n‘authority to propose modifications to a utility’s [FPA section 205] proposal if the utility consents to the \nmodifications.’”  N.Y. Indep. Sys. Operator, 188 FERC ¶ 61,051 at P 22 n.36 (alteration in original) (citing \nNRG Power Mktg., 862 F.3d at 114-15); see Midcontinent Indep. Sys. Operator, 180 FERC ¶ 61,141 at P 26 \nn.29 (same); ISO New England, 175 FERC ¶ 61,172 at P 16 n.20 (same). \n317 PJM is not, for example, suggesting that the Commission may modify or sever provisions of its proposal \nto result in an “entirely different rate design.”  NRG Power Mktg., 862 F.3d at 115 (“Our decisions in City of \nWinnfield and Western Resources indicate that Section 205 does not allow FERC to suggest modifications \nthat result in an ‘entirely different rate design’ than the utility’s original proposal or the utility’s prior rate \nscheme.”); see also id. at 116 (holding that the Commission’s modifications resulted in an entirely different \nrate design where Commission’s modifications: (1) replaced PJM’s proposal to permit exemption where \ngenerators demonstrate on a case-by-case basis that their costs fell below the price floor with one in which \ngenerators can claim exemptions even if they cannot demonstrate that their price falls below the floor; (2) \nundid the compromise between LSEs and Generators and thus “eviscerated the terms of the bargain.”). \n318 PJM Interconnection, 175 FERC ¶ 61,137 at P 110 (first quoting Aera Energy LLC, 789 F.3d at 190-92 \n“affirming the Commission, finding ‘FERC’s conditional acceptance . . . simply required Kern River to \nsubstitute one number for another when allocating costs to the rolled-in shippers.  . . . Because this mechanical"},{"page":139,"startToken":42893,"endToken":43286,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 132 \n \n \n \nof any compliance filing implementing such modifications would constitute PJM’s consent \nand acceptance of the Commission’s modifications.   \nSecond, PJM observes that the facts underlying the PJM proposal at issue in NRG \nPower Marketing are distinguishable from the facts here.  In NRG Power Marketing, the \nFPA section 205 filing with the Commission was one in which “PJM asked the \nCommission ‘to view this filing, not as a list of discrete Tariff changes, but . . . a hard-\nfought compromise package, and to approve it as such.’”319  By contrast, the proposal put \nforth here is not a stakeholder compromise package.  Unlike NRG Power Marketing, there \nis no danger of undoing the compromise between LSEs and Generators and thus \n“eviscerat[ing] the terms of the bargain.”320  Rather, this filing is the product of an RBP \nproposal that was independently endorsed by the PJM Board following the CIFP \nstakeholder process.  Moreover, through this pre-emptive grant of authority pursuant to \nwhich the Commission may sever and modify each element of the proposal, stakeholders \nare on notice of potential changes to the proposal as filed, and will have the opportunity to \ncomment as they feel necessary and appropriate.   \n \nchange gave Kern River no discretion to adjust its rate models, FERC provided sufficient notice to \nratepayers,’” and then quoting Elec. Dist. No. 1, 774 F.2d at 493 “vacating when the ‘effective date of an \norder set[] forth no more than the basic principles pursuant to which the new rates are to be calculated’” \n(alteration in original)).  As the Commission elaborated further in PJM Interconnection, 175 FERC ¶ 61,137 \nat P 110, mere “direction” without “sufficient detail on each element [of the replacement rate] that \n[customers/market participants] could determine when their transactions would be subject to [the new rule],” \nwould mean that implementation of the compliance directive prior Commission approval would violate the \nfiled rate doctrine.  PJM Interconnection, 175 FERC ¶ 61,137 at P 110 (quoting Elec. Dist. No. 1, 774 F.2d \nat 493 “[P]urchasers of electricity cannot plan their activities unless they know the cost of what they are \nreceiving, ‘providing the necessary predictability is the whole purpose of the well-established filed rate \ndoctrine.’” (citing Ark. La. Gas Co., 453 U.S. at 577)). \n319 NRG Power Mktg., 862 F.3d at 113. \n320 Id. at 116."},{"page":140,"startToken":43286,"endToken":43557,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 133 \n \n \n \nThird, although PJM consents to make each element of the proposed revisions to \nthe Tariff and RAA severable, PJM has demonstrated that each element of its proposal is \njust and reasonable.  Notwithstanding PJM’s grant of authority to sever, PJM urges the \nCommission to accept all revisions as proposed so that the RBP can commence on \nSeptember 30, 2026.   \nTo the extent the Commission does sever and modify any element, the Commission \nshould take care to ensure that its replacement rate appropriately meshes with the other \ninterlocking parts of the RBP framework to allow for quick and efficient implementation.  \nThe PJM Board has extensively considered the requirements to implement the RBP that \naccount for risks associated with a fixed, 15-year term of procurement, including risk of \nTransmission Owner exit, and coordination with states.  In addition, severance of specific \nelements of the proposal without a prescriptive replacement rate would not provide the \nsufficient detail necessary to promptly implement RBP.  Finally, modifications to this filing \ncould jeopardize the commencement of the RBP in September 2026, which would also \nhave downstream impacts given that the BRA for the 2029/2030 Delivery Year is currently \nscheduled to commence on December 9, 2026. \nVI. \nDOCUMENTS ENCLOSED \nThis filing consists of the following: \n1. \nThis transmittal letter;  \n2. \nRevisions to the PJM Tariff (in redlined and non-redlined format (as \nAttachments A and B, respectively) and in electronic tariff filing format as \nrequired by Order No. 714);321  \n \n321 Electronic Tariff Filings, Order No. 714, 124 FERC ¶ 61,270 (2008), final rule, Order No. 714-A, 147 \nFERC ¶ 61,115 (2014)."},{"page":141,"startToken":43557,"endToken":43839,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 134 \n \n \n \n3. \nAffidavit of Ms. Danielle Croop, Senior Manager in the Market Design group \nof PJM Interconnection, L.L.C. as Attachment C; and \n4. \nAffidavit of Ms. Gwen Kelly, Senior Director in Credit Risk and Collateral \nManagement of PJM Interconnection, L.L.C. as Attachment D. \nVII. \nSERVICE \nPJM has served a copy of this filing on all PJM members and on all state utility \nregulatory commissions in the PJM Region by posting this filing electronically.  In \naccordance with the Commission’s regulations,322 PJM will post a copy of this filing to the \nCommission filings section of its internet site, located at the following link:  \nhttps://www.pjm.com/library/filing-order.aspx with a specific link to the newly filed \ndocument, and will send an e-mail on the same date as this filing to all PJM members and \nall state utility regulatory commissions in the PJM Region323 alerting them that this filing \nhas been made by PJM and is available by following such link.  PJM also serves the parties \nlisted on the Commission’s official service list for this docket.  If the document is not \nimmediately available by using the referenced link, the document will be available through \nthe referenced link within 24 hours of the filing.  Also, a copy of this filing will be available \non \nthe \nCommission’s \neLibrary \nwebsite \nlocated \nat \nthe \nfollowing \nlink:  \nhttp://www.ferc.gov/docs-filing/elibrary.asp in accordance with the Commission’s \nregulations and Order No. 714. \n \n322 See 18 C.F.R. §§ 35.2(e), 385.2010(f)(3). \n323 PJM already maintains, updates and regularly uses e-mail lists for all PJM members and affected state \ncommissions."},{"page":142,"startToken":43839,"endToken":43966,"text":"Honorable Debbie-Anne A. Reese \nJuly 31, 2026 \nPage 135 \n \n \n \nVIII. CONCLUSION \nBased on the foregoing, PJM requests that the Commission accept the enclosed \nTariff and RAA revisions by September 29, 2026, at the latest, effective September 29, \n2026. \nRespectfully submitted, \n/s/ Vivian W. Chum \n \nCraig Glazer \nVice President–Federal Government Policy \nPJM Interconnection, L.L.C. \n1200 G Street, N.W., Suite 600 \nWashington, D.C.  20005 \n(202) 423-4743  \ncraig.glazer@pjm.com \n \nRyan J. Collins \nVivian W. Chum \nWright & Talisman, P.C. \n1200 G Street, N.W., Suite 600 \nWashington, D.C.  20005 \n(202) 393-1200  \ncollins@wrightlaw.com \nchum@wrightlaw.com \n \nChenchao Lu \nAssociate General Counsel \nPJM Interconnection, L.L.C. \n2750 Monroe Blvd. \nAudubon, PA  19403 \n(610) 666-2255  \nchenchao.lu@pjm.com \n \n \n \nJuly 31, 2026"}],"sections":[{"p":1,"at":0,"title":"Opening text","method":"opening text","endPage":2,"endAt":0,"startToken":0,"endToken":119},{"p":2,"at":0,"title":"TABLE OF CONTENTS","method":"printed heading","endPage":2,"endAt":21,"startToken":119,"endToken":122},{"p":2,"at":21,"title":"I. THE RBP IS A LEGALLY DURABLE REFORM THAT","method":"printed heading","endPage":2,"endAt":273,"startToken":122,"endToken":144},{"p":2,"at":273,"title":"A. The RBP Is a Just and Reasonable, Interim Step to Address","method":"printed heading","endPage":2,"endAt":700,"startToken":144,"endToken":192},{"p":2,"at":700,"title":"E. The RBP Requires Cooperation from Numerous Sectors in Order","method":"printed heading","endPage":2,"endAt":1358,"startToken":192,"endToken":237},{"p":2,"at":1358,"title":"III. THE PROPOSED REFORMS TO THE TARIFF AND THE RAA ARE","method":"printed heading","endPage":2,"endAt":2140,"startToken":237,"endToken":332},{"p":2,"at":2140,"title":"B. The RTO-Wide RBP Target Is Equal to the Initial RBP Target","method":"printed heading","endPage":3,"endAt":1494,"startToken":332,"endToken":543},{"p":3,"at":1494,"title":"C. The Procurement Process: RBP Resources, Offers, RPM Must","method":"printed heading","endPage":5,"endAt":527,"startToken":543,"endToken":916},{"p":5,"at":527,"title":"D. Treatment of RBP Commitment in Event of Transmission Owner","method":"printed heading","endPage":5,"endAt":1546,"startToken":916,"endToken":1033},{"p":5,"at":1546,"title":"E. Allocation of Costs Associated with Resources Procured Through","method":"printed heading","endPage":6,"endAt":3,"startToken":1033,"endToken":1106},{"p":6,"at":3,"title":"F. Credit Requirements of RBP Resources and LSEs Commensurate","method":"printed heading","endPage":7,"endAt":4,"startToken":1106,"endToken":1343},{"p":7,"at":4,"title":"V. REQUESTED EFFECTIVE DATE AND CONSENT TO","method":"printed heading","endPage":13,"endAt":555,"startToken":1343,"endToken":3257},{"p":13,"at":555,"title":"I. THE RBP IS A LEGALLY DURABLE REFORM THAT INCORPORATES","method":"printed heading","endPage":13,"endAt":704,"startToken":3257,"endToken":3278},{"p":13,"at":704,"title":"A. The RBP Is a Just and Reasonable, Interim Step to Address Resource","method":"printed heading","endPage":16,"endAt":177,"startToken":3278,"endToken":4363},{"p":16,"at":177,"title":"B. The RBP Is Consistent with the PJM Governors’ Principles.","method":"printed heading","endPage":17,"endAt":62,"startToken":4363,"endToken":4631},{"p":17,"at":62,"title":"C. The Success of the RBP Requires State Participation.","method":"printed heading","endPage":20,"endAt":62,"startToken":4631,"endToken":5523},{"p":20,"at":62,"title":"D. The RBP Adheres to the Legal Precedent on Jurisdiction.","method":"printed heading","endPage":23,"endAt":1235,"startToken":5523,"endToken":6846},{"p":23,"at":1235,"title":"E. The RBP Requires Cooperation from Numerous Sectors in Order to Meet","method":"printed heading","endPage":26,"endAt":62,"startToken":6846,"endToken":7569},{"p":26,"at":62,"title":"II. BACKGROUND","method":"printed heading","endPage":26,"endAt":67,"startToken":7569,"endToken":7570},{"p":26,"at":67,"title":"BACKGROUND","method":"printed heading","endPage":26,"endAt":80,"startToken":7570,"endToken":7571},{"p":26,"at":80,"title":"A. The Critical Issue Fast Path Stakeholder Process","method":"printed heading","endPage":28,"endAt":62,"startToken":7571,"endToken":8235},{"p":28,"at":62,"title":"B. PJM Board Determination","method":"printed heading","endPage":29,"endAt":749,"startToken":8235,"endToken":8686},{"p":29,"at":749,"title":"C. PJM’s Large Load Matters","method":"printed heading","endPage":32,"endAt":1121,"startToken":8686,"endToken":9604},{"p":32,"at":1121,"title":"III. THE PROPOSED REFORMS TO THE TARIFF AND THE RAA ARE JUST","method":"printed heading","endPage":32,"endAt":1247,"startToken":9604,"endToken":9624},{"p":32,"at":1247,"title":"A. Overview of the RBP","method":"printed heading","endPage":38,"endAt":907,"startToken":9624,"endToken":11417},{"p":38,"at":907,"title":"B. The RTO-Wide RBP Target Is Equal to the Initial RBP Target Minus","method":"printed heading","endPage":53,"endAt":821,"startToken":11417,"endToken":15914},{"p":53,"at":821,"title":"C. The Procurement Process: RBP Resources, Offers, RPM Must Offer,","method":"printed heading","endPage":97,"endAt":1119,"startToken":15914,"endToken":29728},{"p":97,"at":1119,"title":"D. Treatment of RBP Commitment in Event of Transmission Owner Exit","method":"printed heading","endPage":103,"endAt":1305,"startToken":29728,"endToken":31403},{"p":103,"at":1305,"title":"E. Allocation of Costs Associated with Resources Procured Through the","method":"printed heading","endPage":115,"endAt":612,"startToken":31403,"endToken":35230},{"p":115,"at":612,"title":"F. Credit Requirements of RBP Resources and LSEs Commensurate with","method":"printed heading","endPage":130,"endAt":624,"startToken":35230,"endToken":40033},{"p":130,"at":624,"title":"G. Miscellaneous and Conforming Changes","method":"printed heading","endPage":137,"endAt":338,"startToken":40033,"endToken":42213},{"p":137,"at":338,"title":"IV. CORRESPONDENCE","method":"printed heading","endPage":137,"endAt":1031,"startToken":42213,"endToken":42319},{"p":137,"at":1031,"title":"V. REQUESTED EFFECTIVE DATE AND CONSENT TO MODIFICATION","method":"printed heading","endPage":140,"endAt":1350,"startToken":42319,"endToken":43492},{"p":140,"at":1350,"title":"VI. DOCUMENTS ENCLOSED","method":"printed heading","endPage":141,"endAt":336,"startToken":43492,"endToken":43612},{"p":141,"at":336,"title":"VII. SERVICE","method":"printed heading","endPage":142,"endAt":63,"startToken":43612,"endToken":43848},{"p":142,"at":63,"title":"VIII. CONCLUSION","method":"printed heading","endPage":142,"endAt":826,"startToken":43848,"endToken":43966}]}