U.S. Grid Capacity Dispute Highlights Federal-State

President Donald Trump issued two Defense Production Act determinations in April, finding that the constrained U.S. Electric grid and delays in large-scale energy infrastructure pose threats to national defense. Less than three months later, New York Governor Kathy Hochul imposed a one-year moratorium on new hyperscale data centers, citing a desire to protect state residents from paying for infrastructure for uncertain future loads.

This tension between national defense imperatives and commercial energy demand is central to a cost dispute within the PJM Interconnection regional electricity market. According to a March 2026 analysis by the Center for Strategic and International Studies, the PJM region contains 55 percent of U.S. Titanium capacity, 50 percent of aluminum capacity, 31 percent of steel capacity, and 12 percent of semiconductor fabrication capacity. The same analysis estimates that, in a peer war mobilization scenario, increased production of munitions and drone systems would account for roughly 60 percent of additional defense manufacturing energy demand.

Surging Demand Meets Industrial Mobilization Needs

The PJM region is simultaneously facing 48.5 gigawatts of planned data center capacity, which is roughly 30 percent of its 2025 summer peak load. The core defense capability at stake, as described in the source, is industrial surge capacity: whether the regional grid can support a military mobilization while absorbing tens of gigawatts of new commercial load from data centers.

In March, major technology companies signed the White House's Ratepayer Protection Pledge, promising to build, bring, or buy the power they need and pay the full cost of required infrastructure. This pledge highlights a fundamental jurisdictional split. Federal regulators and regional grid operators govern the wholesale side of the power system, while states largely oversee retail electricity rates and local distribution. No single institution has authority spanning both the wholesale treatment of uncertain future demand and the retail allocation of its costs.

Capacity Market Calculations and a $6.5 Billion Exposure

The PJM grid operator runs a capacity market for a region serving more than 67 million people across 13 states and the District of Columbia, securing power resources up to three years in advance. A data center project does not need to be operating today to affect what the region prepares to buy for a future delivery year. The Federal Energy Regulatory Commission has warned that developers shopping the same project among different utilities can lead to duplicative requests, inflating expected load growth.

In its analysis of the 2027/2028 capacity auction, PJM's independent market monitor, Monitoring Analytics, calculated actual capacity market revenue of about $16.4 billion. Its counterfactual analysis found that removing existing and forecast data-center load from the peak forecast would reduce modeled revenue by about $6.5 billion, or 39.6 percent. About $6.2 billion of that modeled reduction came from forecast new load rather than data centers already operating. The market monitor states these estimates show "the scale of exposure created when planners act on large loads that have not yet materialized."

The auction cleared at the $333.44-per-megawatt-day ceiling of a Federal Energy Regulatory Commission-approved price collar. The market monitor says a minimum price floor in the collar "significantly reduced the calculated impact of data center load" in its analysis. It separately estimated that, without a restricted demand curve, total auction revenue would have been about $26.3 billion rather than $16.4 billion.

State Intervention and the Price Collar Settlement

The price collar itself resulted from state intervention into the federal wholesale market. In December 2024, Pennsylvania Governor Josh Shapiro filed a complaint with the Federal Energy Regulatory Commission challenging PJM's capacity-market rules, arguing that coming auctions could impose billions in unnecessary costs on consumers. A January 2025 settlement lowered the auction's price ceiling, which federal regulators approved in April.

Shapiro's administration now attributes roughly $45 billion in cumulative consumer savings to its interventions in the regional capacity market. However, PJM describes its capacity market as providing long-term price signals needed to attract investment in new power supply and has argued that a temporary price collar should balance consumer costs against the need to preserve incentives for new generation.

Proposals to Separate Risk and the Ohio Test Case

Monitoring Analytics President Joseph Bowring has proposed a dedicated mechanism for new large data center load that would directly link that demand with new generation, separating the risk from the ordinary capacity auction. On August 13, 2026, PJM filed a new large load framework. Beginning with the 2029/2030 capacity auction, the proposal would exclude new large loads without new supply behind them when calculating future power needs to be procured.

Ohio offers a test of whether financial commitments can separate firm demand from expressions of interest. Before American Electric Power Ohio's Data Center Tariff took effect, developers had submitted requests totaling more than 30,000 megawatts. The process required customers to pay for formal load studies, present service plans, and sign binding agreements.

The process turned a broad expression of interest into a much smaller set of new projects willing to put money behind their forecasts. However, the Ohio Manufacturers' Association argues that the utility's tighter customer commitments did not produce a corresponding reduction in the load forecast sent to the regional grid operator. The utility says it is updating its forecasts to report only load backed by signed contracts, a dispute that captures the persistent jurisdictional gap.