On September 29, 2026, the Federal Energy Regulatory Commission (“FERC”) accepted PJM Interconnection, L.L.C.’s (“PJM”) Reliability Backstop Procurement proposal (“RBP Proposal”), suspending the proposal for five months and establishing a paper hearing on three elements of the RBP Proposal: (1) cost allocation; (2) Transmission Owner (“TO”) exit provisions; and (3) Load-Serving Entity (“LSE”) collateral requirements. FERC also established a Federal Power Act (“FPA”) section 206 proceeding in anticipation of any changes to the RBP Proposal that may result from the paper hearing. The order, however, encourages PJM to bypass the paper hearing process by submitting a new FPA section 205 proposal that addresses the concerns described in FERC’s order.
The RBP was designed to be a one-time procurement of new capacity that, in addition to a facilitated bilateral contracting process, would allow PJM to address the resource adequacy challenges driven by oncoming large loads in the PJM region. Consistent with directives contained in the January 2026 Statement of Principles released by the White House National Energy Dominance Council and the governors of all 13 PJM states, resources procured in the RBP would serve a fixed term of up to 15 years, starting with the 2028/2029 delivery year and ending no later than the 2042/2043 delivery year. PJM requested that FERC approve the RBP Proposal by September 29, 2026, so that the RBP bid submission window could open on September 30, 2026, and end on October 21, 2026.
FERC found numerous elements of the RBP Proposal to be just and reasonable, including PJM’s proposed eligibility requirements for RBP resources, process for selecting RBP resources, price cap for RBP resources, exclusion of Fixed Resource Requirement entities from RBP cost allocation, and lack of direct market power screens or mitigation. However, FERC found that PJM failed to demonstrate that three elements of the RBP Proposal were just and reasonable and directed further briefing regarding cost allocation, TO exit provisions, and LSE collateral requirements. Specifically, FERC found that:
• PJM failed to demonstrate that its proposed cost allocation methodology was consistent with the cost causation principle and that the proposed opt-out for qualifying cooperatives and municipal utilities may be unjust, unreasonable, and unduly discriminatory.
• PJM’s proposed TO exit provisions may be unjust and unreasonable because PJM did not demonstrate that the costs assigned under the provisions are properly directed to the entities causing the costs, consistent with the cost causation principle.
• PJM’s proposed LSE collateral requirements may be unjust and unreasonable because PJM failed to demonstrate that the proposed rules balance protecting PJM’s markets and members against the risk of default and ensuring that market participants have adequate flexibility to manage their collateral requirements.
While FERC directed further briefing on each of these RBP Proposal elements via paper hearing, FERC also strongly encouraged PJM to submit a new FPA section 205 proposal addressing FERC’s concerns. According to FERC, such a filing would prompt FERC to approve a motion for abeyance of the paper hearing. In anticipation of future changes to the RBP Proposal should the paper hearing proceed, FERC also established an FPA section 206 proceeding, but did not establish any further processes.
FERC’s order, issued in Docket Nos. ER26-3380-000 and EL26-108-000, is available here.