On Saturday, January 24, 2026, as Winter Storm Fern pushed temperatures below zero across the Midwest and Mid-Atlantic, America's electric grids came under severe stress. The nation's largest grid operator, PJM Interconnection, saw wholesale electricity prices spike above $3,000 per megawatt-hour—more than 15 times normal levels. MISO issued emergency actions to avoid capacity shortfalls. And in the midst of it all, a bipartisan coalition of 13 governors joined the Trump administration in demanding fundamental changes to how data centers pay for the electricity infrastructure they require.
The Storm's Impact
The PJM Interconnection serves 67 million people across 13 states in the East and Mid-Atlantic. On Saturday, the grid operator predicted an all-time high for winter electricity demand on Tuesday—147.2 gigawatts, exceeding the previous record of 143.7 GW set in January 2025.
"A 40-year-old gas turbine switches on because it sees these super-high prices. That's a sign of stress in the PJM system and elsewhere."
— Georg Rute, CEO of Gridraven
The stress wasn't limited to PJM. MISO—the Midcontinent Independent System Operator covering 15 states including Michigan—issued an all-hands-on-deck emergency action designed to avoid capacity shortfalls. Over the past 24 hours, MISO imported several thousand megawatts from PJM's territory just to meet demand, while spot prices soared above $400 per MWh throughout the region.
In New England, the situation was stark: fuel oil generation, typically accounting for about 1% of output, surged to 38% of the grid as the region worked to conserve natural gas. Meanwhile, Dominion Energy in Virginia—home to the largest collection of data centers in the world—warned that the storm has "the potential to be one of the largest winter events to affect the utility's operations."
The Capacity Shortfall
The winter storm arrived just weeks after PJM revealed a troubling milestone: its December 2025 capacity auction fell 5.2% short of reliability requirements for the 2027-2028 delivery year—the first time the nation's largest grid has experienced such a shortfall.
The numbers tell the story. PJM procured 145,777 MW in the auction, about 6,625 MW below its 20% installed reserve margin target. Approximately 54.2 GW of thermal capacity has retired across PJM from 2011 to 2023, with an additional 24 to 58 GW—up to 30% of installed capacity—at risk of retirement by 2030.
And then there's the demand side. After decades of flat electricity demand, load is growing at historic rates—driven largely by data centers. The EIA expects electricity demand in PJM to grow by 3.3% in both 2025 and 2026. By 2030, forecasts show load growth of 9.5% compared to 2025 levels, with data centers representing the primary driver.
The Governors' Response
On January 15, 2026—just nine days before Winter Storm Fern—all 13 PJM state governors joined U.S. Secretaries Doug Burgum (Interior) and Chris Wright (Energy) to sign a Statement of Principles Regarding PJM. The bipartisan coalition included governors from Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.
The principles aim to address three problems: accelerating new generation, making data centers pay their share, and protecting ratepayers from skyrocketing costs.
Key Elements of the Statement of Principles
Emergency Backstop Auction
Trigger a reliability backstop auction by September 2026 to procure additional generation, with 15-year price guarantees to provide revenue certainty for new capacity.
Cost Allocation to Data Centers
Allocate costs of new backstop capacity to data centers through new large load rate classes. Data centers that self-procure power or agree to curtailment during emergencies would be exempt.
Price Protection
Extend existing price restrictions through the next two base auctions, freezing prices through 2030 to protect residential ratepayers.
150-Day Interconnection Limit
Institute a 150-day time limit for interconnection studies to accelerate new generation coming online.
Pennsylvania Governor Josh Shapiro was blunt about the stakes: "Make no mistake, if PJM, this sort of faceless bureaucratic organization that is driving prices up on the American people, does not change and does not reflect what we are putting forth here today, Pennsylvania will be forced to act and forced to go it alone."
PJM's Counter-Proposal
The same day the governors issued their statement, PJM's Board of Managers offered a different path forward—one that emphasizes working within existing market frameworks rather than emergency procurement.
PJM's Key Proposals
- "Connect and manage" with curtailment
Data centers can connect without bringing their own generation but would be among the first customers to have load reduced during reliability emergencies.
- Bring Your Own Generation (BYOG)
Large load customers can avoid curtailment requirements by self-supplying with dedicated generation.
- Expedited interconnection track
A fast-track process for state-sponsored generation projects, targeted for August 2026.
- Backstop procurement
Immediate initiation of backstop generation procurement through existing tariff mechanisms.
PJM Board Chair David Mills framed the plan as operational rather than political: "This is not a yes/no to data centers. This is 'How can we do this while keeping the lights on and recognizing the impact on consumers?'"
What It Means for Your Community
The winter storm and policy responses highlight several issues that communities facing data center development should understand:
Key Takeaways
- Grid capacity is finite. The 5.2% capacity shortfall means there isn't enough generation to meet growing demand. New data centers compete for a shrinking pool of available power.
- Cost allocation is changing. The governors' statement signals a shift toward making data centers pay for infrastructure they require, rather than spreading costs across all ratepayers.
- Curtailment may become mandatory. PJM's proposal would require data centers without self-supplied generation to be first in line for power cuts during emergencies.
- Winter reliability is fragile. Natural gas plants—the backbone of PJM's generation—face fuel supply constraints and mechanical freezing during extreme cold.
- Retirements outpace additions. 54 GW of thermal capacity has retired since 2011. Replacing 1 MW of thermal generation requires approximately 5.2 MW of solar or 14 MW of onshore wind.
What Happens Next
The Statement of Principles carries political weight but no legal force. Any emergency auction requires PJM to file tariff changes and FERC to approve them. PJM has not agreed to the governors' framework—its own proposal suggests the grid operator prefers a different path.
Key filings are due to FERC in the coming weeks. With the reliability gap arriving summer 2027, the question is whether political pressure can accelerate a regulatory process that typically moves in months, not weeks.
Meanwhile, Winter Storm Fern continues to test the grid. The Department of Energy has already issued emergency orders keeping coal plants online in Michigan and Pennsylvania through mid-February 2026. And the fundamental tension remains: data centers can be built in 18-24 months, but the generation and transmission to serve them takes 5-10 years.