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# FERC Told PJM You Cannot Curtail Your Way Out of a Shortage
- URL: https://www.freemarketsreport.com/ferc-told-pjm-you-cannot-curtail-your-way-out-of-a-shortage/
- Published: 2026-10-13T15:09:40.000Z
- Updated: 2026-10-13T15:09:40.000Z
- Description: FERC rejected PJM's curtail-first plan for new data centers. A private Google and Constellation deal added 890 MW of nuclear supply with no mandate. The market read, the bear case and one stock idea.
- Author: Michael A. Gayed, CFA

**On Friday FERC told the nation's largest power grid that it cannot cut off new data centers first and call that a market. Three days earlier a private deal between Google and Constellation added 890 megawatts of new nuclear supply without a single mandate. I think those two facts belong in the same sentence, and almost nobody has put them there.**

## Key Highlights

- **The rejection:** On October 9, 2026 FERC rejected most of PJM's large-load plan in docket ER26-3515-000, including the curtail-first Interim Resource Adequacy Service and the Bring Your Own New Capacity rules, and kept only a 50 MW Large Load definition and a registry.[1](#fn-1), [2](#fn-2)
- **The shortage:** PJM's 2028/29 capacity auction cleared 138,318 MW of capacity, 6,831 MW short of the reliability requirement, at the $325 per MW-day cap, with only 525 MW of new generation and uprates.[3](#fn-3)
- **The masked price:** An uncapped simulation put the same auction at $554.72 per MW-day, about 71% above the $325 cap.[4](#fn-4)
- **The private answer:** Google signed a 20-year agreement for 890 MW of new nuclear output from uprates at 11 Constellation units, backed by more than $4.3 billion of Constellation investment, with a first uprate by 2028.[5](#fn-5)
- **The market's reaction:** Constellation closed up 12.2% on the deal day, October 6, and it sits 28.7% below its 52-week high on October 13.[6](#fn-6), [7](#fn-7)

Here is where I land before I earn it. FERC got the law right and the economics right. PJM got the diagnosis right and the remedy wrong. And the stock that benefits is the obvious one, which is exactly why I want to show you the part the obvious trade misses.

## The Rule PJM Wanted

PJM filed the plan on August 13.[8](#fn-8) The idea was simple on its face. A new data center of 50 MW or more that arrived without its own new capacity would be first in line to be switched off when the grid got tight, starting June 1, 2027.[2](#fn-2) PJM called it the Interim Resource Adequacy Service.

A second piece, called Bring Your Own New Capacity, let a big load sign up its own supply to avoid that queue. A third piece mattered more than either. Loads in the curtail-first class would be left out of the demand curve in the capacity auction, so that from the 2029/30 auction the grid would stop buying capacity for them.[9](#fn-9)

FERC did not buy it. Its reasoning was narrow and legal. Several provisions, it wrote, "appear to place obligations directly on eligible new large loads, which are, for the most part, retail customers," and would "dictate which retail customers taking retail service will be curtailed".[1](#fn-1) Retail service is a state matter. A grid operator cannot write a retail rate into a wholesale tariff.

FERC accepted two small things. It kept the 50 MW definition of a Large Load, and it accepted a Large Load Registry, effective October 12.[2](#fn-2) PJM may file again.

## The Quiet Second Document

The headline is the October 9 order. The better story is the one from ten days earlier. On September 29 FERC accepted PJM's Reliability Backstop Procurement but suspended it until February 28, 2027, and set a paper hearing on who pays.[10](#fn-10) The core design, including an average price cap of $555 per MW-day, was found just and reasonable.[10](#fn-10)

That is a big number sitting in a small document. The regular auction is held to $325\. The backstop for new generation would pay up to $555, and Reuters reported it as a one-time auction with longer contracts than usual.[11](#fn-11) So the same regulator accepted two different prices for scarce capacity inside two weeks. One of them is a cap on what the market says. The other is a bid for what the market refuses to build at the cap.

## The Numbers Behind the Fight

Start with the auction. In July PJM procured 138,318 MW of capacity for 2028/29 at the cap of $325 per MW-day, down 2.5% from $333.44 a year earlier.[3](#fn-3) The cleared value was $16.4 billion.[3](#fn-3) Supply fell 6,831 MW short of the reliability requirement, and PJM said the cap and floor "do not solve the underlying supply-demand imbalance".[3](#fn-3)

Now the part that surprised me. Only 525 MW of new generation and uprates cleared.[3](#fn-3) Reuters split that into 317 MW of new generation and 208 MW of upgrades.[11](#fn-11) That is the output of a mandated, cap-managed, regulator-supervised market after years of record prices.

The cap hides the gap. Dow Jones ran the same auction without the collar and got $554.72 per MW-day, against the actual $325.[4](#fn-4) For 2027/28 the simulation was $529.80 against $333.44, and for 2026/27 it was $388.57 against $329.17.[4](#fn-4) Renewable Energy World put the uncapped bill at nearly $30 billion against the $16.4 billion that cleared.[12](#fn-12)

![Grouped bars showing the actual capped PJM capacity price against the uncapped simulation for three auctions, with the gap widening to $554.72 versus $325 per MW-day in 2028/29.](https://storage.ghost.io/c/be/1b/be1bb8f3-f534-4eb9-b00d-09ff49598e5f/content/images/size/w1000/2026/10/chart1.png)

The cap held the price near $330 while the simulated uncapped price kept climbing. Sources: Dow Jones, uncapped simulation[4](#fn-4); PJM news release, July 14, 2026[3](#fn-3).

By my math, the gap in the last auction is $229.72 per MW-day, or about $84,000 per MW-year. That is the amount a new generator is told it will not receive. You do not need a PhD to see why capital stays home.

Then came October 6\. Google signed a 20-year power purchase agreement for 890 MW of new nuclear capacity, from uprates at 11 units across six sites in Illinois, Pennsylvania and New Jersey.[5](#fn-5), [13](#fn-13) Constellation will invest more than $4.3 billion, and the first uprate is expected by 2028.[5](#fn-5) POWER reported the full 890 MW arriving by the end of 2032.[8](#fn-8)

The companies also signed a separate 15-year supply agreement for another 2,700 MW from the existing fleet.[5](#fn-5) Reuters counted the whole package at 3,590 MW.[14](#fn-14) Prices were not disclosed. Take the $4.3 billion and 890 MW at face value and you get about $4.8 million per MW, which is roughly 41 years of revenue at the capped capacity price alone. Capacity auctions at the cap do not fund this. A contract does.

## Winners and Losers

**Winners.** Existing generators come first. Jefferies called the ruling positive for existing generation, since higher capacity prices should last longer, and named Constellation, NRG, Talen and Vistra as beneficiaries.[1](#fn-1) Data center developers win too, because the threat of being first in line to lose power is gone for now. Any large load that signs a bilateral deal wins most, because it buys certainty.

**Losers.** Households and small businesses in PJM carry the risk if the shortage persists. Commissioner Rosner warned that the result "could be a capacity market signaling that PJM has more than enough capacity while the region sheds thousands of megawatts of demand on an involuntary basis".[1](#fn-1) PJM's staff lose a tool. States gain a job, because the curtailment question now sits with them.

The generators win from a shortage, and that is no reason to cheer. Pro-market is not pro-incumbent.

## The Free-Market Read

Start with the other side, because it deserves a fair hearing. PJM's engineers face a real clock. The reliability shortfall is 6,831 MW, and a grid that falls short has to do something by 2027.[3](#fn-3) Curtailing the newest, biggest and most flexible load is not crazy. Texas already uses a 75 MW threshold for its large-load rules.[2](#fn-2) If you run a grid, "who goes dark first" feels like prudence, not tyranny. A rule that tells everyone the order in advance is better than a blackout that picks at random.

Here is why I still land with FERC. A curtailment order is a price control in disguise. It sets the price of new load at "off" without ever letting a bid reveal what that load is worth. Some data centers would pay a great deal to stay on. Some would take a payment to go off. The auction and the contract are how you find out which is which.

The Google deal shows the alternative working. It was funded by private parties, in Constellation's words, and done "without state or federal mandates".[5](#fn-5) Compare the scoreboard. A voluntary contract produced 890 MW of new supply in one announcement, while the mandated auction produced 525 MW of new generation and uprates in a whole cycle.[3](#fn-3) Utility Dive added that Constellation also signed a 20-year agreement with Amazon the same week, bringing the two deals to almost 1.1 GW of nuclear expansion.[13](#fn-13)

PJM seems to know it. It began facilitating bilateral long-term agreements on June 9 and says market participants remain free to pursue them independently.[3](#fn-3) Glen Thomas of the PJM Power Providers Group told Reuters that bilateral contracting for new capacity is the preferred way for it to enter the market.[11](#fn-11) I agree with him. Let buyers and sellers write the contract. Keep the regulator out of the retail meter.

## The Bear Case

I could be wrong here, and I want you to see how. First, FERC left the door open, and PJM can file again with the retail pieces stripped out. Jefferies expects a revival to be state-led, in places like Ohio and Pennsylvania.[1](#fn-1) Second, politics. The midterms are on November 3\. I expect data centers and power bills to be a campaign issue, and that pressure will land on regulators.

Third, the collar. PJM set the price cap and floor for four auctions, and July was the third.[3](#fn-3) The next auction is scheduled for December.[3](#fn-3) A governor-backed extension would keep the lid on the very prices that make the thesis work.

Last, an uprate is not a press release. Turbines, steam generators and control systems have to be built and licensed, and POWER puts the full 890 MW at the end of 2032.[8](#fn-8) Delays are cheap to announce and expensive to own.

## The Idea: CEG (Constellation Energy)

Yes, it is the obvious name. I am picking it anyway, and I will tell you why the obvious name is still the right one to look at. This is not advice. It is a way to think about who gets paid when the price is allowed to speak.

**Why the policy helps.** FERC's refusal keeps new data center load in the demand curve, which keeps scarcity visible in the auction and keeps the bilateral market as the path of least resistance. Constellation just signed the template. It will add 890 MW of capacity at existing sites, with a first uprate by 2028, and it has a 15-year supply deal on 2,700 MW of the current fleet.[5](#fn-5) On October 13 the shares trade at $294.10 with a market value of $105.6 billion, a price-to-earnings ratio of 28.6 and earnings per share of $10.63.[7](#fn-7)

**What the market may be missing.** The group moved on the deal, not the ruling. On October 6 Constellation rose 12.2%, Talen 12.4%, Vistra 10.8% and NRG 7.0%.[6](#fn-6) On October 9, the day of the order, they rose 4.6%, 5.4%, 3.4% and 1.6%.[6](#fn-6) Yet Constellation is still 28.7% below its 52-week high of $412.70, Vistra 25.9% below $217.10 and NRG 44.0% below $189.96.[7](#fn-7) My read is that the market priced one deal and has not yet priced a market where scarcity can no longer be hidden by the regulator.

![Indexed line chart of Constellation, Vistra, Talen and NRG closes from September 22 to October 13, 2026, with the October 6 Google deal and October 9 FERC order marked.](https://storage.ghost.io/c/be/1b/be1bb8f3-f534-4eb9-b00d-09ff49598e5f/content/images/size/w1000/2026/10/chart2.png)

All four generators jumped on the Google deal. The FERC order added a smaller step. Source: Perplexity Finance, daily closes Sept. 22 to Oct. 13[6](#fn-6).

Why Constellation and not the others? Balance sheets. Constellation's net debt was 0.92 times EBITDA at the end of 2025, against 4.07 for Vistra, 3.50 for NRG and 32.06 for Talen.[15](#fn-15) Talen has had the biggest move since September 22, up 29.1%, and the most debt, and it posts a loss per share of $4.02.[7](#fn-7) If the thesis is right, the cleanest balance sheet can fund its own uprates. If I am wrong, it can also survive it.

![Table comparing Constellation, Vistra, Talen and NRG on price, price-to-earnings, distance from the 52-week high and 2025 net debt to EBITDA.](https://storage.ghost.io/c/be/1b/be1bb8f3-f534-4eb9-b00d-09ff49598e5f/content/images/size/w1000/2026/10/chart3.png)

Constellation carries the least debt of the four. Sources: Perplexity Finance, quotes Oct. 13[7](#fn-7); Perplexity Finance, company ratios[15](#fn-15).

**The risks.** Valuation first. A price-to-earnings ratio of 28.6 is well above the 18.8 of 2024.[15](#fn-15) Execution next. Eleven units, six sites and a 2032 finish line leave plenty of room for slippage. Policy last. A state-backed curtailment priority, a longer collar or a new PJM filing could reopen the question.

**What would prove it wrong.** I would be wrong if PJM refiles a curtail-first plan that FERC accepts, if the December auction clears well below the cap with no change in the shortfall, or if the first uprate slips past 2028 without a stated reason. Any one of those would tell me the market is not paying for scarcity. This is a view, not a price target, and I will not give you one.

## What to Watch

Watch for a new PJM filing. FERC invited one, and the second version will show how much of the retail piece PJM is willing to drop. Watch Ohio and Pennsylvania, where Jefferies expects any revival.[1](#fn-1) Watch February 28, 2027, when the suspended backstop procurement comes back, and the cost-allocation hearing that sits behind it.[10](#fn-10)

Watch the December auction most closely. It is the next price cap test, and it is the clearest answer to whether new supply shows up when the number is lifted.[3](#fn-3) And watch the next contract. If Google and Amazon were the first, I expect more hyperscalers to follow. I will keep reading the filings, and you should keep asking who sets the price.

## Sources

1. [Utility Dive, FERC order](https://www.utilitydive.com/news/ferc-pjm-large-load-interconnection-iras-byonc/832716/?ref=freemarketsreport.com) (utilitydive.com)
2. [MGRID, FERC order summary](https://mgrid.org/2026/10/10/ferc-rejects-pjms-curtail-first-plan-for-new-large-loads-and-keeps-only-the-50-mw-definition-and-a-registry/?ref=freemarketsreport.com) (mgrid.org)
3. [PJM news release, July 14, 2026](https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/2026-releases/20260714-pjm-capacity-auction-procures-138318-mw-of-generation-resources.pdf?ref=freemarketsreport.com) (pjm.com)
4. [Dow Jones, uncapped simulation](https://www.dowjones.com/business-intelligence/blog/pjms-2028-2029-capacity-auction-clears-at-price-cap-for-third-time/?ref=freemarketsreport.com) (dowjones.com)
5. [Constellation press release, Oct. 6](https://www.constellationenergy.com/news/2026/10/google-and-constellation-announce-landmark-agreement-to-bring-890-mw-of-new-nuclear-capacity-to-pjm-grid.html?ref=freemarketsreport.com) (constellationenergy.com)
6. [Perplexity Finance, daily closes Sept. 22 to Oct. 13](https://www.perplexity.ai/finance/CEG?ref=freemarketsreport.com) (perplexity.ai)
7. [Perplexity Finance, quotes Oct. 13](https://www.perplexity.ai/finance/CEG?ref=freemarketsreport.com) (perplexity.ai)
8. [POWER, Google deal and uprates](https://www.powermag.com/google-deal-backs-890-mw-of-constellation-nuclear-uprates-at-11-pjm-reactors/?ref=freemarketsreport.com) (powermag.com)
9. [Sustainable Innovation Council, PJM data center power](https://sustainableinnovationcouncil.org/news/ferc-pjm-data-center-power?ref=freemarketsreport.com) (sustainableinnovationcouncil.org)
10. [The Duck Curve, FERC tag page](https://theduckcurve.com/tags/ferc?ref=freemarketsreport.com) (theduckcurve.com)
11. [Reuters, PJM bilateral deals, Aug. 26](https://www.reuters.com/business/energy/pjm-capacity-market-woes-spur-activity-bilateral-power-deals--reeii-2026-08-26/?ref=freemarketsreport.com) (reuters.com)
12. [Renewable Energy World, PJM auction at cap](https://www.renewableenergyworld.com/power-grid/pjm-capacity-auction-easily-hits-price-cap-again/?ref=freemarketsreport.com) (renewableenergyworld.com)
13. [Utility Dive, Constellation and Google](https://www.utilitydive.com/news/constellation-google-deal-will-bring-890-mw-of-new-nuclear-to-pjm/832223/?ref=freemarketsreport.com) (utilitydive.com)
14. [Reuters, Google and Constellation, Oct. 6](https://www.reuters.com/business/energy/google-enters-massive-36-gw-power-deal-with-constellation-energy-2026-10-06/?ref=freemarketsreport.com) (reuters.com)
15. [Perplexity Finance, company ratios](https://www.perplexity.ai/finance/CEG?ref=freemarketsreport.com) (perplexity.ai)

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