The PJM Interconnection must agree to governance and stakeholder reforms by the end of September or the Federal Energy Regulatory Commission will impose them, agency chairman Laura Swett announced Thursday at a technical conference on the grid operator's governance issues. "PJM is facing a grave legitimacy crisis," Swett said, noting that some transmission owners are openly discussing leaving the regional transmission organization altogether. She added that market participants have lost confidence in PJM's decision-making abilities. The ultimatum comes roughly two years after capacity prices spiked in PJM as rising demand from data centers outpaced any increase in power supplies on the system, which spans 13 Mid-Atlantic and Midwest states and the District of Columbia.

That price spike led to rate increases of 20% or more for some utilities and sparked intense interest from governors and policymakers, according to the report. PJM failed to attract significant new generation in its last two capacity auctions, exposing weaknesses in how the grid operator functions. Two problems highlighted at the meeting were the ability of PJM members to effectively fire the grid operator's board members as well as its stakeholder process, which can be long and end without concrete results. PJM uses a sector-weighted voting system that divides members into five categories — electric distributor, end-use customer, generation owner, other supplier, and transmission owner — with a two-thirds majority of a sector-weighted vote required for a measure to pass. One effect of the voting system is that two sectors can join up to block a measure they don't like, which has happened repeatedly, especially on contentious issues.

Potential reforms discussed at the meeting include increased board independence, a formal role for states at PJM, and giving states the right to file proposals at FERC — called "filing rights" — while also expanding PJM's filing rights. Unlike in all other regional transmission organizations, PJM states lack section 205 filing rights, preventing them from filing proposals at FERC under that provision of the Federal Power Act. Representatives for American Electric Power and PSEG said the utility companies support major changes at PJM, including shifting to an advisory stakeholder structure where the board would get input from stakeholders but final decisions would rest with the board. PJM's new president and CEO David Mills, who officially took over the role in May after several months as interim leader, said the organization is "fully committed to rise to the challenge."

PJM's struggles in responding to the rapid shift in its supply-demand balance intensified governance problems that had been festering for years, according to testimony at the conference. FERC Commissioner David LaCerte described the situation as "a cultural quagmire that they've developed by eroding the board in the past and creating this fear of [board members] being terminated to where they're not using their authorities." The report noted that currently PJM members run the grid operator's stakeholder process, which can lead to priorities getting offtrack. Some panelists called for explicitly requiring PJM's board and staff to work in the public interest rather than in the interest of their members. Mark Christie, a former member of FERC and the Virginia State Corporation Commission, said on social media that he was "cautiously optimistic" that there could be fundamental changes in PJM governance, though it's unlikely that stakeholders will reach an agreement on reforms and FERC will have to craft them for the grid operator.

After taking post-conference comments, FERC intends to hold a dispute resolution forum in September with PJM stakeholders to develop a governance reform package. If an agreement isn't reached by the end of that month, FERC will impose its own reforms on PJM. One industry observer noted that the most important takeaway from the meeting wasn't any single proposal but "the recognition that governance itself has become a strategic asset." In a period of unprecedented AI-driven demand growth, the ability to make timely decisions is no longer an administrative issue but is becoming a prerequisite for reliable markets, efficient capital allocation, and grid resilience.