By Laila Kearney
NEW YORK, July 23 (Reuters) - U.S. energy officials questioned PJM Interconnection's power structure on Thursday as regulators weigh reforms to the country's largest power grid, which faces the growing risk of blackouts as data center demand soars and little new electricity supply is added.
PJM, which covers 67 million Americans across the Mid-Atlantic and Midwest that include the world's biggest concentration of data centers, has struggled with power shortfalls and surging electricity
prices since demand in the region began to accelerate roughly two years ago.
Officials with the White House, state governments and power industry executives convened at a technical conference held by the Federal Energy Regulatory Commission to discuss potential solutions to PJM's supplies and pricing woes.
Some of those proposals included giving the grid operator's board of managers more independence from its stakeholders, which include voting members like utilities and independent power producers, and more control to enact changes in the market that covers 13 states and the District of Columbia.
PJM's hundreds of members, including transmission owners and power plant operators, vote on market rules through a multi-layered process, with the board ultimately deciding whether to approve proposed changes.
Under proposals floated at the conference, those members would potentially serve in a type of advisory role instead of voting directly on PJM rules - a change that would shift more decision-making onto the board of managers.
"I don't know how to get around it without breaking the system up to where the board is empowered to get a backbone," said FERC Commissioner David LaCerte.
LaCerte said the board should take bolder actions instead of swaying to the demands of its stakeholders, whose conflicting interests can ultimately slow down PJM's primary work of making sure the grid is operating reliably and affordably.
RETENTION DILEMMA
Participants in FERC's conference also noted concerns that board members, who serve three-year terms, run the risk of being ousted if they take an opposing or unpopular stance among the membership.
Two years ago, PJM's board chair and another member were ousted after clashing with members, sources told Reuters at the time.
"PJM needs an independent, transparent board that can take action and make tough decisions without fear of being fired after every board meeting," said Peter Lake, senior director, power at the White House's National Energy Dominance Council.
Proposed solutions to that retention dilemma included extending the terms of PJM board members. PJM's new CEO, David Mills, when asked by FERC commissioners for a reasonable new term period, suggested six to nine years.
Critics also said the governance of PJM, including its stakeholder votes and the board's deliberation, lackS transparency because they are generally conducted outside public view.
"We want the board to not be shrouded in mystery or secrecy. We want to know what's going on and we want the responsibilities to be clearly outlined," U.S. Deputy Secretary of Energy James Danly said at the conference.
FERC commissioners also discussed the possibility of giving states, including governors, in PJM more decision-making power in the grid. While governors have political influence over PJM that includes capping power prices in the latest power auctions held by the grid operator, they do not have membership or much say in PJM governance.
"By taking authority away from the members to some degree, and giving the board more authority, they can then focus on the state's concerns of affordability in addition to reliability," said Jon Gordon of energy trade group Advanced Energy United.
PJM has proposed its own series of reforms to get more power generation on the grid, connect data centers quickly and to avoid shortfalls.
Lake, who chaired the Public Utility Commission of Texas after a deadly and widespread grid failure in the state following 2021 Winter Storm Uri, said he sees warning signs in PJM similar to the run-up to the catastrophe four years ago and underscored the urgency of making reforms.
"The root cause of that failure was a failed governance structure and a failed stakeholder process, the same ills that harm PJM today," he said.
(Reporting by Laila Kearney in New York; Editing by Aurora Ellis and Deepa Babington)
