The largest US grid operator, PJM, has issued a formal warning: the artificial intelligence boom is pushing the power grid to a breaking point, forcing data centers to face potential mandatory power cuts.
According to a report, PJM Interconnection LLC sent a letter to stakeholders on July 28, announcing that by mid-2027 at the earliest, data centers that fail to secure their own sufficient power supply will be temporarily disconnected from the grid during peak demand periods. Simultaneously, PJM declared it will launch an emergency power auction in September to fill a projected shortfall of about 7 gigawatts starting in June 2028—a previous auction held this month had already failed due to insufficient supply.
PJM Board Chair Paula Conboy stated directly in the letter: "The current trajectory of rapid load growth, tightening supply, and rising capacity costs is unsustainable. Existing consumers should not bear higher capacity costs for large new loads that fail to bring or procure the new supply they require." This stance signals that the electricity costs of AI infrastructure expansion will increasingly be borne by data center operators themselves, rather than being passed on to ordinary residential users.
Power Shutdown Warning Mechanism: Compensation for Cooperation
Under PJM's plan, data centers will not face power outages without warning. The scheme includes an early warning system: before the grid enters a true emergency, data centers will receive warnings about potential curtailments, giving operators a response window.
To mitigate the impact of forced shutdowns on data center operators, PJM stated that operators who accept curtailment will be eligible for compensation to offset their inconvenience and additional expenses. This arrangement effectively integrates data centers into the demand response system, transforming them from passive recipients into active participants in grid regulation.
Simultaneously, PJM will advance a bilateral matching process to help data centers connect directly with power generators, seeking supply-demand balance at the market level.
The agency forecasts that by 2038, data center electricity demand will increase by about 70 gigawatts. Earlier this month, PJM grid demand surged to 168 gigawatts, breaking a 20-year historical record—driven by extreme heat and the combined demand from new AI facilities.
Meanwhile, since 2022, about 15 gigawatts of generation capacity in PJM's coverage area have been retired. The double pressure of surging demand and shrinking supply has significantly strained the grid's resource adequacy. PJM stated in the letter that "the board believes this reliability threat requires decisive action."
To address this, PJM announced a "Reliability Backstop Procurement" emergency auction in September, aimed at supplementing about 7 gigawatts of the gap for the supply period starting in June 2028. Under this plan, the costs of the emergency procurement will be borne by data centers.
These actions from PJM send a clear signal to the market: the costs of AI-driven electricity demand expansion will increasingly be absorbed by data center operators themselves, rather than being shared by existing users. For technology companies with large-scale deployments in PJM's coverage area, this means a dual increase in both electricity acquisition costs and uncertainty.
PJM is the largest grid operator in the United States, covering the "Data Center Alley" in northern Virginia.
Political Pressure Mounts, Calls for Reform Grow
Additionally, reports indicate that PJM has recently faced pressure not only from the market but also from the political sphere. Multiple state governors, utility companies, consumer advocacy groups, and even the White House have criticized the operator, with some voices even calling for the grid to be broken up and restructured.
In January, President Donald Trump and a bipartisan group of governors jointly proposed a plan for PJM to hold a one-time power auction, where technology companies would effectively fund the construction of new power plants by bidding for 15-year contracts.
To improve the accuracy of future demand forecasts, PJM also announced it will establish a new data center registration system to track the identity information and electricity demand of each data center, enabling more precise planning of grid resource allocation.
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