FERC Holds Conference to Consider Major PJM Governance Reforms

The Federal Energy Regulatory Commission (FERC) on July 23, 2026, convened a technical conference to examine governance reform at PJM Interconnection LLC (PJM). FERC Chair Laura Swett presided over the conference, joined by Commissioners David A. LaCerte, Lindsey S. See, David Rosner and Judy W. Chang.

Key Discussion Items

Throughout the conference, panelists and commissioners repeatedly returned to several overarching governance issues that many participants viewed as central to PJM's ability to respond to rapidly evolving reliability, transmission, resource adequacy and market challenges. Although views differed on the appropriate path forward, the discussion largely coalesced around four potential areas for reform:

• Increasing PJM Board Independence. Whether the PJM board should have greater authority to act when stakeholder processes fail to produce timely solutions – including potential reforms to strengthen board accountability while insulating it from stakeholder pressures that may impede necessary action – and whether governance changes are needed to allow PJM leadership to respond more effectively to urgent reliability, transmission and resource adequacy concerns
• Expanding FPA Section 205 Filing Rights. Whether the current allocation of Section 205 filing rights among PJM, transmission owners and the Members Committee slows needed reforms, including proposals to grant PJM or the PJM board broader authority to make tariff, transmission planning and governance-related filings directly at FERC, and consideration of whether changes to PJM's governing documents could reduce procedural barriers to timely regulatory action
• Increasing State Involvement in PJM Governance. Whether states should have a more formal and influential role in PJM governance through Organization of PJM States Inc. (OPSI) or other mechanisms, including how to better incorporate state perspectives while preserving PJM's independence as a regional transmission organization (RTO), and recognition that many PJM decisions increasingly intersect with state energy, economic development and resource adequacy objectives
• Streamlining the PJM Stakeholder Process. Whether the existing committee structure, voting rules and decision-making procedures impede timely action, including proposals to consolidate committees, impose timebound review processes or establish expedited procedures for critical issues and debate over whether stakeholder voting should become advisory, allowing PJM and its board to act more quickly when necessary

Panel 1: PJM Governance Mechanics – Board Authority, States' Role, Filing Rights and Document Architecture

The conference's morning panel, "PJM Governance Mechanics – Board Authority, States' Role, Filing Rights, and Document Architecture," focused on whether PJM's existing governance architecture adequately equips the PJM board and management to respond to the region's increasingly urgent operational and market challenges. FERC's agenda framed the panel around several interrelated issues: 1) the PJM board's role in ensuring that PJM is addressing regional challenges, 2) degree to which the board should act unilaterally, 3) how states, including through OPSI, should interface with the board while preserving PJM's independence, 4) whether the existing division of Federal Power Act (FPA) Section 205 filing rights among PJM, transmission owners and the Members Committee slows necessary reforms, and 5) whether provisions in PJM's Transmission Owner Agreement (TOA), Tariff, Reliability Assurance Agreement (RAA) or manuals impede timely decision-making. The panel featured representatives from PJM, state regulatory and executive offices, transmission and generation owners, market participants and another RTO, providing a broad range of perspectives on PJM governance, board authority, state involvement, filing rights and potential structural reforms.

A central theme was whether PJM's current governance documents give PJM sufficient authority to act quickly when reliability, resource adequacy, transmission planning or market-design challenges require prompt action. PJM argued that any governance reform should strengthen PJM's ability to act and advocated for additional resources and a more formalized role for state perspectives through OPSI. PJM also stated that it seeks expanded authority to bring FPA Section 205 filings to FERC when necessary, including with respect to the operating agreement and transmission planning, explaining that an augmented OPSI organization capable of speaking for the totality of PJM states and would afford the PJM board Section 205 rights over those areas. That proposal was consistent with PJM's preconference testimony in which PJM acknowledged that rapid load growth, tightening supply-demand conditions, changing resource economics and upward pressure on consumer costs place greater stress on PJM's governance and stakeholder processes.

The panel also highlighted the importance of state participation in PJM governance. FERC specifically asked how states, whether through OPSI or other structures, should interface with the PJM board to help the region meet operational and market challenges while respecting PJM's independence. The discussion suggested that state involvement may become a key element of any reform package, particularly where PJM decisions implicate resource adequacy, transmission buildout, generation retirements, and entry and cost allocation issues that directly affect state policy priorities and retail customers. Although the precise structure remains unresolved, the panel's focus on OPSI and potential enhanced state engagement indicates that future reforms could seek to make state input more systematic and influential without converting PJM into a state-directed entity.

The panel also underscored that governance reform may require changes not only to decision-making norms, but also to the architecture of PJM's governing documents. FERC's questions expressly asked whether provisions in PJM's operating agreement, TOA, Tariff RAA or manuals impede timely action, as well as whether lessons from other RTO/independent system operator (ISO) governance structures could be adapted to PJM. This is significant because changes to filing rights or document architecture could alter who controls the timing and content of future reforms affecting PJM markets, transmission planning and resource adequacy. If PJM receives expanded Section 205 filing authority or key substantive provisions are moved into documents more directly controlled by PJM or subject to easier amendment, market participants may face a more centralized and faster-moving reform process, potentially reducing stakeholder leverage but allowing PJM to respond more quickly to reliability and market pressures.

The commissioners' questions throughout the first panel suggested particular interest in three reform concepts: 1) strengthening the PJM board's ability to act independently when stakeholder processes fail to produce timely solutions, 2) enhancing formal state participation through OPSI or related structures and 3) reconsidering the current allocation of FPA Section 205 filing rights among PJM, transmission owners and stakeholders. Though the commissioners did not endorse any particular proposal, the questioning indicated a focus on practical reforms designed to improve decisional speed, accountability and responsiveness in light of PJM's resource adequacy, transmission and load-growth challenges.

Panel 2: PJM Stakeholder Process – Design, Transparency and Decision-Making

The conference's afternoon panel, "PJM Stakeholder Process – Design, Transparency, and Decision-Making," examined how PJM's stakeholder process – including its sector-weighted voting structure, committee hierarchy and deliberative timeline – affects the RTO's ability to take timely action, including FPA Section 205 filings, to address pressing operational and market challenges. The panel featured two groups of panelists representing PJM management, state officials, independent market monitors, generation owners, transmission-dependent utilities, large customers and policy experts. Several cross-cutting themes emerged: 1) acute tension between the speed of PJM decision-making and preserving robust stakeholder deliberation, 2) vigorous debate over whether governance and accountability reforms, rather than filing-rights changes, are the real solution to PJM's challenges, and 3) growing momentum toward increased state participation in PJM governance.

The first panelist group addressed whether PJM's multilayered committee structure impedes timely action and what reforms could accelerate decision-making. PJM acknowledged that though the stakeholder process has functioned reasonably well, it struggles with speed and efficiency, noting that Manual 34's annual work plan requirement has not been followed and PJM has failed to enforce prioritization of issues. PJM suggested that lower-level committees could be eliminated to improve timeliness, and PJM could preview priorities with FERC to induce adherence and potentially codify prioritization requirements. Others disagreed, arguing lower committees allow focused attention on technical issues and should be preserved, with more frequent meetings, including informal remote sessions, serving as the remedy. Several panelists emphasized the need for a timebound stakeholder resolution, proposing a "time clock" mechanism analogous to ISO New England Inc. (a "jump ball" process, after which PJM would obtain Section 205 filing rights). Those panelists identified the core problem as stakeholders benefiting from the status quo who have incentive to delay, urging PJM to demonstrate leadership in filing tariff changes under Section 205 even without unanimous agreement. State regulatory representatives recommended that stakeholder input be made advisory only and advocated for greater state and gubernatorial voting roles, citing the need for more "speed to electrons." Commissioner LaCerte questioned whether the issue is resolvable without making the stakeholder process advisory, given the PJM board's vulnerability to removal. Panelists also argued that the real bottleneck arises when critical issues – such as resource adequacy or matters at the state-federal nexus – are pushed to lower committees and proposed that PJM and states jointly set the agenda on select issues. Further, panelists noted that Section 205 rights alone do not fully address resource adequacy concerns and highlighted that the ability of members to voluntarily exit the RTO undermines reform efforts by allowing exit threats to stymie change.

The second panelist group focused on structural and governance reforms, with Commissioner See asking panelists to identify the highest-value reform proposals discounted by implementation time. PJM's Independent Market Monitor (IMM) identified two essential solutions: 1) reforming PJM's nominating committee process and 2) ensuring the PJM board cannot be voted out without state input. PJM's IMM argued that PJM members should have less control over PJM, that staff should act in the public interest rather than cater to member interests and dismissed Section 205 filing rights as the wrong focus, stating that "speed to a bad decision is not the solution." Panelists also argued that consensus is not synonymous with leadership, noting that large customers cannot make major capital investments without the certainty that comes from PJM leadership and transparency on resource adequacy, as well as citing lack of speed to market and ongoing indecision about PJM's capacity market as key deterrents to capital investment. PJM proposed relocating Operating Agreement Schedule 1 (Energy and Ancillary Services Markets) and Schedule 6 (RTEP Protocols) to the PJM Tariff RAA, noting that amending the operating agreement requires a two-thirds member vote that is difficult to achieve, leaving PJM to pursue an FPA Section 206 complaint at FERC as an alternative (also a difficult path). Some panelists called Section 205 filing rights a "red herring," noting PJM already has such rights as to resource adequacy and that the real need is greater PJM accountability. They further argued that introducing state governors into PJM's deliberative process is the "lowest hanging fruit" while cautioning against rushing state participation on the Nominating Committee given limited understanding of its current operation. Panelists pushed back on the notion that transmission owners effectively hold veto power but expressed concern that sector-weighted voting does not align voting power with accountability, suggesting a shift to advisory-only stakeholder voting with stronger ties between PJM board members and PJM states.

Takeaways

Looking ahead, energy and natural resources clients should monitor several potential developments signaled by this conference. First, FERC may take a more active role in overseeing PJM's prioritization of issues and work-plan compliance, potentially leading to codified requirements. Second, proposals to shift the stakeholder process to an advisory model, coupled with reforms to insulate the PJM board from removal and increase the independence of the nominating process, appear to have broad directional support across multiple stakeholder categories and could form the basis of future FERC action or PJM filings. Third, the possible relocation of operating agreement Schedules 1 and 6 to the Tariff RAA would significantly alter the procedural landscape for market and transmission planning rule changes by eliminating the current two-thirds member vote requirement for those provisions. Finally, proposals for enhanced state and gubernatorial participation in PJM governance may gain momentum, with implications for the balance of authority between federal and state regulators in RTO decision-making.

Clients with interests in PJM's capacity markets, resource adequacy reforms and transmission planning should assess how these potential structural changes may affect their participation rights and strategic positioning. For more information or assistance regarding the impact to your business, please contact the authors.

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