Federal ruling hands virtual power plants a win in PJM

A recent ruling from federal regulators will let virtual power plants help meet surging energy demand in the county’s biggest energy market.

Late last month, the Federal Energy Regulatory Commission ordered PJM Interconnection to accept statistical sampling as a valid method for measuring the reliability of programs tapping into demand-response and virtual-power-plant programs, which pay customers to turn down energy use as needed. The decision requires the grid operator to reconsider strict data rules that had prevented providers of this carbon-free resource from participating in PJM’s constrained energy-capacity market.

In its decision, FERC ruled in favor of Voltus, which runs demand-response and virtual-power-plant programs, and the Mission:data Coalition, a nonprofit advocacy group, and against PJM’s desire to preserve its status quo.

FERC agreed with Voltus and Mission:data that, under its current rules, PJM is losing out on at least 4.9 gigawatts of capacity — the equivalent of several large power plants — ​“at a time when PJM is experiencing unprecedented load growth driven in part by hyperscale data center development, threatening reliability.”

Booming power demand from data centers and bottlenecks in power plant construction are not just threatening reliability in PJM but also driving up energy costs for the 67 million people it serves across 13 states. FERC found it would be ​“unjust and unreasonable” to allow the current rules to stand.

Last month’s ruling caps a yearslong fight from providers of demand-response and virtual-power-plant services.

“This is a huge win, and we’re really optimistic that it will unlock hundreds of megawatts of residential load over the next several years,” said Marissa Galizia, Voltus’ senior director of partnerships. FERC’s order makes clear that ​“PJM has the power to change the rules even while utilities aren’t providing the data,” she said.

At issue was PJM’s concern about relying on third-party demand-response aggregators to reduce household electricity demand when needed. PJM insisted that Voltus and other demand-response firms must furnish detailed evidence that participating households actually cut power when prompted to do so. Specifically, PJM required smart-meter data, which is collected in the service territories of most utilities PJM covers.

If firms could not produce that data, PJM would not count on — or pay for — that demand-response capacity to show up during times of peak demand.

But for the most part, demand-response firms could not get their hands on that data. That’s because, as Voltus and Mission:data argued to FERC, most of the major utilities in PJM territory have failed to make that data from their digital smart meters readily available.

It’s a catch-22. And as a result, PJM has missed out on gigawatts of demand-response capacity that could have helped alleviate the reliability and cost crunch it faces — and aggregator firms have been essentially locked out of the lucrative capacity market.

Utilities blame states’ data privacy regulations for their conservative management of smart-meter data. FERC doesn’t get to tell states how to manage those data privacy and data access rules, but it can compel PJM, which it has jurisdiction over, to accept alternative forms of data.

That’s what FERC did in the July decision.

Given the ​“significant barriers to obtaining interval meter data,” FERC told PJM to allow aggregators to use a statistical sampling method that the grid operator had relied on before smart meters existed. PJM also still allows this method for customers that don’t have smart meters. In light of those facts, FERC found that ​“statistical sampling is a valid method to approximate load reductions when interval meter data is not reasonably available.”

Both PJM staff and Monitoring Analytics, its independent market monitor, protested that letting demand-response companies use statistical methods could undermine reliability.

Monitoring Analytics argued that allowing statistical sampling would ​“degrade PJM’s ability to maintain resource adequacy and to correctly determine efficient capacity market prices through supply and demand.”

FERC disagreed, citing evidence presented by Mission:data and Voltus showing that statistical sampling can be as or more accurate than methods that use metered data when applied to large numbers of homes, as opposed to single large customers like factories.

The order won’t take effect immediately. FERC directed PJM to launch a proceeding to work with stakeholders to find a method that parties could agree on, with initial plans due within 45 days of FERC’s order.

“We’re going to be working with our partners to submit answers to the questions and propose what we’d like to see,” Voltus’ Galizia said. ​“Generally, we’d like to make it as easy as we can while guaranteeing that that process is as accurate as possible.”

FERC’s ruling comes at a tense time for PJM. Over the past year, the Trump administration and state governors have attacked the grid operator for failing to mitigate the huge increase in capacity market prices that are driving up utility rates and driving public anger against utilities and data center developers.

“I hope the decision sends a message to PJM and its stakeholders,” said Ken Schisler, chief legal and regulatory officer at CPower, a demand-response company that brought a similar complaint that FERC rejected in 2024 for lack of evidence. ​“The message is to stop the nonsense and to remove barriers that are keeping demand response from growing in the market.”

Michael Murray, president of Mission:data, hopes the ruling will also add fuel to his decade-long effort to make utilities and state regulators unblock smart-meter data that technically belongs to customers.

FERC’s order doesn’t address the underlying state-by-state data-access barriers that Mission:data is working on — the agency doesn’t have the jurisdiction to do so even if it wanted to.

Still, Murray hopes it will push state regulators to revisit their data-access policies, since ​“states may not like the remedies that FERC comes up with in this case or in other cases.”

And more broadly, he said, it’s the first time the agency has acknowledged just how critical this issue is.

“FERC has finally recognized that what I’ll call data blocking is not just an artifact of state privacy laws, and it’s not something to just ignore and say, ​‘Oh this is just a state matter,’” he said. ​“They definitely said that it rises to a Federal Power Act matter.”