Three Maryland Utilities Told Regulators They Cannot Build the Peak-Shaving Program That Would Exempt Them From PJM’s Capacity Backstop

PJM Interconnection’s Reliability Backstop Procurement, a 6,831 MW purchase of capacity intended to cover a reliability shortfall driven by load growth, carries one documented escape hatch. An electric distribution zone can opt out of the backstop’s cost allocation if it addresses its capacity need through a peak shaving adjustment program codified in state law. The solicitation and target-adjustment window ran from September 30 to October 21, 2026.

Baltimore Gas and Electric, Pepco and Delmarva Power told the Maryland Public Service Commission they cannot use it. The three utilities said they have no PJM-compliant peak shaving adjustment program and have found no viable way to stand one up before the deadline.

The mechanism. A qualifying peak shaving adjustment program is retail machinery, not a market product. It requires enrolled customers, measurable curtailment, verification acceptable to PJM, and a tariff that binds the reduction for long enough to count as capacity. States across PJM have spent recent years authorizing storage procurement targets, incentive budgets and large-load tariffs, nearly all of which sit on the supply side or the cost-allocation side of the ledger. The instrument that converts customer-side load reduction into a capacity-market credential is a different piece of infrastructure, and the number of states holding one in statute appears small enough that PJM wrote the opt-out as a narrow exception rather than a general right.

The Maryland filing is the clearest available evidence of what that narrowness costs. Three large distribution utilities in a single state, serving the Baltimore and Washington suburban load centers, have put on the record that the statutory vehicle does not exist in a form they can use within the window.

The consumer advocate’s counterproposal. The Maryland Office of People’s Counsel is pressing the Commission to move the obligation onto the load that is driving the need. Under its framework, large-load customers in the affected zones would choose among three options: post collateral and commit to cover a specified number of backstop megawatts, secure an offset by bringing new capacity, or enroll in a peak-shaving program for their assigned megawatts. The office has urged the Commission to act quickly in order to shield residential customers from the cost allocation.

The third option in that list is the one with no delivery vehicle behind it. The utilities that would have to operate such a program have already said they cannot build one in time.

The FERC order. On September 29 the Federal Energy Regulatory Commission acted on the backstop and suspended implementation until February 28, 2027. The same order addressed who may participate. FERC rejected the Independent Market Monitor’s bid to exclude demand resources and distributed energy resource aggregations from the 6,831 MW procurement, confirming that aggregated behind-the-meter assets qualify through registration and performance contracts rather than through a commercial operation date. The procurement carries a June 1, 2032 in-service deadline.

Eligibility, however, arrived attached to a term. FERC upheld the requirement that every backstop commitment extend through the 2042/2043 delivery year. For a resource entering service in the 2028/2029 delivery year, that is a fifteen-year obligation. The Commission did so against evidence in the record that only 21 percent of surveyed suppliers would accept terms of that length.

The term problem on both sides of the meter. The fifteen-year horizon is the same number that appears at the retail end of the same mechanism. A supplier is unwilling to commit capacity for fifteen years. A commercial customer, asked to commit metered load reduction on an equivalent horizon in order to make a peak shaving adjustment program qualify, presents the distribution utility with a structurally similar problem one layer down the system. A program that cannot source long-dated commitments from merchant suppliers is unlikely to source them more easily from building owners whose tenancy, ownership and operating profile turn over faster than fifteen years.

The practical consequence for aggregators is a channel shift. With the backstop term set at fifteen years, bilateral capacity contracts, which typically run closer to five, become the realistic route for commercial battery fleets seeking capacity revenue in PJM. That is a materially shorter commitment to put in front of a landlord, and it routes distributed capacity value away from the centralized procurement that FERC just confirmed those resources are eligible to enter.

What the suspension changes. Three weeks was the operative constraint the Maryland utilities cited. FERC has now pushed implementation of the entire procurement to February 28, 2027. The scheduling argument, that a compliant program could not be constructed before October 21, has a weaker foundation once the procurement it attaches to does not take effect for another five months. Whether Maryland uses the interval to build the retail infrastructure, or treats the suspension as a reprieve from having to, is an open question on the record.

The cost direction. Zones that do not secure the opt-out absorb backstop costs through delivery rates. For commercial and industrial customers, those costs land on the demand component of the bill, the same component that a peak shaving program would be designed to compress. Capacity cost allocation across PJM has been migrating steadily toward the commercial meter: the backstop procurement, the large-load tariffs now under consideration in more than twenty-five states, and the peak shaving opt-out itself all push in the same direction. The customers with the most exposure to the resulting rate increases are, in most zones, the ones with no statutory mechanism available to reduce it.

The gap that the Maryland record documents is not between regulatory intent and market interest. The consumer advocate wants a peak-shaving pathway, PJM wrote one into the tariff, and FERC has confirmed that aggregated distributed resources may participate in the procurement the pathway exempts a zone from. The missing element is the retail tariff that converts a commercial customer’s metered load reduction into something a capacity market will accept, and in Maryland, three utilities have now said in writing that it does not exist.

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