Trump and northeastern governors push for massive electricity auction to make tech giants defray costs

By Ramishah Maruf, Kit Maher, CNN

(CNN) — The Trump administration and a consortium of governors from northeastern states are asking PJM, the country’s largest electrical grid operator, to hold an emergency power auction as part of an effort to make technology giants pay for surging power costs from new data centers.

In the auction, tech companies will be able to bid on 15-year contracts for electricity generation from newly constructed power plants, Bloomberg first reported. Although power auctions are standard practice and routine, they are typically for one-year periods of electricity supplies and are open to public utilities and private power companies.

The proposed auction – which the White House and governors cannot mandate – is unusual both for the extraordinary length of the contract and because it will be limited to technology companies that build power-hungry data centers. The billions of dollars raised from the auction would support construction of new power plants in the region that the tech companies would use to satisfy their growing demand for energy over the next decade and a half.

“Energy cannot be separated from our economy,” Interior Secretary Doug Burgum said during a press conference Friday. “It’s the core to reliable, affordable, secure energy support to driving down inflation and making everything more affordable for every American.”

Utilities used to directly generate the electricity they sold to customers. But deregulation over the past few decades has led to the introduction of outside providers, who generate much of the power sold by utilities to both residential and business customers. The auctions play the role of an intermediary, balancing the anticipated demand for electricity from utilities with the power available from various energy producers, like natural gas plants or solar or wind farms.

The rates paid by consumers for electricity is regulated by the state regulators. But those rates are based on the costs utilities have to pay for that energy, either from their own plants or at free market auctions. The growing demand for power due to a rash of AI data center construction has put upward pressure on the rates regulators allow utilities to charge their customers.

The planned auction could help add much-needed electricity supply to the region and lower costs for the 67 million residents who are served by the PJM grid.

“Ensuring the American people have reliable and affordable electricity is one of President Trump’s top priorities, and this would deliver much-needed, long-term relief to the Mid-Atlantic region,” said White House spokesperson Taylor Rogers.

It’s tough to say what impact the auction will have on rates, said Andrew Weisel, energy and utilities analyst with Scotiabank, because too many details are yet to be determined.

“My view is the effort here is about limiting future increases (rather than lowering rates),” he told CNN. “And what’s important to realize is that this won’t have any immediate effect. Any new build is going to take five years or more given the long lead time to add capacity.”

PJM for the first time in its history last month failed to match supply with demand at an auction. The company said it could not reliably meet the anticipated electricity needs of the customers it serves between June 2027 and May 2028: PJM said it could generate 5.2% less electricity than needed.

The company blamed runaway demand from data centers.

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, PJM’s chief operating officer, in a statement following the December auction.

But it’s not clear that PJM will be on board with the government’s directive. The company said it was given no advance notice of the plan.

“Apparently they will make an announcement,” the company said in a statement to CNN. “We have not been invited and will not be there.”

The company said on Friday its decision, “resulting from a multi-month stakeholder process on integrating large load additions,” would be released later that day.

“The Board has been deliberating on this issue since the end of that stakeholder process. We will work with our stakeholders to assess how the White House directive aligns with the Board’s decision,” the company said in an emailed statement.

PJM is the country’s largest grid, covering thirteen states and the District of Columbia.

While some states like Virginia are in the midst of an AI-fueled data center boom, all that server power is straining the interconnected grid and spiking energy costs throughout the entire region. Virginia’s largest utility is increasing rates by roughly 9%, and New Jersey utility bills jumped by more than 20% this year.

The cost of electricity is up 6.7% nationwide over the last year, according to the Consumer Price Index, the government’s key inflation measure. The cost is up nearly 30% since the end of 2021.

Americans have been facing sticker shock when opening their electricity bills, as the tech industry rapidly builds data centers and other infrastructure to power AI systems across the United States. These centers, which have cost the tech industry billions of dollars to make, use up a gargantuan amount of electricity.

Some communities have rung the alarm on environmental impacts as well as worries about AI eliminating jobs.

Trump has directed his attention toward the rising costs, teasing plans in January to address the rising bills with Big Tech.

“Therefore, my Administration is working with major American Technology Companies to secure their commitment to the American people, and we will have much to announce in the coming weeks to ensure that Americans don’t ‘pick up the tab’ for their POWER consumption, in terms of higher Utility bills,” Trump said in a Truth Social post.

Some tech giants have already been trying to come up with solutions. Microsoft, for example, said it will ask to pay higher electricity bills in areas where it’s building data centers. It said it would also cover the cost of updating and adding necessary electricity to the grid.

– CNN’s Chris Isidore contributed to this report

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