PSEG has entered PJM’s bilateral contracting market with proposals to supply power directly to data centers, marking a significant shift in how utilities are positioning themselves to capture surging hyperscaler demand. The move comes as New Jersey considers reforms to its utility business model that could further enable such arrangements, with CEO Ralph LaRossa expressing encouragement about the potential changes.
PJM’s bilateral contracting process allows large loads to negotiate supply directly with generators and utilities outside the traditional capacity auction, offering price certainty and customized terms that data center operators increasingly demand. PSEG’s participation signals that incumbent utilities recognize the strategic imperative to serve these loads proactively rather than ceding them to competitive suppliers or behind-the-meter solutions. The utility’s nuclear-heavy generation portfolio in New Jersey and Pennsylvania provides a carbon-free profile that aligns with hyperscalers’ sustainability commitments.
New Jersey’s Board of Public Utilities has been exploring performance-based regulation and other business model reforms that would reward utilities for facilitating clean energy adoption and grid modernization rather than simply earning a return on capital deployed. Such changes could create regulatory pathways for utilities to invest in the flexible, resilient infrastructure that data centers require — including on-site generation, microgrids, and enhanced distribution automation — while sharing benefits with ratepayers.
The convergence of PJM market evolution and state-level regulatory reform creates a template other utilities are watching closely. As data center clusters concentrate in specific transmission zones, the ability to offer integrated supply, delivery, and reliability solutions becomes a competitive differentiator. PSEG’s early move suggests the utility intends to shape that market rather than react to it, leveraging its generation assets and regulatory relationships to lock in long-term anchor tenants.
Read the full report at Utility Dive.