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PJM Proposes $2 Million Capital Requirement to Strengthen Market Protections

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PJM is proposing higher capitalization requirements, including a $2 million threshold, to reduce default risk and strengthen protections across its wholesale electricity markets, PJM Inside Lines said Monday.

The grid operator submitted the proposal to the Federal Energy Regulatory Commission on May 27, marking the first update to the requirements since 2011.

Minimum capitalization standards help demonstrate participants' financial strength and determine eligibility to operate in PJM's wholesale electricity markets.

PJM said the revisions align its credit framework with requirements that federal regulators have already approved for other US grid operators.

The proposal aims to encourage stronger balance sheets while avoiding unreasonable obstacles for companies seeking access to PJM markets.

Senior Vice President, Chief Financial Officer, and Treasurer Lisa Drauschak said the changes would keep credit thresholds current while preserving flexibility for established and developing businesses.

PJM would require Financial Transmission Rights market participants to maintain a tangible net worth of $2 million when the changes take effect.

The proposal would phase in the same $2 million tangible net worth requirement for other participants and introduce a 3% annual increase beginning five years after implementation to reflect inflation.

PJM plans to begin the transition on April 30, 2027, and complete the five-year rollout by 2032.

Participants that do not meet the thresholds could still access the market through collateral, letters of credit, surety bonds, or corporate guarantees.

The proposal received near-unanimous support from the January Members Committee, PJM Inside Lines said.

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