Trump plans to intervene in the power market urgently: forcing AI giants to sign 15-year long-term contracts to pay for new power plants worth US$15 billion

# Source: Wall Street Insights

## Zhang Yaqi

The Trump administration is reportedly set to announce an emergency intervention plan on Friday, forcing tech giants to participate in special wholesale auctions and sign 15-year long-term power contracts to provide revenue guarantees for newly-built power plants worth approximately $15 billion. The move aims to "contain" the soaring costs triggered by the data center boom within tech companies and defend residential electricity prices, preventing high power bills from becoming a "political bombshell" for the Republican Party in the midterm elections.

The Trump administration will unveil an unprecedented power market intervention plan on Friday, compelling tech giants to foot the bill for new power plants in a bid to curb surging residential electricity prices driven by the explosive growth of data centers. This emergency action marks the first time the government has directly intervened in the pricing mechanism of regional power markets, aiming to avoid power costs becoming a political liability for the Republican Party in this year's midterm elections without undermining AI competitiveness.

According to reports, the Trump administration has reached an agreement with governors of several northeastern states to launch a special wholesale power auction, requiring tech companies to bid for 15-year power supply contracts. Regardless of whether the electricity is actually consumed, tech firms must make payments throughout the contract term, providing a stable revenue stream for the construction of new power plants valued at around $15 billion. The auction will be administered by PJM Interconnection, the largest regional grid operator in the U.S., which serves 67 million customers in the northeastern region.

This plan comes against the backdrop of rising electricity prices in the U.S. Data shows that the average retail electricity price climbed 7.4% in September last year to a record high of 18.07 cents per kilowatt-hour; residential electricity prices surged 10.5% between January and August 2025, marking one of the steepest increases in over a decade. The surging demand from data centers is the primary driver of higher electricity prices, with PJM projecting that its system peak demand will surge 17% by 2030 compared to this year.

White House officials stated that this is a one-time emergency intervention targeting the acute problem of rapidly rising electricity prices in the Mid-Atlantic region. In a social media post this week, Trump emphasized: "I will never allow Americans to pay higher electricity bills because of data centers." The participation of Democratic governors such as Pennsylvania's Josh Shapiro and Maryland's Wes Moore is regarded as a key pillar of this bipartisan collaborative effort.

### Electricity Price Crisis Threatens Midterm Election Prospects

Rising power costs are emerging as a major risk to the Republican Party's efforts to retain control of both houses of Congress. While Trump has repeatedly highlighted the significant declines in oil and gasoline prices since taking office, electricity prices have continued to climb amid surging demand, and opposition to data centers is mounting.

According to data from the National Energy Assistance Directors' Association, residential electricity prices rose 10.5% in the first eight months of 2025, a rate rarely seen in over a decade. In September last year, the U.S. average retail electricity price hit a record high of 18.07 cents per kilowatt-hour, up 7.4% year-on-year, the largest increase since December 2023.

Power auctions in the PJM region have become the political focal point of the national debate on electricity affordability. After 2024 auction prices hit an all-time high, despite a price cap agreement reached between Pennsylvania's Shapiro and PJM, costs in the subsequent two auctions still set new records. The latest auction in December last year also saw a 6.6-gigawatt supply shortfall, which PJM attributed to the massive data center construction boom. In fact, without implicit price caps, residential electricity bills would have risen by an additional 60%.

### Forcing Tech Giants to Sign 15-Year Long-Term Power Contracts

The plan to be announced on Friday will take the form of a "Statement of Principles" signed by the Trump-led National Energy Council and governors of states including Pennsylvania, Ohio, and Virginia. While not a legally binding document, pressure from the Trump administration and the bipartisan coalition of governors is likely to prompt a substantive response from PJM.

Timothy Fox, an analyst at research firm ClearView Energy Partners, commented:

"While the 'Statement of Principles' does not appear to include legal mandates requiring PJM to act, pressure from the Trump administration and the bipartisan coalition of PJM states is likely to drive a considerable response from the grid operator."

At the core of the plan is a requirement for PJM to immediately hold a Reliability Backstop Auction—a mechanism already contemplated by the grid operator following multiple auction failures. However, the government and governors' plan calls for an emergency auction to be held immediately after a definitive failure, with special provisions designed to spur a wave of new construction, and the only eligible bidders will be data center owners and operators.

Unlike PJM's existing auctions with 12-month terms, this auction will offer 15-year contracts. The White House and governors are urging PJM to hold this special one-time auction by the end of September. The commissioning timelines for new power plants may be staggered. State governors have pledged to implement and allocate these costs to data centers, ensuring that the prices of new power plants do not fall on ordinary households.

Notably, PJM representatives will not attend Friday's plan announcement event. Jeffrey Shields, a PJM spokesperson, said in an email:

"We don't have much to say about this. We were not invited to the event they are apparently holding tomorrow, and we will not be in attendance."

### Lowered Demand Forecast Reflects Project Delays Rather Than Weak Demand

Just two days before the Trump administration rolled out the intervention plan, PJM revised down its load growth forecast through 2032 in its annual report released on Wednesday, while raising longer-term projections. The adjustment is mainly due to stricter reviews of planned data centers and large loads, as well as updates to electric vehicle and economic forecasts.

PJM cut its 2028 summer peak demand forecast by 4.4 gigawatts (a 2.6% reduction) and its 2027 summer forecast by approximately 4 gigawatts, narrowing the reserve capacity gap for that capacity year to around 2.6 gigawatts. Compared with the previous long-term load forecast report, large load factors reduced this year's summer peak load forecast by 0.7%, economic activity factors by 0.5%, and electric vehicle factors by 0.1%.

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